Recent concerns about peso’s depreciation have been exaggerated. In the most dangerous international environment since the postwar era, there is no room for complacency, however.
In the past, international and domestic critics of the Duterte government have complained that the Philippine peso has fallen “six straight years,” which is seen as a sign of the failure of Duterte agenda.
In March 2017, Bloomberg reported that “Asia’s ugly duckling of 2017 is the peso, thanks to Duterte.” At the time, peso’s weakening was explained, oddly enough, by investors who had been spooked by allegations of “unlawful killings and corruption.”
More recently, the peso is said to face an additional threat, “a mid-term election that may compound concerns about its economy.” This time Bloomberg believes that “political uncertainties” pose an added source of pressure.” Yet, recent surveys do not seem to support such speculation.
Still other reports see “political risks” where such do not necessarily exist, while approaching the peso’s weakening as if it was fueled by mainly internal forces.
In reality, most currencies in emerging markets have depreciated since first expectations that the U.S. will start rate normalization and when the actual rate hikes began – about “six straight years” ago, well before Duterte (Figure).
Since the Fed’s signaling of normalization and rate hikes, Philippine peso has depreciated almost in parallel.
About the Author
Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/
The original commentary was released by The Manila Times on January 28, 2018