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DBS bank analyzes Philippine peso vs. Indian rupee

by: Carlo Abadilla

Friday, October 2, 2009 | Outsourcing News |


Southeast Asia's largest bank, DBS, released its Asian Currency Research report on September 24 which involved a cross-analysis of the currencies of leading outsourcing destinations, the Philippines and India. Studies indicated the Philippine peso had appreciated against the Indian rupee during three of the last four years; a trend that is expected to continue in the remaining year.

While India proved more resilient amid the economic recession, it also suffered record trade deficits and growth in the negative on its overall current account. The Philippines, on the other hand, recorded current-account surpluses which, as DBS currency strategist, Philip Wee points out, is the determining factor in the behavior of the peso in comparison to India when attracting business process outsourcing (BPO) investments.

Wee also noted that India will have to increase external loans to compensate in domestic savings shortages:

“Herein lies one important difference between India and the Philippines. When both countries were achieving high growth rates before the global crisis, India's external debt was rising and catching up with its foreign reserves, while foreign reserves were rising and closing its gap with external debt in the Philippines.”

The Philippines was assessed as having a more manageable budget gap of 2.7 percent of GDP in the second quarter of this year (vs. India's 7.3 percent), and a stronger international liquidity position overall.

Source:
http://www.businessmirror.com.ph/

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