For decades, many Filipinos have romanticized the economic performance of the Philippine peso under former President Ferdinand Marcos. A popular belief persists that during his administration, the peso was trading at 1 peso to 1 US dollar, signifying a strong and stable economy. This nostalgic perception fuels comparisons with the present-day economy, where the peso has significantly depreciated. But is this historical claim accurate?
The truth is far from what many believe. The peso under Marcos never actually traded at 1:1 with the US dollar, and the notion that this exchange rate indicated a prosperous economy is misleading.
The Reality of the Peso’s Exchange Rate
Looking at official exchange rate data from the World Bank, Marcos took office in 1965, and at that time, the peso was actually trading at 3.9 pesos to 1 US dollar. More importantly, this exchange rate had remained relatively stable for years before his presidency, between 1963 to 1969. This stability was not due to a strong economy but rather because of a fixed exchange rate policy imposed by the government. The peso’s value was artificially maintained through government intervention, rather than determined by market forces.
Over time, however, the peso experienced severe devaluation. Contrary to claims that Marcos maintained a strong peso, historical data shows that it steadily depreciated under his administration, particularly in the early 1980s, when it fell dramatically to 18.61 pesos per US dollar.
The Peso After Marcos
Following Marcos’ administration, the devaluation continued. Under President Gloria Macapagal Arroyo, the peso traded between 40 to 50 pesos per US dollar. Today, the peso fluctuates around 58 pesos per dollar, leading many to assume that the Philippine economy is in a worse state than before.
However, just like the 1:1 peso-dollar myth under Marcos, this assumption is also flawed. A weakening peso does not necessarily indicate economic decline. In fact, a depreciating currency can bring significant benefits to the economy.
The Benefits of a Weaker Peso
Many countries, including Vietnam and China, have used a weaker currency to their advantage. Despite its undervalued currency, Vietnam’s economy has outperformed the Philippines in many aspects, including GDP per capita. A weaker currency makes exports more competitive, boosting industries and employment.
Impact on Philippine Exports
A look at the Philippines’ export performance over time shows a clear trend:
- When the peso depreciates, Philippine exports become cheaper and more competitive in global markets.
- During the 1980s, when the peso traded at 15-25 pesos per dollar, exports were not a major economic driver.
- In the early 2000s, as the peso weakened further under Arroyo’s presidency, exports’ contribution to GDP significantly increased.
- However, when the peso regained strength, exports’ share of GDP declined.
This happens because when the peso weakens, Philippine-made products become more affordable for foreign buyers, increasing demand and leading to higher export revenues and job creation.
The Role of the BPO Industry
One of the biggest beneficiaries of a weaker peso is the Business Process Outsourcing (BPO) sector, which is heavily reliant on foreign clients paying in US dollars.
Example: BPO Revenue Growth with a Weak Peso
- If a U.S.-based company pays $10,000 per month for outsourcing to a Philippine BPO firm:
- At an exchange rate of ₱50 per dollar, the firm receives ₱500,000.
- If the peso weakens to ₱58 per dollar, the same $10,000 is now worth ₱580,000, increasing revenue without the client paying more.
This additional revenue allows BPO firms to expand operations, hire more employees, and improve infrastructure, making the Philippines even more competitive in the outsourcing industry.
Similarly, a weaker peso allows BPO firms to hire employees at lower costs in dollar terms, making the Philippines a preferred outsourcing destination over other countries.
Other Beneficiaries of a Weak Peso
- Tourism – Foreign tourists get more value for their money, encouraging travel to the Philippines.
- Overseas Filipino Workers (OFWs) – Remittances become more valuable, as families receive more pesos per dollar sent home.
- Foreign Investments – International companies find it cheaper to set up operations in the Philippines.
The Downsides of a Weaker Peso
Despite its advantages, a weaker peso also comes with economic challenges:
- Higher import costs – Essential goods like rice, fuel, and medical supplies become more expensive.
- Inflation – Increased costs of imported goods reduce purchasing power, affecting consumers.
- Debt servicing – Loans denominated in foreign currency become more expensive for the government.
A Balancing Act
While a weaker peso supports export-driven industries, tourism, and remittances, it also increases inflation and the cost of living for Filipinos. The key is striking a balance—ensuring the peso is competitive enough to support economic growth without causing excessive inflation.
Final Thoughts
The notion that the peso traded at 1:1 under Marcos is a myth, and so is the idea that a weaker peso means a weaker economy. Economic performance depends on various factors, including trade policies, industrial development, and global competitiveness.
A weaker peso can be beneficial if leveraged correctly—boosting exports, foreign investments, and remittances. However, the government must implement policies to mitigate inflation and protect consumers.
So, rather than longing for a fictional golden era, it’s time to understand the realities of currency valuation and focus on economic strategies that drive real growth.