Philippine GDP and Inflation

Economic Planning Secretary Ralph Recto stated he expected the fourth quarter growth for the Philippines to be at least 4.6%  This is a healthy number and better than the previous estimate of 3.5%.  He also said that he believe growth for the entire year will probably be at 4.6% for the entire year.

Last year, Philippine GDP was 7.2% which was a 31 year high.  Growth at this rate was a bit inflationary and interest rates had to go up to slow growth a bit.

For expats this would likely indicate that a flat value on the Peso.  I wouldn’t expect the peso to either fall or rise much based on these numbers.  If the rate of growth falls a bit more than expected then I would expect the Philippine Central Bank to lower its interest rate.  At that point, the value of the Peso will have more downward pressure and help reduce the fall of the dollar against the Peso.

Right now, I fear the dollar will continue to decline against the Peso.  It held pretty steady today, down only slightly to P47.400 = USD1.00.  The previous close was at 47.625.  Still a downward trend for the dollar.  I’m keeping my fingers crossed that the Philippine Peso vs Dollar trend will begin to show an increased value to the dollar.

While it is normal for the dollar to fall in December, I am not looking at the current trend and then writing about it.  I’m looking at the fundamentals of the market.  The factors that I’m aware of are all pointing for the dollar to fall.  CNN just reported that the dollar “feel sharply against the Euro and the Yen today” on news that the US Federal Reserve Bank will but the interest rate no to 1/2 percent to 1/4 of a percent!  That is the lowest rate ever.

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Filed under: Expat Finances

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