DOWN?
Am not talking about the great super organization that UP alumni have put together for our varsity players — with a clear bias for the men’s basketball team.
I am talking about the global economy and the stock market and the peso exchange rate (the peso is not weak because…) that has been battered by COVID and its long-COVID effects on world trade and national economic activity. There doesn’t seem to be light at the end of the tunnel, at least not before this year ends.
I have become a regular viewer of Bloomberg television since March 2020 when the pandemic first hit, monitoring (I have to admit) global nickel prices and (only secondarily) the peso-dollar exchange rate. I’ve seen how the former started off from about $14,000 slowly rising to the $20,000 level, before skyrocketing for a brief time to unbelievable levels in mid-2022 before settling back to the $20,000-23,000 range.
The war between Russia and Ukraine has been a major factor affecting the price of nickel, balanced off by the slowdown in the Chinese economy which in many ways is the world’s greatest consumer of nickel.
Of course, the peso has taken the other route, slowly weakening against the dollar at a rate faster than some of the other currencies in the Asean region. There are pros and cons on the weakening of the peso depending on where you stand — an importer, for example, is hurt every time the peso weakens against the dollar, and this is the pain we feel when pump prices have to go up every now and then; exporters, on the other hand, can face a financial bonanza whenever the dollar strengthens.
‘From what I hear on the Bloomberg channel, the world is still far from turning a corner on this economic downturn, which means we need to sit tight and expect some turbulence for some time to come.’
The peso is weak and the dollar is strong. But maybe what we have to ask is this — what makes other currencies in the region less weak against the dollar, or (conversely) the dollar less strong against them?
Around the world central bankers are doing what they can to cool down demand — because we were taught in Econ 101 that high demand raises prices, especially when supply is limited or low. And one way to make people want to spend less is to raise interest rates — it becomes more costly to borrow to spend, and more enticing to park your money to earn interest. But we also know that if too many people stop spending and just parking their monies then businesses can collapse, unemployment rises and these, too, have their own negative consequences.
It’s a tightrope act that bankers around the world have to do mainly independent of each other but somehow affecting each other as well.
From what I hear on the Bloomberg channel, the world is still far from turning a corner on this economic downturn, which means we need to sit tight and expect some turbulence for some time to come. Our economy remains blessed with the contributions of overseas Filipinos and the BPO industry, without which we could be as devastated an economy as many in the African continent. But because much of our economic system is so backward — logistics is just one principal example; oligopolies and protected but inefficient industries are others — we move forward with this baggage that weighs us down and keeps us from having more than just our head above the water.
Here’s hoping that 2023 will be more of “nowhere to go but up!”
