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MANILA - Socioeconomic planning chief Ralph Recto is worried about the peso's sharp weakening against the US dollar in 2008, saying the local economy would benefit from a stronger domestic currency.
But because inflation in the country had likely peaked, Recto said there was pressure for the central bank's interest rates to go down even if the peso was depreciating.
"I'm always worried about the (peso) depreciation. I don't think it's good for national interest or national security as well," Recto said in an interview at the sidelines of a press conference held by the government's economic managers in Malacañang on Thursday.
"I'm in favor of a stronger peso, and you know that's dependent on fiscal, monetary policy and trade policy as well, so there should be a good mix between the three," Recto said.
The local currency has now depreciated by over 13 percent against the US dollar since the start of 2008, thus becoming one of the worst performing currencies in the region alongside the South Korean won and the Indian rupee. This is a reversal of the trend in 2007, when it rallied by nearly 19 percent versus the greenback.
"You want a stronger economy and a good equilibrium of where peso should be but I think it should be in favor of a stronger peso," Recto said.
The peso is now trading between 46-47 levels, weaker than the 42-45 range against the greenback assumed by the government for fiscal and macroeconomic planning for 2008 through 2009.
Recto believes that inflation might have peaked this September, which suggested that the Bangko Sentral ng Pilipinas might be prompted to reverse the current cycle of interest rate increases given a sagging economic growth. The government recently scaled down domestic economic growth forecast for this year to 4.4-4.9 percent.
"Maybe inflation has peaked and inflation is going down brought about by (softening) supply side pressure, (so) there is pressure for a decrease in interest rates," Recto said. "But to me, what's important is that inflation goes down."
"I think it has peaked already, as of today -- unless there will be new typhoons or if people lose confidence in US dollar and invest in commodities like gold, wheat and oil again. I expect volatility," he said.
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