"(At this point) the appreciation of the peso is good for the economy," Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo said. The peso improved six percent over the last twelve months and at its current level of P51.20 to P51.40: , it has gained 3.5 percent from January.

Guinigundo said based on central bank estimates, for every peso appreciation the impact on inflation is to lower it by 0.043 percentage point for a twelve month basis.

BSP inflation expectations for the year are 7.5 percent to 8.3 percent. Inflation targeting is the core basis for setting its monetary policies.

"A strong peso (allows us) inflation control or management," Guinigundo said. In a good currency environment, there are winners and losers- those "losers" would be the exporters who earns in dollars and the overseas Filipino workers who remit the dollars. "However a strong peso benefits all of us not only in inflation control but the government also has better debt management," the BSP official added.

More resources mean more to spend for infrastructures and other mitigating measures. According to the Department of Finance, the government saves P5 billion for each P1 gain over the US dollar. (LCC)

"A higher exchanged rate (in favor of the local currency) reflects a strong economy. Investors are encouraged to come here … the bottomline is when the economy is strong, no matter what happens to the exchange rate, people will invest money," Guinigundo said.

"(So our view) of the exchange rate should not be short term or very narrow in focus on what’s happening. The peso has an independent float and we have a flexible exchange rate regime. It has a self correcting mechanism," he added.

For the first half of the year the BSP expects some inflation spikes due mainly to the impact of the 12 percent VAT rate increase. In February, inflation was up at 7.6 percent from January’s 6.7 percent. Inflationary pressure was strongest in food and utilities, which were mostly attributed to the ten percent VAT, implemented last November.

National Economic Development Authority Director Dennis Arroyo said the VAT rate increase would pull up inflation to 8.5 percent for the year, higher than central bank projection of 7.6 percent to 8.3 percent.

Arroyo said that with the VAT impact on consumption, this would slightly reduce consumers’ spending power. He added that only the double-digit growth in overseas Filipino workers’ remittances would boost consumption. (LCC)