How will the Philippines fare amidst what is shaping up to be an international currency war triggered by the announcement of second stimulus of $600 billion by the US Federal Reserve? Brazil reportedly joined the so-called currency war – the term coined by the IMF director Dominique Strauss Khan – to defend its growing export industry as well as other so-called emerging market economies.
Like the rest of the Third World, a devaluation of the dollar would result in the strengthening of the peso. This translates to an adverse impact on our exports. Our exports would become more expensive in the world market.
The dollar remittances of our OFWs would also mean less in terms of pesos although tourists coming to the Philippines will need to spend more in terms of dollars for the same services and goods (that’s if our tourism sector would maintain the same prices; but doing so will make visits to the Philippines more expensive and thus dampen enthusiasm to visit our shores).
Nevertheless, it would also make it easier for us to pay off our dollar loans. We will need fewer pesos to pay off these dollar loans. In the import sector, we will likewise need fewer pesos to import the same volume especially if the imports come from the US.
Is this good for the Philippine economy? Brazil thinks it is bad for theirs.