A boon for exporters on weak peso seen – Manila Bulletin
Yes, war does benefit certain sectors from the violence and its expected impact on the global economy. One of the primary beneficiaries of Russia’s war in Ukraine is the export sector, which stands to benefit from the depreciation of the peso against the US dollar. The peso fell over P52, breaking through the P51 level against the greenback.
“Definitely a boost for exporters,” Commerce and Industry Secretary Ramon M. Lopez said. For every dollar exported, the Philippine exporter gets more P1.
Electronics, the country’s biggest export, is expected to rise in income in pesos.
“A weaker peso leads to higher exports,” said Dan Lachica, president of the Semiconductor and Electronics Industries Foundation in the Philippines Inc. (SEIPI). The group of electronics exporters predicts a 10% increase in exports this year to $49.5 billion.
Sergio Ortiz-Luis Jr., president of the Confederation of Employers of the Philippines (ECOP), who has criticized the Bangko Sentral ng Pilipinas (BSP) whenever the peso strengthens, said the depreciation of the local currency would really help support export earnings.
“It’s comfortable,” Ortiz-Luis said, referring to the exchange rate above P52.
However, the export sector is also plagued by the real resulting from the pandemic.
Ortiz-Luis noted that the foreign exchange factor will boost exports this year but “not at the speed expected” as there are still issues hampering the flow of goods.
Since the pandemic, Philippine exporters have been harassed by high shipping costs and global supply disruptions. For example, Ortiz-Luis said it has issues with ship availability, causing delays and incurring penalties at ports.
“It (a weaker peso) helps but it’s not a big deal,” he said, noting that with the high cost of transportation and supply disruptions, many exporters would still end up have difficulty posting positive margins or possibly breaking even.
“It’s just a wash because the weak peso also means a higher cost of imports for the raw materials needed to assemble or manufacture the product to be re-exported,” he explained.
Robert Young, president of the Foreign Buyers Association of the Philippines (FOBAP), echoed the same view that said the weak peso is in fact self-liquidating.
This means that the cost of more pesos to source US dollars (to pay for imported fabric and accessories) will be recouped upon receipt of incoming export shipments, as you earn more pesos when you exchange your dollars.
Young said the impact is in the impending increase in wages and electricity and utility rates. “These will eventually add to the cost of manufacturing,” he said.
The DTI secretary also added that the higher cost of imports to produce for exports is “very good” because “in terms of dollars it is the same, both for the price of inputs and for the price of outputs”. .
But for industries that have the option of sourcing domestic inputs, Lopez said, this can encourage higher local content because imported inputs will be more expensive.
A weaker peso, he added, will also result in the competitiveness of the country’s exports, as these products should become cheaper and able to compete with other exports in the international market. “Exporters will get better prices, in terms of pesos,” he said.
Under the promising export scenario, the Philippines’ trade deficit, which is the difference between the value of a country’s exports and imports, jumped 63% to $4.69 billion in the first month of the year. 2022 compared to $2.88 billion in the same month in 2021, as Filipinos purchased more overseas-made goods, according to data from the Philippine Statistics Authority (PSA).
PSA data showed total imports rose 27% to $10.74 billion from $8.42 billion a year earlier. Meanwhile, exports grew only 8.9% year-on-year to $6.04 billion from $5.54 billion.
Lopez attributed the country’s export growth to the recovery of most markets, particularly before the Ukraine crisis as well as the earlier reopening of the export sector which enabled 100% operational capacity even at the height of the crisis. pandemic.
Almost half of the export growth for the month was driven by the increase in the country’s electronics exports. In line with the long-standing structure of the Philippines’ merchandise exports, electronics remains the main driver of export sales, amounting to $3.5 billion in total revenue in January, accounting for 58% of total exports. from the Philippines.
Almost half of the export growth for the month was driven by the increase in the country’s electronics exports. In line with the Philippines’ longstanding merchandise export structure, electronics remains the main driver of export sales, amounting to $3.5 billion in total revenue in January, equivalent to 58% total exports from the Philippines.
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