Several of you readers poo-pooed my happy optimism that the piso might have finally bottomed out, even telling me to brace myself for 25-26 pisos to the dollar while I was predicting a turnaround. Even I warned myself that little turnarounds in the piso historically were followed by even further drops in the exchange rate, forcefully curbing my optimism in exchange for a bit of pragmatism.
But even Jil The Eternal Optimist couldn't have predicted these kinds of numbers: The piso has gone from 43 to 44 in just 9 days, after taking about a month to go from 42 to 43. That's a really big and positive jump of 2.5% in a week, 4.5% in 5 weeks, and 9% in 3 months.
Based on the numbers, this is a totally local phenomenon... possibly even limited to The Philippines itself. It may be all of the forex remittances from expatriate Filipinos are playing a part, with overseas Filipinos holding their cash in dollars instead of converting them to pisos, thus devaluing the piso. That would be one reasonable diagnosis considering what a large segment of the foreign currency exchange in The Philippines those remittances represent.
Well, whatever is causing this: Please! Keep it up! See you at 45.
(And, as always, further dire predictions of doom and gloom diametrical to what's actually going on are always welcome in the comments section.)
it doesnt suprise me that the peso is weakening
ReplyDeletephilipines isnt that cheap anymore, more expensive than thailand in fact. property prices in manila certainly are, and yet gdp per capita is half thailands
Star,
ReplyDeleteI have found some aspects of The Philippines are more expensive than Thailand... however I haven't lived here long enough to say definitively what things are truly more expensive. Another fact additionally is that I only lived in Pattaya when in Thailand, whose costs are not representative of the country of Thailand as a whole.
I will agree with you though that land in The Philippines does seem to be dearer than Thailand though.
However, none of these prices and none of the economic conditions in The Philippines are new; they have been around for a while now, and don't explain a rapid change in the valuation of the Piso.
Like I said, I think that remittances in foreign funds to The Philippines is what is driving the shift in The Piso: I looked it up, and those remittances represent 10% of The Philippines Gross Domestic Product.
Last year, the total amount of overseas Filipino remittances (OFW) was officially recorded at US$12.8 billion (Bt445 billion), just above 10 per cent of the GDP. The Philippines is now the world's third highest remittance-recipient country after India and Mexico, and the highest when remittances are measured as ratios to population, GDP and exports.
So, if you have even a fraction of that money being held overseas because of a strong piso, the demand on the piso drops, as does its value.
I can see the piso strenghtening again against the dollar (i.e. going back downward) if my assessment is correct, when those monies eventually do get sent to the Philippines and exchanged for Pisos... that remains to be seen. I've got my fingers crossed though.