Why is the government not doing enough to temper the rise of the peso vis-a-vis the US dollar? It is now at PhP40.70/US$. Exporters and OFWs are badly hit.
Simple: Price of oil at the New York Mercantile Exchange is at US$100 per barrel level. The weakness of the dollar offsets, or at least mitigates whatever price increase on the broader economy on account of the high oil prices. Inflationary pressures obviously are on top of the government's agenda, which involves proposals to scrap VAT on petroleum products.
I think this is the more sensible solution, combining a strong peso and restructuring taxation to protect consumption-led growth, rather than the ill-advised Oil Price Stabilization Fund proposed by leftists.
Gloria reduced oil import tariffs from 2% to 1%, with foregone revenues estimated at PhP11 billion. I think the government can go further: With government's deficit now at break-even level (down from the PhP100-200 billion deficits in previous years), the country is in a good position and can afford to provide safety nets to the hundred-dollar oil environment through eliminating the VAT on petroleum products altogether.
The end-goal is to ensure that consumption remains strong. Growth registered in 2007 was clearly consumption-led.
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