Philippine Government Seeks to Stabilize Peso through Various Measures

Strategic Insights -

The Philippine government is attempting to stabilize the country's currency, the peso, through various means, including increasing the value-added tax (VAT) to 12% from 10% and encouraging foreign investors to stay with confidence in the economy. Bangko Sentral ng Pilipinas (BSP) Assistant Gov. Diwa Guinigundo stated that the government has been passing bills to boost the confidence of foreign investors, while Cebu Chamber of Commerce and Industry (CCCI) president Robert Go expressed support for the VAT increase, but emphasized the need for the government to do its share in belt-tightening. Meanwhile, the seaweed industry has incurred substantial losses due to the unpredictable value of the peso against the dollar.

Key Takeaways:

  • The Philippine government is implementing measures to stabilize the peso, including a proposed 2% increase in the value-added tax (VAT) from 10% to 12%.
  • Net direct investments from January to September last year grew 76.2% to $252 million from $143 million in 2003.
  • The Cebu Chamber of Commerce and Industry (CCCI) has expressed support for the VAT increase, but emphasized the need for the government to avoid tax leakages and cut the pork barrel.
  • The seaweed industry has incurred substantial losses due to the unpredictable value of the peso against the dollar, with the Association of the Seaweed Industry of the Philippines (SIAP) president Benson Dakay stating that his company, Shemberg Corp., will lose P2.5 million every month if the value of the peso will be at P54.
  • The peso has sharply risen since the start of this year, trading at a high of P54.52 to the US dollar from P56.34 at the end of last year.
  • Stock market analysts have attributed the sharp rise to optimism about the Philippine economy as the government passes one revenue measure after another to strengthen the country's financial position.
  • The steady growth of remittances from overseas Filipino workers (OFW) is expected to help stabilize the peso, with OFW remittances increasing by 11% to $7.7 billion from January to November last year.

Statistics:

  • Net direct investments grew 76.2% to $252 million from $143 million in 2003.
  • OFW remittances increased by 11% to $7.7 billion from January to November last year.
  • The peso has traded at a high of P54.52 to the US dollar from P56.34 at the end of last year.

Sources:

  • "The Philippine Government's Year-end Economic Briefing" (Cebu City Hotel and Casino, 2023)
  • Bangko Sentral ng Pilipinas (BSP) Assistant Gov. Diwa Guinigundo (interview)
  • Cebu Chamber of Commerce and Industry (CCCI) president Robert Go (interview)
  • Seaweed Industry Association of the Philippines (SIAP) president Benson Dakay (interview)
  • Cebu Furniture Industries Foundation (CFIF) Inc. president Jay Yuvallos (interview)
  • Philippine News Agency (PNA) (14 February 2023)
  • National Federation of Filipino American Associations chairperson Loida Nicolas-Lewis (statement)