If you’re an American expat living in the Philippines like I am, along with thousands of others, you probably keep a close eye on the Philippine Peso exchange rate versus the United States Dollar. This is a topic that has explored before on PhilippinesPlus.com, and a popular topic on other American expat sites. With some recent comments (thanks, Gary!) that alerted me to some recent dire predictions of an exchange rate of PHP 37.50 to $1 in 2011 and PHP 35.50 in 2012 from HSBC (Hong Kong and Shanghai Banking Corp) made this past Wednesday. The bank forecast a stronger Philippine peso this year and next as a “result of the Philippine Central Bank’s strong support for the country’s currency to ease the impact of inflation caused by soaring oil and food prices.” That according to a recent report in All Headline News.
However, the same report states that last week the Philippine Central Bank also revised its forecast to an average exchange rate of PHP 42 to 45 to 1 USD from a previous range of PHP 45 to 47, much higher than the HSBC forecast. In 2010, the average exchange rate was PHP 45.12.
The weakening of the US dollar versus the Philippine Peso has adversely impacted our budget at “The Compound.” When we arrived in the Philippines in July 2009, the exchange rate was 48.01. So for a exchange of $1,000 USD from July 2009 versus exchange done in February 2011, when our exchange rate was 43.74, that is a loss of about 97 USD. That is a big chunk of income to lose when you’re already on a fixed income as we are. This past Friday the rate stood at 43.37, and has been on a downward trend.
Hopefully, the actual exchange will be more in line with what the Philippine Central Bank is predicting. Frankly, with the ongoing investigations into the corrupt practices of the Philippine military, along with other widespread corruption in the Philippine government, I’m surprised the peso is as strong as it is.
However, with the possibility that Taiwan, the third largest employer of OFWs (Overseas Filipino Workers) threatening the jobs of almost 80,000 Filipino workers due to a diplomatic row the Taiwanese government is having with the Philippine government, this would drastically cut the amount of OFW taxes coming in to the Philippines government and would sharply curtail remittances coming in to the country. I would suspect that such a scenario would have a negative impact on the peso and the economy.
So if you’re planning to retire to the Philippines, don’t let the wild fluctuations you read about concerning the PHP vs. the USD concern you too much. We’ve managed to do just fine despite the reduction in the exchange rate, and have made budget cuts where we could. One money saving idea we have implemented for the past several months is using a jeepney in Iloilo instead of cabs.
A jeepney ride across town costs P7.50 (17 cents.) A taxi ride the same distance can now run about P80 (about 1.84 US Dollars.) That’s a savings of $3.34 each trip to Iloilo since we used to go back and forth always using the cabs. Figure about four trips a month to the city now saves us $13.36. It’s not much but it adds up.
We’re also going to be opening up a bank account soon in the Philippines which will mean we’ll save money on our ATM fees. BPI (Bank of the Philippine Islands) recently started charging an additional P200 (4.61 USD) for each withdrawal on top of other bank fees, so that will save us a substantial amount each month, also. In the new BPI fees alone it will save us around 23 USD a month. So there are ways to economize and work around the peso to dollar fluctuations. We’re in it for the long haul, and plan to stay living in the Philippines, where it is still much cheaper, we find, than living in the United States.