Monday, October 01, 2007

I do not agree with this forecast 30:1 dollar

On the news today (BPI):

French banking giant BNP Paribas is very bullish on the peso, expecting the local currency to firm up at 43 to the dollar by yearend, zoom to 37 next year and further to 30 -- at par with the Thai baht -- by end-2009.

Alright, BNP Paribas is BNP Paribas, but I do not agree with 30:1 by end of 2009. Although I agree with 43 by end of the year.

There are many things that could happen from today until 2009. I am not sure what would be the impact of 30:1 to the economy, quickly I can think of the following:

1. Our OFWs sending 12 billion dollars a year (672 billion pesos a year in 2005, 56:1), would be sending an equivalent of 360 billion pesos by 2009 (30:1). An almost 50% loss in income. The bulk of the middle class who are OFW dependents would lose half of their income in peso equivalent.

2. The income of manufacturers/exporters in Peso terms would have been halved, by 2009 if the Peso reach 30:1 assuming the same volumes and prices of Philippine products overseas, in dollar terms. Since income would have been halved, will the salaries of its workers be halved also, or would they close shop? The latter is mostly likely.

The government should really look at these possibilities. They should do something to temper the value of the Peso.

Got busy, this is all for now.