Analysts claim economy headed for a banner year

THE PHILIPPINE economy is headed for banner growth this year, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) yesterday claimed, with the stock market set for new highs, interest rates to stay low and inflation to remain benign.

Gross domestic product (GDP) growth will likely hit 7.5-8% this year, economist Victor A. Abola yesterday said in a joint UA&P and FMIC briefing, given “heavy election spending, increased infrastructure projects, robust consumer and services sectors and stronger tourism and gaming industries.”

The forecast is higher than the government’s 6-7% target.

GDP growth last year is expected to have topped the 5-6% target, already averaging 6.5% as of September.

Inflation, meanwhile, ended 2012 at 3.2%, hitting the central bank’s forecast. With monetary authorities expecting the rise in consumer prices to remain under control, FMIC and the UA&P expect the rate to fall to 2.8% this year due to more “stable food and oil prices.”

“The agriculture sector is starting to pick up and the government is spending more to rehabilitate and construct more irrigation systems, farm-to-market roads and storage facilities. International rice prices have also remained stable due to abundant inventories,” Mr. Abola noted.

Remittances will likely increase by 4-5% this year, meanwhile, as developed markets continue to employ Filipino workers.

“Though remittances will not be one of the primary drivers of this year’s growth it will continue to provide a boost to the country’s growth,” FMIC president Roberto Juanchito T. Dispo said.

Money sent home by overseas Filipinos grew by 5.84% to $17.499 billion as of October. The Bangko Sentral ng Pilipinas (BSP) expects remittances to grow by 5% from the $20.117 billion recorded in 2011.

The peso, meanwhile, is expected to average around P41-42 to the US dollar, although Mr. Abola noted that recent gains could push the Monetary Board to cut policy rates by another 25 basis points.

The peso posted a 58-month high on Jan. 3 to close at P40.77 to the dollar. The BSP’s overnight borrowing and lending rates currently stand at record lows of 3.5% and 5.5%, respectively.

At local debt market, FMIC Senior Vice-President Reynaldo B. Montalbo, Jr. said yields would continue to drop amid a manageable inflation environment, a possible credit rating upgrade, high liquidity and a limited supply of debt papers given the trimmed number of government auctions.

The 91-day T-bill rate is expected to settle at around 0.25%-0.5% by the end of the year; the five-year papers, 3.5%-3.625%; 10-year papers, 3.75%-3.925%; 20-year papers, 4.75%-4.9%; and the 25-year papers, 4.925%-5%.

The upcoming “mid-term elections, inflation fears, credit rating upgrade, and developments from the US and the euro zone”, however, could cause volatility, Mr. Montalbo warned.

Fellow FMIC Senior Vice-President Justino Juan R. Ocampo, meanwhile, said recent regulatory reforms, offshore market players’ planned issuances and government debt sales would support the bond market’s performance.

“Issuances will grow as corporations with large financing requirements will take advantage of the low interest rate environment,” he said.

For the equities market, Bede Lovell S. Gomez, FMIC assistant vice-president, said: “The PSEi (Philippine Stock Exchange index) is seen to reach the 6,800 level with price-to-earnings ratio at 17x by yearend” as corporate earnings will likely grow by 20%.

FMIC officials said they favored the stocks of Puregold Price Club, Inc., Pepsi-Cola Products Phillipines, Inc., San Miguel Purefooods Co. Inc., GT Capital Holdings, Inc., Alliance Global Group, Inc. –http://www.bworldonline.com/content.php?section=TopStory&title=Analysts-claim-economy-headed-for-a-banner-year&id=63912