The Peso is expected to hit P42.50 to a Dollar by the end of the 2007, according to the US-based financial giant Citigroup (Inquirer Business, 25 October 2007). The Peso - US Dollar exchange rate is also expected to hit 41.50 in six months, and 40.75 in one year.

 

This is a more conservative (and more reliable?) forecast than what I've heard that the Peso will appreciate to P38 in the first quarter of 2008. Whatever the figure is, however, the appreciation of the Peso will certainly adversely affect certain sectors. A group of Overseas Filipino Workers (OFW), in an open letter to the President, already raised their concern over the continued appreciation of the Peso. As stated in the open letter:

1) While our salaries during the last few years remained the same, our cost of living here in the Kingdom [Saudi Arabia], like anywhere else, have increased. This means less income available for remittance to our families back home;

2) The situation became worse when the peso appreciated from 55 to 45 versus US dollar during the last ten months. The continued peso appreciation effectively reduced the value of our remittances by an average of 18%;

3) On the other hand the rising prices of commodities back home, which ironically should have decreased due to the strengthening of the peso, aggravated further the already worsening situation;

4) We estimate that with the 18% reduction in the value of our remittances plus, say a 10% increase in household expenses of families back home, an OFW who used to remit $300 monthly, will now have to send $405 to maintain his family?s current living standard. To be able to do this, he will have to work longer hours and/or tighten his belt.

5) For those of us who have planned to go back home for good within the next couple of years, will now have to reconsider our plans, and might have to extend our stay here in the Kingdom for a few more years.

OFWs are not the only ones to be adversely affected by the Peso appreciation. For instance, local products and services competing with other countries (like BPO companies) may see their competitiveness - in terms of pricing - diminished. (Update: The Philippine Exporters Confederation [Philexport] said that the government should intervene to stop the continued appreciation of the peso. The call to peg the exchange rate at P47:US$1 is anchored on the argument that the continuing trend of peso appreciation adversely affects families of overseas Filipino workers and those whose livelihood depend on exports. - Inquirer, 28Nov07)