During the last few years, much has been said about how the Philippine Economy is ready for a boom. There is evidence to point toward that boom too. Look at the Peso, as we close in on the end of 2007 the Peso is standing at just barely more than 40 Pesos to the U.S. Dollar. It was just a couple of years ago that we got more than 56 Pesos for every Dollar that we traded! That would appear to be a huge boon for the Philippine economy.
But, it it really?
Well, when you look at it and do a bit of analyzing, the strong Peso is not necessarily a good thing for the Philippine people. You see, the biggest part of the Philippine economy is money remitted by Overseas Filipino Workers (OFW’s). These Filipino workers go abroad and work. They send a large percentage of their earnings home to support their family in the Philippines. Most of the contracts of OFW’s are written in US Dollars. Three or Four years ago, when an OFW sent home $100 to his family, they got around P5,600 worth of spending power! Now, though, when the OFW sends that same $100 home to his wife and kids, they get only P4,000 for it! Thus, the same $100 that he sent home a short while ago, is worth 30% less to his family now! This is hurting a lot of Filipino families!
But, the strong Peso is great for Filipino businesses, right? Well, not really. A lot of export businesses are actually going out of business because of the strong Peso! I just read an article in the paper this morning that a lot of clothing factories in Bulacan are already going out of business. They produce clothes that are exported to the USA. Now, the clothes are more expensive for the US consumer! Basically, the Philippine company has two choices, they can charge a lower price in Pesos (this keeping the price the same in Dollars), or they can raise the price. What are the consequences of each action? If they keep the price at a constant dollar level, they are only getting 70% of the Pesos that they got a few years ago. This much of a price reduction can put them out of business. However, if they raise the price, the US companies go to Vietnam to have the clothes made. It’s a catch 22 situation. And, all the while, prices continue to rise in the Philippines.
Less money coming in….. higher prices at the store. It’s a death warrant for poor Filipino families.
Feyma and I are really seeing this in action at the malls this year. Usually during December the malls are packed with Christmas shoppers! The mall owners extend their hours and are generally open until Midnight at least 3 nights per week during the Christmas season. The parking lots are full, and it’s hard to park your car. Getting a taxi during Christmas season is next to impossible, they are all in use! But, this year, when you go to SM City Davao, the parking lot is half empty, or more. The mall looks like a ghost town. Taxis are aplenty. Just based on my observation of Christmas Season shopping, I believe that the Philippine economy is not robust.
You can’t believe everything that the Government says.