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Over the past 1 year or slightly longer, the US Dollar has been falling like a rock! It seems that whatever the bad news for the Philippine economy, the Peso still gains strength against the Dollar. Keep in mind, if you are an American and you get your money from some US source, this means that your spending power is decreasing almost every day!
Let’s take a look at the value of the Dollar over the past few years. All conversions will show the value of the Dollar in December of each year:
2003: P55.59 is equal to $1
2004: P56.28 is equal to $1
2005: P53.60 is equal to $1
2006: P49.39 is equal to $1
Wow! Can you imagine, since December 2004, the Dollar has lost around 12% of it’s value? That is a huge loss in just two years. And, that is just the beginning of your loss in spending power, because inflation in the Philippines is relatively high. It would be my estimate that you now must spend 20% more in Dollars to buy the same items that you could buy just 2 years ago. For some who are on a tight budget, this is a major loss in purchasing power.
I have been lucky, because I have enough income that I am able to withstand this loss, but some others are not as lucky.
The truth is that the US Dollar is declining worldwide, not just against the Peso. It was not that long ago when you could buy a Euro for under $1. Today, it costs more than $1.30 to purchase a Euro. A British Pound Sterling is almost $2 today.
Of course, currency exchange rates go in cycles. In another year or two, we could be in the opposite situation with the Dollar being strong. Right now, though, the Dollar is as weak as I ever remember it being when weighed against a wide variety of worldwide currencies.
Philippine Economists in the Government here are talking of a Peso at about P45 to the Dollar in the relatively near future (2007 or 2008). That’s almost another 10% of the value of the Dollar vanishing in a year or so.
If you are considering making a move to the Philippines, or anywhere outside the United States this is something to keep in mind. The Dollar may continue sliding before it stages a rally again. Don’t leave yourself short!