Yes, war makes some sectors benefit from the violence and its expected impact on the global economy. One of the early beneficiaries of Russia’s war in Ukraine is the exports sector, which is expected to incur windfall from the depreciation of the peso against the US dollar. The peso fell to over P52, breaching the P51 level against the greenback.
“Definitely, a boost to exporters,” said Trade and Industry Secretary Ramon M. Lopez. For every dollar export, Filipino exporter gets P1 more.
Electronics, the country’s largest export, is anticipating higher peso income as a result.
“Weaker peso results in higher exports,” said Dan Lachica, president of the Semiconductor and Electronics Industries Foundation in the Philippines Inc. (SEIPI). The group of electronics exporters forecast a 10 percent increase in exports this year to $49.5 billion.
Sergio Ortiz-Luis Jr., president of the Employers Confederation of the Philippines (ECOP), who has been critical of the Bangko Sentral ng Pilipinas (BSP) every time the peso strengthens, said the depreciation of the local currency would really help prop up export earnings.
“It is comfortable,” said Ortiz-Luis referring to the more than P52-level exchange rate.
However, the export sector is also beset with real arising from the pandemic.
Ortiz-Luis noted that the foreign exchange factor will boost exports this year but “not in the speed expected” because there are still problems hounding the flow of goods.
Since the pandemic, Philippine exporters have been hounded by the high cost of shipping and global supply disruptions. For instance, Ortiz-Luis said that they have issues on the availability of vessels causing delays and resulting in penalties at ports.
“It (weaker peso) helps but it is not a big component,” he said noting that with the high cost of shipping and supply disruptions many exporters would still end up having difficulty posting positive margins or possibly a break even.
“This is just a wash because the weak peso also means higher cost of imports for the raw materials needed to assemble or produce the product for reexport,” he explained.
Robert Young, president of the Foreign Buyers Association of the Philippines (FOBAP), echoed the same opinion who said the weak peso is actually self liquidating.
This means the cost of more pesos to procure US dollar (to pay for the imported fabric and accessories), will be earned back upon receipt of inward export remittance because you earn more pesos when you exchange your dollars.
Young said the impact is in the impending increase in wages and power and utilities rates. “These will ultimately add up to manufacturing cost,” he said.
The DTI Secretary also added that the higher cost of imports to produce for exports is “just fine” because “dollar-wise, it is the same, both on input and output price.”
But for industries that have domestic sourcing inputs option, Lopez said, this can encourage higher local content because imported inputs will be more costly.
Weaker peso, he added, will also translate to the competitiveness of the country’s exports as these products should become cheaper and be able to compete with other exports in the international market. “Exporters will have better pricing, peso terms,” he said.
Amid the promising export scenario, the Philippine trade deficit, which is the difference between the value of export and import of a country, jumped by 63 percent to $4.69 billion in the first month of 2022 versus $2.88 billion in the same month in 2021, as Filipinos bought more foreign-made products, data from the Philippine Statistics Authority (PSA) showed.
The PSA data showed that total imports grew 27 percent to $10.74 billion from $8.42 billion a year earlier. Meanwhile, exports increased by only 8.9 percent year-on-year to $6.04 billion from $5.54 billion.
Lopez attributed the growth in the country’s exports to the recovery in most markets, especially prior to the Ukraine crisis as well as the earlier reopening of the export sector which allowed 100 percent operating capacity even during the height of the pandemic.
Nearly half of the growth in exports for the month was driven by the increase in the country’s export of electronic products. Consistent with the long-standing structure of Philippine merchandise exports, electronics remain to be the largest driver of export sales amounting to $3.5 billion in total earnings this January, accounting for 58 percent of the total Philippine exports.
Nearly half of the growth in exports for the month was driven by the increase in the country’s export of electronic products. Consistent with the long-standing structure of Philippine merchandise exports, electronics remain to be the largest driver of export sales amounting to $3.5 billion in total earnings this January which is equivalent to 58 percent of the total Philippine exports.