The last three times that I was at the money changer’s, the exchange rate went down by 2.38%; this in a span of three weeks. Analysts predict it could go down to as low as 45 in the coming months. That definitely hurts exporters, recipients of OFW remittances, and outsourcing industry freelancers. On the flipside, many look at it as a positive economic indicator. You would think that with the widespread election-related violence and many cases of alleged and documented cheating and vote-rigging, the primary economic barometers – the exchange rate and the stock market – would be negatively affected. On the contrary, the peso has been steadily gaining strength even through the election period, and when other Asian currencies took a slight dip the other weekend, the peso remained steadfast. No thanks to the conclusion of the election, definitely, which, despite government claims to the contrary, was considered generally troubled by foreign observers.

A strong peso paints a good picture of the economy, or so it seems. But look beyond the figures and dig some facts. The strong peso is attributed to the surge in OFW remittances obviously in preparation for enrollment of the children this June. The dismal scientist in the palace cannot really claim credit for the contribution of remittances to the economy. But there’s something else: the entry of 3 billion pesos portfolio investments courtesy of a JP Morgan investor roadshow largely contributed to the abundance of dollar supply in the market, from which the Philippines netted a total of over 1 billion pesos. Isn’t that good, investors are flooding our stock market? Now, that’s where the danger is. Most of it is in the form of portfolio investments that can easily be withdrawn from the country. If something happens to make the Philippine economy unattractive to investors, say, another EDSA if the GO-TU argument about election cheating allegations really heats up, imagine the volume of capital flying out of the economy – Php3 billion or roughly $65 million. That would drastically turn things around as far as the exchange rate is concerned. It happened to the Mexican peso in 1994-1995 when it suffered a 50% devaluation, a debacle that precipitated the 1997 Asian crisis from which the Philippine economy is still recovering.

The news this morning bannered a 2.5% growth in the economy in the first quarter of 2007. The economy is “on a roll,” according to the President herself. Again, look beyond the statistics. The surge in domestic spending can be traced partly to the election, what with candidates spending millions on TV ads and distributing millions more to voters. It’s not exactly a welcome improvement, as far as I’m concerned, since it is certain the winning candidates will be recovering their expenses from government coffers, taxpayers’ money. More graft and corruption? Likely.

See, statistics and figures, just as unfounded rumors and hearsays, do not give the whole picture. It is up to us to read beyond the numbers or whatever information that reaches us, to look for more facts so we can make intelligent, informed, and objective conclusions. It is a process that is very applicable even in our day-to-day lives.

Filed under: Economics, In the news, May 2007 | You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.