News Analysis: Good and bad effects of a weak Philippine peso

A weak Philippine peso, the local currency, has both positive and negative effects on the Philippine economy, according to the Bangko Sentral ng Pilipinas, the country' s central bank.

BSP Deputy Governor Diwa C. Guinigundo has said that while certain sectors, such as exporters, overseas Filipino workers ( OFWs) and the business process outsourcing (BPO), would benefit from a cheaper peso, it would at the same time make imports more expensive.

"We're still relying on imported energy, raw materials and other imported goods. This will become more expensive. It's possible that it would depress, to some extent, the demand for imports," Guinigundo said.

In a radio interview on Wednesday, Leonor Briones, former national treasurer and now economics professor at the University of the Philippines, said that the depreciation of the peso is " double-bladed."

Briones said that with cheaper peso, the families of OFWs can have more money to buy goods and exporters can earn more from their export products.

But on other hand, importers would now spend more for their imports, Briones said. She also said that the government would need more funds to pay for the servicing of the country's foreign debts which are denominated in U.S. dollars.

On Tuesday, the Philippine peso further declined amidst worries over the region's growth prospects. It opened at 47 pesos to 1 U.S. dollar and closed at 46.93 pesos to 1 U.S. dollar, its lowest level in more than five years.

On Wednesday, however, the peso strengthened to 46.80 pesos to 1 U.S. dollar but still the lowest since 2010.

Guinigundo said that the country's exchange rate is market- driven. "The volatilities in the market make everything uncertain. "

He said that if the external factors continue, a "darker prospect" for the global economy, particularly in Asian region, may be expected, adding that "currently the market sentiment is negative."

Meanwhile, another international rating firm has downgraded its growth forecast for the Philippines this year.

In its report released this week, Moody's Investor Service said that in 2015, the Philippine economy will grew by 5.7 percent down from its earlier forecast of 6.7 percent.

"Fiscal under-spending continues to be an issue. In recent years, [the government] has pledged to channel funds into growth- enhancing infrastructure and other investment, but has repeatedly missed targets," the firm said.

Moody's projection for next year was also scaled down by half a percentage point to 6 percent. Moody's, however, said that Philippines would remain as Asia-Pacific's third fastest-growing emerging market, behind China and Vietnam.

Earlier, the British bank Standard Chartered also trimmed is growth projection for the Philippines to 5.7 percent, which is slower than the low-end target of the government of 6 percent.

American banking giant JP Morgan Chase said that its yearend growth forecast for the Philippines is 5 percent, which is up from its previous forecast of 4.1 percent.

In a research note issued Aug. 27, Singapore-based JP Morgan chief economist for Southeast Asia Sin Ben Ong said like the rest of the region, the Philippines is affected by a slowdown in exports. He said that exports in the region in the second quarter declined by 10 percent compared with that of the same quarter last year.

"However, despite the slowdown in external demand, domestic demand has remained unexpectedly robust in the Philippines," Ong said.

Director General Arsenio Balisacan of the National Economic and Development Authority (NEDA), the country's highest economic policy-making body, has admitted that with the 5.6 percent expansion of the Philippine economy in the second quarter, the country would not be able to achieve its earlier target of 7 percent to 8 percent full-year growth in 2015.

Balisacan said that the government will now settle for a 6 percent to 6.5 percent full-year growth. Endi