Professional Documents
Culture Documents
SITUATION
Enday and Dodong are among the customers in the store. Those who came before
them are on a frenzy mode, grabbing goods mostly electronic gadgets and devices.
Anybody can sense the looming disaster. It arose from the governments plan to
devalue the currency in the next day which will end the pesos parity with the dollar
after a period of soaring prices and economic woes.
QUESTIONS
Why do people are in a frenzy buying mostly electronic gadgets and devices,
specifically? Who are the winners and losers in currency devaluation?
How does Devaluation of currency help during a period of soaring prices and
economic woes?
IA
With its plan to devalue the peso currency in response to a period soaring
prices and economic woes, how can the government mitigate or buffer the risks and
adverse effects of the currency devaluation to its economy and to its people?
II
DATA GATHERED
Exporters (Winners)
Tourists (Losers)
Exports cheaper. A devaluation of the exchange rate will make exports more
competitive and appear cheaper to foreigners. This will increase demand for
exports
III
ANALYSIS OF DATA
STRENGTHS (Pros)
WEAKNESSES (Cons)
expensive.
With
exports
more
competitive
and
imports
more
higher
expensive,
we
should
see
in
Aggregate
Demand
protects domestic industries who may
will
be
Real
favorable
Estate,
to
pressure of competition.
and
(Psychological)
Negative
Image
International Investors
brought
by
the
devaluation
might
OPPORTUNITIES
THREATS
stronger economy
IV
COURSES OF ACTION
1. Encourage consumption of locally produced goods
The government should encourage consumption of locally produced goods to
increase demand of locally produced goods instead of the imported goods.
PROS Increase in demand of locally produced goods will increase production of
local manufacturer will make prices and quantity of imported goods dropped, helping
eliminate trade deficits. Also, GDP will also increase.
CONS Importers and existing Foreign companies in the country might lose
because this movement. Thus, companies might close and workers will get
unemployed.
2. Increase local production of usually imported goods with increase of cash
inflow from foreign investors
One of the positive effects of devaluation is that foreign investors are more likely
to invest because they will have greater returns as compared to their investments
before the devaluation. Local companies should utilize this influx of foreign
investment for the manufacture of the usually imported goods, making the country
self-sufficient and settle trade deficits.
PROS Increase in GDP, Lessens imports and trade deficit.
CONS Some goods are just more advantageous to import than to manufacture
locally, such as petroleum, etc.
CONCLUSION
Devaluation of currency is principally intended to invert the trade deficits into
surpluses, in hope of making the economy of the country to perform better and battle
adverse effects of inflation and other economic issues. Although it is advantageous
for a country, devaluation also poses threats and risks in its implementation. The
challenge is to minimize the damages that it may bring to the economy.
In devaluation, there are winners and there are losers. It is the role then of the
government to mitigate the losses that the losers are incurring to impede further
economic disaster. We believe that the devaluation, with its risk and threats, is still
more advantageous move of an economically distressed country especially amidst
huge trade deficits.
RECOMMENDATION
Considering that it is highly necessary for the country to impose devaluation
of the currency, we recommend that the government exert more effort in minimizing
the adverse effects, the risks and the threats that the devaluation.
In order to minimize these adverse effects, our group recommends that the
government do the following including but not limited to (1) encourage consumption
of local produce, (2) be more self-sufficient by producing locally the usually imported
goods as long as it is more beneficial than costly, and (3) increase the disposable
income of the citizens by increasing statutory wages and increasing tax exemptions.
REFERENCES