By Marcus Suner

Following the increase in the Philippines’ balance of payments (BOP) deficit, the Philippine Peso (PHP) nearly depreciated to its all-time low value and is currently pegged at Php 58.986 per $1. 

The BOP, or the summary of the country’s worldwide transactions recorded by the Bangko Sentral ng Pilipinas (BSP) as of September 2022, was publicized last October 21.

The data from this showed that the recorded deficit amounted to $2.339 billion and was termed the “historically high” deficit within four years, while the inflation rate also rose to 6.9 percent.

Having “such” BOP deficit signified a “weaker” currency which could make international trade “more expensive and costly,” especially in regard to importing goods. 

Additionally, the BSP said that the reported figures were mainly coming from its foreign exchange operations and the servicing of the national government’s foreign debt, such as when around $4.4-billion worth of foreign currency reserves of the BSP were expended to service the country’s foreign debt obligations in September of this year. 

Moreover, BSP Governor Felipe Medalla said that the exhausted BSP reserves were utilized for foreign exchange operations where there is a process of borrowing and selling dollars on the spot market. 

Compared to past figures, August 2022 had a deficit of $572 million, while September 2021 had a deficit of $412 million. 

Implications of the depreciation of the peso

Economics Professor Cielito Habolito mentioned that the depreciation of peso is a “significant loss” for imported essentials and its consumers as more pesos are needed to buy the same amount as one dollar. 

Consequently, local producers and manufacturers, as well as Filipino households, are affected by this phenomenon, as imported goods are put at higher costs.

Moreover, the Department of Energy Secretary Raphael Lotilla said that the country is dependent on imported resources that are “heavily influenced” by import prices, for power generation such as coal and oil.

In September, Manila Electric Co. or Meralco said that the increase in the cost of electricity production is caused by the higher cost of fuel and a weaker currency, thereby also making the electricity rates climb.

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