Stronger peso may affect consumption

by Kathleen A. Martin,

Posted at Feb 13 2013 05:16 PM | Updated as of Feb 14 2013 02:09 AM

MANILA, Philippines - As the local currency is expected to remain firm and strong this year, the Bangko Sentral ng Pilipinas expressed concern this may affect consumption, the economy's main driver.

"We expect that there will be an impact on consumption expenditure," Diwa C. Guinigundo, BSP deputy governor, said during the Philippine Economic Briefing.

But Guinigundo was quick to point out that the firmness of the peso helps the central bank manage inflation or the rise in the prices of goods.

"So if prices are kept stable, that is also something that can encourage consumption expenditure," Guinigundo said.

He stressed the real issue is which factor will have a bigger impact on consumption: the strong peso or the stable inflation.

The peso has appreciated more than 6% in 2012 from the previous year, and is expected by analysts to strengthen further in 2013 amid a robust economy.