PESO SURGES TO 52.83 TO $1 / SENATORS OPTIMISTIC STRONG ECO IN '06
MANILA, January 3, 2006 (STAR) By Des Ferriols - The first trading day of the year proved auspicious for the peso which broke through the 52 to $1 range, settling at a new 31-month high of 52.83, up from Friday’s close of 53.090 to the dollar.
The local currency opened strong at the Philippine Dealing System (PDS), meeting expectations that the peso’s momentum could be easily sustained throughout the year, provided the Arroyo administration stayed on track with its economic reforms and deficit reduction program.
Yesterday’s closing rate of 52.835 was the highest since the peso last touched the 52.760 level on May 26, 2003.
President Arroyo expressed elation over the continued rise of the value of the peso, attributing it to the fiscal and economic reforms implemented last year.
In a televised roundtable discussion at Malacañang aired on NBN-Channel 4, the President congratulated her economic managers and the business sector, represented by Philippine Chamber of Commerce and Industry’s Donald Dee, for contributing to the strengthening of the peso.
"Let’s be united to further push forward the nation’s progress," Mrs. Arroyo said. "Thank you for supporting our reforms. Together, we will benefit from the increase in the entry of capital, increase in jobs and the upliftment of the lives of every Filipino."
The President also attributed the strengthening of the peso to the record increase of remittances from overseas Filipino workers (OFWs) and the surge in portfolio and direct investments.
"Portfolio and direct investments increased because of (investor) confidence," Mrs. Arroyo said.
Dealers affirmed that the peso is still getting a lift from the inflow of remittances from OFWs and on speculation that local bonds could get a boost from a credit rating upgrade this year.
The Bangko Sentral ng Pilipinas (BSP) said the amount of money that Filipinos sent home increased by 27 percent to $8.8 billion in the first 10 months of 2005.
"The flows are getting bigger," said Jonathan Ravelas, market strategist at Banco de Oro. "We’re sending more workers and we’re sending more teachers than entertainers so when they remit, it’s bigger."
BSP Governor Amando Tetangco Jr. said the peso’s performance was a reflection of the market’s expectation of a continued and stable appreciation of the local currency against the dollar.
Tetangco earlier said the peso may strengthen to as high as 52 to the dollar this year, especially if the expanded value-added tax (EVAT) is adjusted from 10 to 12 percent as originally planned.
Market analysts have been bullish about the performance of the peso, which rose six percent last year and was tagged as the best-performing currency in Asia and one of the best performers in the world.
According to Tetangco, the peso’s performance was buoyed by positive sentiments as well as continued dollar inflows from overseas workers, which provided the sustained momentum.
"The peso is expected to sustain its stability, indicating that the projected appreciation against the dollar would be gradual but steady," Tetangco said.
"Last year, we recorded the volatility of the peso at only 1.4 percent, one of the lowest volatility rates in the region," Tetangco added.
The BSP governor had originally projected that the peso would trade between 53 and 55 to $1 in 2006, or P2 better than the BSP’s official projected range of 55 to 57 to $1 this year.
Meanwhile, analysts said the peso’s sustained rally is hinged on the full implementation of the EVAT, including the increase in the tax rate from 10 percent to 12 percent by February.
According to Tetangco, implementing the final portion of the tax reform would significantly improve investor confidence which has a direct impact on dollar inflows.
"The impact on the peso is not direct but it’s significant and measurable," Tetangco said. "Obviously, additional revenues would improve our fiscal position and showing that kind of commitment to reforms would attract inflows." — With Paolo Romero
Senators optimistic economy can sustain strength in 2006 The Star 01/03/2006
Senators expressed optimism yesterday that the economy would sustain its strength in the short term.
Senate committee on ways and means chairman Ralph Recto said the peso, the interest rates and the real estate sector should continue to improve in the short term as a carryover from the gains made in the latter part of 2005.
The peso continued to strengthen, trading at a record high level of P52.83 to $1 yesterday.
Since November last year when the remittances of overseas Filipino workers (OFWs) started entering the financial system in larger than normal amounts, the peso has been trading at P53 to $1 from a low of P56 earlier this year.
On the other hand, interest rates based on the benchmark 91-day Treasury bills, have gone down to 5.1 percent on the last trading day of 2005 and down further to 4.9 percent yesterday, the first trading day of the year.
However, Recto said that the government must spend more on infrastructure to pump prime the economy and sustain gains in the long term.
"We must spend more on infrastructure to further our competitiveness and sustain the economy for the long term," Recto said.
Recto has been pushing for a bigger portion of the 2006 budget for public projects, particularly infrastructure, education and health.
He noted that the Philippines has one of the lowest infrastructure spending in the region, "a major reason why investors are shying away from us."
Malacañang has since responded by announcing last week that P35 billion in government savings would be used to pump prime the economy.
President Arroyo also said yesterday that the Department of Budget and Management would release P500 million to build more farm-to-market roads in the first quarter of the year.
She explained that this is part of the promised P35 billion she ordered released for economic projects meant to address poverty and unemployment.
Mrs. Arroyo, who inaugurated a P17.348-million farm-to-market road in Sagada yesterday, said that to bring the dividends of growth to the poorest household, projects such as the Nangonogan-Aguid road in the Cordillera Administrative Region are necessary.
Public Works Secretary Hermogenes Ebdane said the President’s primary directive to his department this year was to build more farm-to-market roads to spur economic activity and provide jobs as well.
Ebdane also disclosed that the President ordered a review of danger zones and structures like dikes and dams to protect the people from these structures during heavy rains caused by flooding.
Senate President Franklin Drilon, however, said that the economic gains in 2005 were temporary and were only brought about by huge OFW remittances and revenue generating measures enacted by Congress.
He predicted that the gains would soon be lost as global competition sets in with the New Year and margins and opportunities return to normal.
The challenge, he said, is for the government to sustain growth "in the scale capable of lifting the Filipino masses from poverty."
Senate committee on trade and economic affairs chairman Manuel Roxas II lamented that while the country’s economic indicators continue to show improvements, these are not felt by the consumers.
He said there is "disconnect between the financial sector and the real economy" as there are no marked improvement in the lives of the people.
Roxas said that the strong peso and the lower interest rates have not brought down the prices of goods and commodities, which normally go up alongside the two indicators.
Interest rates for bank loans and credit cards also failed to go down with the T-bill rates. — Marvin Sy, Aurea Calica
Chief News Editor: Sol Jose Vanzi
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