Peso closes at ₱56.96 to $1, strongest level since April | Cai U. Ordinario (2024)

THE Philippine peso rallied against the United States dollar on Tuesday, allowing it to close at its strongest level since April this year, which augurs well for the country’s aspirations of becoming an Upper Middle Income Country (UMIC).

Based on Bankers Association of the Philippines (BAP) data, the peso closed at P56.96 to the greenback, the strongest since the P56.808 level recorded in April 15, 2024.

In his speech at the Senate panel review of the economic and fiscal assumptions underpinning the budget, Socioeconomic Planning Secretary Arsenio M. Balisacan said keeping the peso at the P56 to P58 to the US dollar will improve the country’s chances of reaching UMIC status.

“Meeting the low end of the [growth] target will keep the country on track to becoming an upper-middle-income country [UMIC]by 2025, provided that the other macroeconomic targets are also achieved,” Balisacan said.

“The average foreign exchange rate during the period does not exceed P58 to USD 1. Otherwise, reaching the upper-middle-income status could be delayed to 2026,” he also said.

With a population estimate based on the 2020 Census of Population and Housing (CPH), the country’s per capita GNI at current local prices is at $4,335.60.

PSA Macroeconomic Accounts also said using the new population projections, the 6 percent GDP in 2024 will result in a per capita GNI at current local prices of $4,530.63.

Balisacan estimated the country’s current GNI per capita at $4,230. This is still short of $286 from the low end of the new World Bank threshold of $4,516 to be classified as a UMIC.

However, Balisacan said, keeping the peso strong and attaining the country’s UMIC aspirations are not without its challenges.

This means measures ensuring that food prices remain affordable for all and improving spending efficiency of government agencies must be implemented.

Balisacan said the government must also leverage agreements and initiatives such as the Regional Comprehensive Economic Partnership (RCEP) and the Luzon Economic Corridor, while improving the ease of doing business to boost trade and investments.

He also said the government must explore and forge agreements with other economies to expand our merchandise and services export market, including partnerships to boost tourism.

“Let me end by saying that we are making steady and solid progress. We remain broadly on track to meet our targets across various socioeconomic indices,” Balisacan said.

“We intend to sustain the growth momentum as we implement strategies to create higher-quality employment and protect our countrymen’s purchasing power,” he added.

Earlier, a brief by the Congressional Policy and Budget Research Department (CPBRD) found that if the country sees an increase in Services Value-Added per Worker (SVAPW), the probability of the country becoming an Upper Middle Income Country (Umic) increases by 174.7 percentage points. (https://businessmirror.com.ph/2024/08/06/phl-overstaying-in-lmic-category-says-house-think-tank/)

The CPBRD brief stated that, based on another study by the Asian Development Bank (ADB), middle-income countries, which includes LMIC and UMIC countries, stay in their classification for 14 years and 28 years on average, respectively.

However, the latest estimates of the World Bank shows the Philippines has been an LMIC for 37 years. This means, the country has been overstaying in the income category for 11 years or more than a decade.

The Philippines has been considered a lower middle income country since 1987. (See:https://businessmirror.com.ph/2024/07/04/economy-must-grow-6in-2024-to-reach-umic-goal/)

Image credits: ALDAR DARMAEV VIA DREAMSTIME.COM