Philippine Peso Slump a Relief to Exporters


© Bloomberg. A customer handles various denominations of Philippine peso banknotes at a market stall in the Tondo district of Manila, the Philippines, on Thursday, Nov. 19, 2015. Philippine gross domestic product (GDP) growth is expected to accelerate in the second half of the fiscal year and the macroeconomic situation will remain sound moving forward, said Bangko Sentral Governor Amando Tetangco on Nov. 18. Photographer: Bloomberg/Bloomberg

(Bloomberg) — The peso near a 12-year low is providing some relief to Philippine exporters, who risk losing some tax perks and are facing tighter labor policies, the top executive for the electronics and semiconductor industry said.

“In general, it’s a blessing that the peso has weakened,” Dan Lachica, head of the Semiconductor and Electronics Industries in the Philippines, Inc., said in an interview. Even if 70 percent of the industry’s inputs are imported and affected by the 6.7 percent drop in the peso, with revenues in U.S. currency “you’re able to stretch the value of your earnings.”

What alarms SEIPI, the nation’s largest grouping of foreign and local electronics companies, is the government’s push to remove tax perks and its crackdown on labor contracting amid higher production costs as faster inflation trims the purchasing power of the peso, Lachica said on July 9. The peso is among the worst performers in Asia this year along with the Indian rupee and Indonesian rupiah.

The industry, which accounts for about half of Philippine exports, is only now regaining its footing as foreign investors get used to President Rodrigo Duterte’s outbursts against the U.S. during his first year in office in 2016, said Lachica. Recent challenges may slow the recovery in exports, which grew 11 percent in 2017 after a dismal 0.1 percent gain in 2016.

Read: Weak Peso, Trade Gap Are Boon to Philippines, Finance Chief Says

Shipments of electronics and semiconductors are forecast to rise 6 percent this year even as total exports contracted for a fifth month in May, Lachica said. The 320-member SEIPI, which accounts for about 10 percent of the country’s gross domestic product, targets to increase total shipments to more than $50 billion by 2030 compared with $32.7 billion as of end-2017.

SEIPI wants the government to reconsider plans to impose a 15 percent levy on companies operating in economic zones and scrap some of the fiscal incentives on expansion.

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