BPOs seen to benefit from weakening peso, says analyst

ABS-CBN News

Posted at Jun 24 2022 11:53 AM

MANILA — Some industries such as Business Process Outsourcing (BPO) are seen to benefit from the weakening peso despite the foreign exchange's impact on inflation, an analyst said Friday.

The peso closed P54.70 to a dollar on Thursday, its weakest since November 2005.

With the peso trading lower to the dollar, investors could see Philippine BPOs as more attractive, said Moody’s Investor Service Sovereign Risk Group Senior Vice President Christian De Guzman. 

"The weaker peso does exacerbate inflation, so we need to keep that inflation targeting mandate in mind," De Guzman told ANC.

"On the other part, there is a competitive aspect. The BPO services may look much more attractive in terms of pricing, so I think there’s competitive angle here," he added.

Remittances are also poised to benefit with the higher value of the dollar compared to the local currency, he said. 

Economist and UP School of Economics professor Solita "Winne" Monsod earlier said the weaker peso also meant a more competitive export sector.

This could also prompt Filipinos to prefer local goods over imported and more expensive items, she added.

De Guzman said the peso is expected to hover within the P54 to P55 level or weaken further in the near term, at least while the US Federal Reserve continue to tighten interest rates to tame inflation. 

"We do think that the BSP is going to be less aggressive as compared to the Fed, which is going to impact capital flows and is going to impact the FX, so this does imply that there is going to be some further weakening of the peso going ahead at least in the near term until the Fed stops," he said.

The Bangko Sentral ng Pilipinas on Thursday raised interest rates to 2.5 percent to temper inflation.