News: SME exporters halt taking buying orders due to strengthening peso -
28 Oct 2007
Small and medium enterprise (SME) exporters have stopped accepting orders from abroad since the peso started rising to P46 against the US dollar.
The peso, now being traded in the neighborhood of P44, is projected to further strengthen towards the end of the year.
Philexport president Sergio Ortiz-Luis estimated that for every P1 appreciation of the local currency against the US dollar, the export sector is losing one percent of around billion revenues generated every year. Ortiz-Luis said Philexport would revise anew their six percent growth target for the exports sector this year as the rapid appreciation of the peso continues to impact on their revenues.
"We are just awaiting the September (revenue) figure before we decide any revision," said Ortiz-Luis Jr. in an interview at the sideline of the 33rd Philippine Business Conference held at the Manila Hotel. Added burdens to exporters are the rising cost of doing business in the country, particularly electricity; higher wages; and the home credit crunch that has hit the United States.
With these problems affecting the sector, exporters reduced by almost half their growth target for 2007 to 6 percent from the original 11 percent based on their July and August revenues.
Exports sales in August started declining by 4.8 percent to $ 4.07 billion. However, cumulative export growth for the first eight months of the year still grew by 4.77 percent to $ 32.80 billion from last year’s $ 31.30 billion. Exporters and other affected sectors were clamoring for government measures to protect them from the impact of the peso’s rapid appreciation.
Ortiz-Luis reiterated the need for the government to pre-pay some of its foreign loans and shift to local borrowing, double its dollar reserves from $ 30 billion to $ 60 billion while the dollar is accumulating, and ensuring a workable dollar burse to attract more investors.
The Department of Finance is already looking into the proposal of sourcing more financing from domestic sources to help stem the sharp peso’s rise and partially address the concerns of exporters.
Aside from exports, among those significantly affected by a rapidly appreciating peso are telecommunications, business process outsourcing (BPO) businesses, domestic manufacturers and families and relatives of overseas Filipino workers.
Ortiz-Luis said that the export sector has a huge potential of growing by a whopping 20 percent crucial in enabling the country’s gross domestic product rise by 8.5 to 9 percent should these measures are undertaken. He based this estimate on empirical evidence indicating that every three percent growth in exports translates to one-percent growth in GDP.
Source: Edu Lopez, Manila Bulletin Online, 28 October 2007