International banker and economist Victor Barrios recently drafted a paper arguing that a strong peso has kept the Philippines poor, its people poorer and a few rich, richer.
He wrote the paper after joining dialogues with government economic and monetary managers and the dollar-earning segments of the domestic economy, including the national organization of recruitment agencies that deploy Filipinos abroad, and leaders of the business process outsourcing industry.
He says the country is actually going through a distorted growth crisis, undetected or unrecognized by policy makers.
One telling proof of that crisis, the international Filipino banker explains, is that a wide swath of industries had sustained corporate closures and lay-offs, a far worse curse than benign inflation.
That is the reason why there are very few decent and good-paying jobs around, the reason why the millions of unemployed and semi-employed keep on growing.
Second, the prices of locally-made goods have added to inflationary pressure — contrary to public policy.
Third, the high cost of local production, particularly hog and poultry, has created a niche for smuggling with its attendant corruption.
Fourth, the pinching impact on local food production has adversely affected food security and will expose the country to hyper-inflation should global hostilities and shortages break out.
Fifth, for the domestic economy to continue to grow, personal consumption expenditures must increase, which means that the country must continue to export warm bodies with devastating social costs. The default government policy of redeploying human resources to foreign lands has also relegated human capital to the lower rungs of international pricing.
In short, under a strong peso regime, there is little hope our OFWs can look forward to the day when they can come home in the near future for good, and not slave it out in the four corners of the globe.
Most Filipinos have turned up losers under that regime, Barrios concludes, except the national government — when it borrows money abroad to cover its yearly budget deficit — and importers of foreign goods led by the oil companies and smugglers.
He argues that policymakers must consider the welfare implication of the BSP’s “market driven” foreign exchange policy, and not limit itself to inflation targeting.
Among suggestions forwarded by the Filipino foreign banker is the deliberate, calibrated depreciation of the Philippine peso. The timing of such should be correct, considering for example the prices of oil products that get affected by the exchange rate.
Another is the suggestion that the government must stop borrowing dollars from abroad and instead, borrow from the huge reserves and even bigger deposits of private banks with the BSP.
These are just a couple of some bold decisions that government will have to consider. We sincerely hope, for the sake of the more productive sectors of the economy and our long-term sustainability, that the nation’s economic managers can implement them.