MANILA, 9 July — Recent developments in the Philippine economic front indicate that things will get worse before they start getting better. First, the National Statistics Office (NSO) reported that exports in May suffered an 11 percent decline. This is the fourth consecutive month that outward shipments of goods and services fell. Economic leaders blamed the bearish global economy for the drop in exports. They noted a 10 percent reduction in US orders and similar weak buying by Japanese importers. Japan and the US account for more than half of Philippine exports.
As a result of the decline in export revenues and the absence of dollar inflows from investors, the local currency got a good beating in the market because demand for dollars is relatively stronger than supply. Last week saw the peso breaching its psychological support level of 53 pesos to one US dollar as it recorded a new low of 53.10 to the dollar.
This prompted the Bangko Sentral ng Pilipinas (BSP) to declare that it is prepared to intervene in the foreign exchange market to prevent speculation. “If the peso’s fall is caused by market forces, that’s okay with us. But if it’s due to speculation, we will have to come in and provide liquidity in the market,” said BSP Governor Rafael Buenventura.
To shore up the faltering peso, the BSP urged Philippine corporations to avail themselves of the agency’s currency risk protection program (CRPP) instead of sourcing their dollar requirements from the spot currency market. The CRPP is a simple form of derivatives, allowing the BSP and a private company to sign an agreement for the purchase of dollars at a pre-agreed exchange rate for a given period. Market players, however, observed that companies are not interested to participate in this scheme because of the strict requirements imposed by the BSP.
As monetary authorities try to calm down a jittery foreign exchange market, a leading business paper published the results of its own study saying business confidence in the country dropped to its lowest level so far in June.
“The Business Confidence Index (BCI), a composite measure of how business people feel about the present economic and political conditions as well as how they view their prospects over the next six months, plunged nearly 18 index points to 94.1 index points in June,” said BusinessWorld, the country’s leading business daily, in its banner story on July 5. The newspaper said this 18-point drop is the largest decline since the index lost 16 points in April. BCI is a joint project of BusinessWorld and New York-based Audits and Surveys Worldwide, through its regional office in Manila.
The survey, which was made in the last week of June, said that the number of businessmen who said “current business is bad” went up 49 percent, compared to 21 percent in April.
“The government’s performance marks likewise deteriorated,” said the report. “While slightly less than 54 percent of the respondents said that the government is “doing a better job than a year ago,” this still represents a hefty nine-percentage-point drop from the prior survey period’s 62.7 percent level.”
The report said that President Gloria Macapagal Arroyo was not spared from the businessmen-respondents’ growing skepticism. Asked whether they think the president is doing a good job, only 50 percent of the respondents replied in the affirmative. The report, however, said 66 percent of those polled “agree that the economy will still prosper despite the recent hostage crisis and the country’s seemingly poor peace and order situation.”
