Should I Invest in the Philippine Peso?
Over the past year, the US dollar to Philippine peso foreign currency exchange rate has become a very attractive investment. Should investors be optimistic or cautious? In this article, we examine how a high foreign exchange rate can have both advantages and disadvantages for investors.
Should you take full advantage of the Philippine peso rate? It’s not an easy question to answer. Let’s take a look at the pros and cons of investing in the Philippine peso.
PROS AND CONS OF INVESTING IN THE PHILIPPINE PESO
- Filipinos Are Optimistic About President Duterte
- The Country Is Going Through an Infrastructure Drive
- The Philippines Has the 30th Largest Economy in the World
- Overseas Filipino Workers Can Send More Money Home
- Wages Are Low in the Philippines
- The Philippines Has a “Credit Negative”
- Basic Commodities Cost More
- Unemployment Is High Because of Insufficient Employers
PROS OF INVESTING IN THE PHILIPPINE PESO
There are several reasons why you may want to invest in the Philippine peso.
Filipinos Are Optimistic About President Duterte
Although Western politicians and the international press often portray president Rodrigo as a hardliner, about 79 percent of adult Filipino voters feel this populist leader has done a commendable job as president in the first quarter of this year.
Although the international media often point out how his statements are brash, harsh, and even buffoonish, the Filipino people appear to view his administration in a more tolerant way, focusing on his political will to take decisive action.
Older Filipinos often compare Duterte favorably to the “good old days” of the late President Ferdinand Marcos, who ruled the Philippines with an iron fist from 1965 to 1986. While the West believe Marcos was a corrupt leader who pocketed around $10 billion during his 21-year dictatorship, nostalgic Filipinos recall him as a strongman who enforced law and order in the country and prospered its economy.
It may puzzle outsiders why Filipinos hold Duterte in such high regard despite his flagrant and well-documented human rights violations—such as extrajudicial killings in his administration’s “drug war.” But like most populous leaders, Duterte has a well-oiled propaganda machine that reinterprets the meaning of his actions, spinning the narrative to credit him with all positive changes in the country. He skillfully blames other politicians or past administrations for anything that has gone wrong. And perhaps most importantly, the economy of the Philippines is doing well, performing better than it has done for several decades.
The Country Is Going Through an Infrastructure Drive
The promise of economic growth across the archipelago gained momentum last year and continues this year as the Philippine government rolls out an infrastructure program. The government expects this program to continue over the next few years and increase the number of people employed, raise household incomes, and benefit the most impoverished families in the country.
The Philippines Has the 30th Largest Economy in the World
According to an International Monetary Fund (IMF) Outlook for 2019 to 2023, which looks at global economic data, the Philippines ranks as the 30th largest economy in the world with a GDP around $354 billion.
Although this emerging market economy was the second largest in Eastern Asia shortly after World War II, the economy declined over the years because of bad governance, political volatility, financial crises, and poor planning.
The Philippines has progressively transitioned from an agricultural-based economy to a service and manufacturing one. Today, its extensive international trade includes the export of electrical parts, copper, petroleum products, clothes, and fruits. Much of this growth occurred after the 1997 Asian financial crisis. In 2018, the Philippines economy grew by 6.2 percent, with most of the revenue generated by manufacturing.
Overseas Filipino Workers Can Send More Money Home
The low exchange rate of the Filipino peso is excellent news for families who have a family member working abroad. Millions of Filipino workers have work contracts abroad, especially in the Middle East, which pays both overseas professionals and skilled laborers well.
CONS OF INVESTING IN THE PHILIPPINE PESO
There are also several reasons why you should use caution before investing in the Philippine peso.
Wages Are Low in the Philippines
Although Filipinos prize literacy because of the abundance of free government elementary and high schools, wages in the country are low. This is due to a low supply of job creators and a high number of available workers. Filipino corporations and outsourcing firms around the world take advantage of this competitive job-seeker market so they can pay low wages.
The Philippines Has a “Credit Negative”
Asia Pacific currencies are most susceptible to foreign exchange rate hikes. This can occur for various reasons. For instance, when the Federal Reserve changes the fed funds rate by increasing or decreasing it, this also affects the United States dollar exchange rate against other currencies.
However, the Philippine currency (the Philippine peso) and the Indonesian currency (the Indonesian rupiah), fared far worse than other Asian currencies during recent foreign exchange fluctuations. While the Philippines’ negative credit is because of a stronger dollar affecting the dollars to Philippine peso foreign exchange rate, many other factors also play a significant role. For instance, the continuously escalating US-China trade wars, the rise in oil prices, and a hawkish US Federal Reserve have all contributed to currencies in Asia feeling the heat of geopolitical maneuvering.
Basic Commodities Cost More
A lower currency often has a negative impact on the citizens of a country. In the Philippines, basic fuels, such as crude oil and coal, have become far pricier. A weakened currency also affects other commodities, especially trade goods.
Unemployment Is High Because of Insufficient Employers
Because of the shortage of jobs, there is a high unemployment rate. In 2018, this was about 4 percent. As a result, millions of Filipinos go overseas to find work in countries that need skillful contract workers.
Many Western corporations also outsource work to the Philippines because the workforce is well-educated and will accept weakened wages despite their high level of technical and computer skills. Consequently, many multinational telecom corporations have built large call centers for hundreds of well-educated Filipino employees fluent in English.
FAQS ABOUT THE PHILIPPINE PESO
Before deciding on whether to invest in Philippine pesos, let’s review some frequently asked questions about the currency and the cost of living in the Philippines to help give you an economic overview.
How do you buy Philippine pesos?
You can get Philippine pesos through your local bank or credit union, a foreign bank branch, or a specialist exchange provider. There are many standard channels to buy any foreign currency with ease on business days. Money bureaus offer travelers, businesses, and investors services like money transfer payments, travel money, or long-term monetary investments.
Banks are useful if you want to use your credit cards abroad, so you have to carry fewer notes and coins of the foreign local currency. Usually, banks will give you a fair USD to Philippine Peso and charge a reasonable fee, but some monetary trade experts argue that they don’t always offer the most competitive exchange rates.
The best places for exchange rates may be online websites and physical storefronts registered as money service businesses. Tell them how many Philippine pesos you need, and they will give you a competitive dollar to Philippine peso foreign exchange rate price.
Why is the peso the currency of the Philippines?
Before the Philippines had a currency, they used pieces of gold called “piloncitos” and gold rings for trading. Then in 1521, the Spanish colonized the Philippines. They replaced gold bits and rings circulating in lieu of money with coins. However, since this money differed in weight, purity, and value because it came from different countries occupied by Spain, the Spanish government established the first mint to standardize the coinage in 1861.
The US acquired the Philippines on December 10, 1898, after the United States and Spain signed the Treaty of Paris. In 1903, the US pegged the currency to be worth half a United States dollar, implementing this monetary policy to control the inflation rate and keep prices stable.
In 1942, during the Second World War, the Japanese occupied all the Philippine Islands and introduced their own notes and coins as legal tender. However, on October 20, 1944, US troops made an amphibious landing on Lyte, an eastern Philippine island, and regained the country.
On July 4, 1946, the Philippines was granted independence by the United States. Two years later, the Central Bank of the Philippines reintroduced the peso as a formal currency.
What is the official currency of the Philippines?
The official currency is the colorful Philippine peso. It’s divided into 100 centavos and comes in the following denominations: 10, 20, 50, 200, 500, and 1,000.
What is the currency code and symbol for Philippine peso?
The currency code is PHP and its symbol is “₱”.
What is the average monthly income in the Philippines?
The average monthly income for someone working in the Philippines is 50,555 PHP per month. In dollars and cents, this comes to about $983.57 USD.
When is the best time to buy Philippine pesos?
The best time to sell United States dollars and buy Philippine pesos is from August to February. The worst time to buy Philippine pesos is during the hot summer months, between March and May.
How does the US dollar trade against the Philippine peso historically?
At the time of this writing, a currency converter will tell you that 1 United States Dollar equals 51.87 Philippine pesos. This is the lowest price in 12 years. Many factors contributed to the Philippine Peso falling to this record low, including the Bangko Sentral ng Pilipinas’ (BSP) cutting the reserve requirement.
What is the cost of living in the Philippines?
Living in the country costs around $300 a month while living in the city costs about $1,100 a month.
INVESTING IN THE PHILIPPINE PESO
Should you consider a long-term investment in the Philippine peso? There are pros and cons. On one hand, you can buy a large amount and wait to see whether the Philippines economic growth will continue rising. If it does, then you can sell this money at a higher price. On the other hand, while it looks like a promising investment, the best economic advice for every investor is to only buy a small amount for now and keep watching for more positive signs.
The leadership of President Rodrigo Duterte and his government’s infrastructure drive will hopefully build a stronger economy. Compared to the Vietnamese currency, which shows the potential to rise in value because of Vietnam’s impressive economic growth, the situation in the Philippines is not as clear. Despite the current performance of the Philippine peso, the good news to date is that it is one of the stronger currencies in Southeast Asia because of the positive economic growth of the Philippines.