PHL economy to stay strong in 2013 — First Metro Investment

GMA News January 7, 2013 3:34pm

The Philippine economy will accelerate further this year, fueled by more infrastructure projects, higher turnover in the consumer and services sector, and election spending, First Metro Investment Corporation (FMIC), the investment banking arm of the Metrobank Group, said Monday.

Continued growth will provide a springboard for corporate earnings to rise by 20 percent with Philippine stocks reaching the 6,800 level, the company said.

The gross domestic product (GDP) is projected at 7.5 percent to 8 percent for 2013, FMIC president Roberto Juanchito Dispo told reporter during the company's 2013 economic briefing.

Growth will be “driven by heavy election spending, increased infrastructure projects, robust consumer and services sector,” Dispo noted.

At the same briefing, University of Asia and the Pacific senior economist Victor Abola said that public sector infrastructure spending "may go full blast," with the Aquino administration's flagship public-private partnership program (PPP) finally taking off by this year, more than two years after it was launched in December 2010.

Expansion in the business process outsourcing (BPO) and tourism sub-sectors will push the services sector output by 8 percent in 2013, up from FMIC's 2012 forecast of 7.1 percent, added Abola, who serves as economic advisor for FMIC.

FMIC projected growth to hit 6.3 percent in 2012. Last month, Socioeconomic Planning Secretary Arsenio Balisacan expected 2012 growth to settle “around 6.5 percent,” adding that the Cabinet-level, policy setting Development Budget Coordination Committee maintained its 6-percent to 7-percent growth goal for 2013.

Dispo, however, warned of downside risks to growth like the peso's continued appreciation, delays in the roll-out of PPP projects as well as political instability that may arise from the election season.

“A strong currency may weigh on dollar-dependent sectors like the manufacturing sector, overseas Filipinos as well as BPOs and the services sector in general,” he explained, noting that FMIC's forecast for the peso-dollar rate in 2013 is at the 41 level—significantly weaker than most analysts' average projection of a 39.5:$1 by year-end.

Low inflation

Abola said the rise in consumer prices will remain benign, forecasting a full-year inflation of  2.8 percent.

Headline inflation hit 3.2 percent in 2012. The Bangko Sentral ng Pilipinas said the rise in consumer prices will average at a slower 3.1 percent in 2013.

Tepid inflation this year will feed on “a bit lower crude oil prices, as US significantly produces more and imports less oil, coupled with weak global demand,” said Abola.

FMIC officials noted that the benign inflation outlook will allow the Bangko Sentral to keep interest rates at record lows, allowing a favorable business environment.

Businesses upbeat

The rosy economic outlook will further boost businesses in the country, with the Philippine Stock Exchange indexc poised to reach fresh records.

“Corporate earnings will likely grow by 18 percent to 20 percent,” Bede Lovell Gomez, assistant vice president and deputy group head of investment advisory, said at the same briefing.

He noted that corporate gains will be driven by higher earnings in the industrial, consumer related-manufacturing, real estate properties, and gaming and retail sectors.

As such, “the equities market will remain bullish with forecast that the index will hit 6,800 and price earnings ratio at 17 times,” Gomez noted.

FMIC's head of investment also brushed off the perception that the stock market is overpriced. “In sync with accelerating 2013 GDP and increased earnings prospects in certain sectors, the PSEi is still a buy,” he added

On Thursday,the benchmark PSEi broke the 6,000 mark less than 15 minutes into the morning session.

Philippine stocks have been sustaining a rally, hitting three consecutive fresh record highs last week. The PSEi recorded a total 38 all-time highs last year.

Dispo, however, said the PSEi will likely have a “healthy” pull-back to 5,800 levels in the coming weeks before trying to break the 6,100 level. “This is healthy and will allow more investors to buy in stocks,” he added.

FMIC expects more companies to list on the stock exchange, prompting brisk trading in the market. — BM/VS, GMA News