Economy falters as peso weakens

This article is available in PilipinoBisayaHiligaynon

Over the past few weeks, the value of the Philippine peso against the dollar has been dropping to record lows almost everyday. Since the start of the year, the peso’s value against the dollar has slid by more than 15 percent from ₱50.9 to ₱58.9 to the dollar. There are estimates that the peso will further tumble to between ₱65 and ₱70 to the dollar before the end of the year.

The peso’s devaluation comes with the weakening of various currencies around the world due to the US government’s push to raise the value of the dollar. The US aims to save its economy from stagflation. The US and other capitalist countries fear the risk of recession.

As in other backward countries, the devaluation of the peso relative to the US dollar has grave consequences on the local economy and livelihood of Filipinos. Combined with rising prices of petroleum products and other commodities, and increasing dependence on imported food supplies, the peso’s devaluation is pushing up the costs of imports and, as a consequence, raising domestic prices. With the peso sliding further, Filipinos face the threat of sharp increases in the prices of food, petroleum products, as well as other basic commodities in the coming months.

Increasing fuel prices has resulted in rapid rise of the country’s trade deficit, where the 7-month (January-July) gap has reached $35.75 billion, more than 45% higher than $24.6 billion trade deficit for the entire 2021. This widening gap will aggravate the economic crisis, especially with the weakening of the peso. The country’s balance of payment in the first half of the year rose to $3.1 billion, 63.1% higher compared to the same period last year. The country’s dollar reserves have steadily declined for six months to $99 billion, the lowest in the last two years.

These drastic consequences of the peso devaluation on the Philippine economy and the socioeconomic conditions of the Filipino people are a result of the country’s dependence on imported commodities, especially capital goods, equipment, manufactures, consumer products, and increasingly on food supplies. As a result of the destruction of local productive forces over the past 40 years, the country is now practically importing everything (including salt), making it vulnerable to currency devaluations. Local production remains largely backward, agrarian and non-industrial. Manufacturing is limited to assembly of import-dependent components (including semiconductors), the demand for which has sharply declined.

Marcos Jr and his economic managers have no plan to end the country’s over-dependence on imported commodities. Instead of addressing the need to raise the country’s capacity to produce food and other manufactures, they are bent on perpetuating dependence on imports, foreign investments and foreign debt-infusion.

Economy falters as peso weakens