Palace politics pummel peso
Time to play some games with all those charts you have undoubtedly seen over the past few days of the fast-fading Philippine peso.
The big question is how much of the peso's weakness is attribut able to the political uproar over President Joseph Estrada's impeachment trial and how much to the general economic malaise to which all of Asia is so prone.
The first chart sets out the picture. Ten years ago you could get 28 pesos to the US dollar. Today you get 55. That is the top line in the chart.
Now calculate the weighted average of how Asian currencies, excluding the yen, have performed against the US dollar and take the peso relative to this. If you start this index again at 28 in January, 1991 you get a notional peso value of 31.3 at the moment, weaker against the US dollar than the average of the others but not by much.
One of the things that can strike you when you spend a few days in Manila talking to businessmen and financiers is how resilient the economy is to political upsets. It has adapted to these things from long experience.
It is another question, of course, whether the Philippine economy is buoyant or ever has been but that is not the point. The point is simply that when you look further afield than the presidential palace and add a pinch of salt to claims that the economy is headed for disaster because of Mr Estrada you find that things are going pretty much as they normally do and in some cases are looking quite good.
For instance, take the current account balance. As the second chart shows it is at present in surplus to the equivalent of more than 11 per cent of gross domestic product, a far cry from the usual chronic deficit position. This is hardly something you associate with an economy in trouble.
Take government finances. The fiscal balance sank from a surplus to a deficit with the onset of the 1997 Asian financial crisis but that deficit is now shrinking again and, at only 3.3 per cent of GDP, is not hugely out of line with the historical context or with what you would expect at this stage of the recovery cycle.
Take private sector finances. The commercial banks have 32 pesos of shareholders' equity behind every 100 pesos of loans made. This is the highest ratio in Asia, almost three times the average of the region. Crisis should produce bank trouble. Find it in the Philippines if you can.
In fact, look at any economic indicator and you will see what you would normally expect for a crony-ridden system that is never particularly efficient but also is not particularly more inefficient now. A creditable civil service is still at work behind the political shenanigans.
The peso is one of the world's weak currencies. Count on it to be so in the future too. However, sometimes it gets a little too weak when people think it driven only by palace politics. This is probably the situation at the moment.