Between rich and poor Filipinos, it's the latter who will feel the brunt of the weak peso more, according to Albay 2nd district Rep. Joey Salceda.
Known as a number-cruncher in the House of Representatives, economist-solon Salceda went on to explain his bleak assessment in a statement Saturday night, Sept. 24.
“The bottom 30 percent of households in terms of income spend 58.2 percent of their total expenditures on food. And 24.9 percent of total food consumption in the country is imported," the Bicol solon began.
"So, a peso depreciation of 25 percent increases their total spending by at least 3.64 percent because of food alone due to first round effects alone. Second round effects, or the effects of increases of imported input costs on domestically produced output, could also pressure household budgets further," he said.
Salceda said the other end of the spectrum spends much less on food.
“The upper 70 percent only spend 39.5 percent of their income on food. So, the same depreciation will only hit them by 2.47 percent of expenses. And of course, they earn more and have more space for savings," noted the House Committee on Ways and Means chairman.
“Fuel accounts for around 30 percent of transport and energy costs, on which the poor spend around 15 percent of their income. So, you’re looking at another 1.13 percent increase in those areas due to a 25 percent peso depreciation, which we are on track to reach year to date by the coming weeks," Salceda said.
He said that, year to date, the peso has already depreciated by 14.7 percent. However, from its 2021 strongest, the peso has already depreciated by 24 percent.
Salceda also adds that high income households have the option to keep their money in dollars, while lower-income households barely have any savings.
“The upper 10 percent of households has at least P322,000 in savings every year that they can keep in dollars. Foreign currency deposit units are tax free also, so they get appreciated value plus tax advantages by keeping their money in dollars.
“The poorest 10 percent of households is in debt by at least P3,000 every year. So, they have no upside from dollar appreciation, and all the downside of a weak currency," he pointed out.
But what should be done to address this? "The solution here is a mix of policy and program interventions,” Salceda said.
“As I’ve suggested, we need to encourage our 'Big 4' in service dollar earners. BPOs (Business Process Outsourcing), foreign-employed freelancers, OFWs (overseas Filipino workers), and the tourism sector. That will allow us to benefit from upside in the dollar. We should train as many people as we can to have the option of employment in these areas," he said.
“The coming Christmas season might also be a good time for some OFWs to repatriate some of their dollars," Salceda said.