Weaker peso benefits exporters, raises debt costs — Philexport

The Philippine peso’s continued depreciation against the US dollar is creating both opportunities and financial pressures across the economy, benefiting exporters and families receiving remittances while raising the cost of servicing the government, according to a leading local exporters umbrella organization.

In a recent statement, the Philippine Exporters Confederation Inc. (PHILEXPORT) said the peso’s decline was no longer as catastrophic as it had been in the past.

Dollar earnings translate into more pesos

Exporters and tourism-related businesses stand to gain from the weaker currency because their dollar earnings translate into more pesos even as families receiving money from overseas Filipino workers (OFWs) receive more in local currency when their dollar remittances are converted.

Agriculture may benefit as well, said the organization, depending on export opportunities. However, farmers and food producers relying on imported fertilizer, fuel, machinery and other production inputs could face higher expenses as the peso loses value.

Importers and manufacturers dependent on foreign raw materials and equipment are similarly exposed to higher costs, particularly when their revenues are earned mainly in pesos.

The government also faces a larger bill for servicing foreign debt. Since dollar-denominated obligations require more pesos when the local currency weakens, depreciation can increase the peso cost of existing overseas loans.

PHILEXPORT cautioned against blaming the peso’s decline alone for inflation, citing other pressures, including higher fuel prices linked to conflict in the Middle East.

More expensive fuel can raise transportation and production costs, which businesses may eventually pass on to consumers.

It said a weaker peso could remain beneficial to some industries provided depreciation does not happen too sharply or rapidly, allowing companies time to adjust to exchange-rate movements and manage expenses.