First Metro: PH economy recharging for growth

July 13, 2022

First Metro Investment Corporation expects the Philippine economy to continue to grow this year despite global and domestic challenges.

First Metro president Jose Patricio Dumlao said, “At the start of the year we projected the growth acceleration of the Philippine economy but so many unexpected events happened in the last six months that abated the strong growth momentum of 8.3% in the first quarter of the year. We still believe, however, that the economy will continue to outpace our peers in the region and will expand by 6-7% this year.”

Economic growth will be driven by sustained domestic demand – household consumption, government and investment spending – which grew by 11% in the first quarter of the year.

“The country’s macroeconomic fundamentals remain sound and we have a much better economic situation now than in the past crises. Our gross international reserves (GIR) remain high at USD106.8 billion or about 9-months’ worth of imports; external debt-to-GDP is still low at 27%; and our trade deficit reached a record high of USD43.2 billion in 2021 and could increase to USD50 billion this year, which is about 70% of our exports,” Mr. Dumlao added.

Inflation will remain elevated at 5-5.2% due largely to the impact of higher oil prices globally, affecting the domestic prices of oil, food and commodities.

OFW remittances, which increased to USD35 billion in 2021 will likely grow by 3.5-5.5% this year.

Revenues from BPOs reached P28 billion in 2021 and will continue to increase by at least 6% in 2022.

The peso will still be in depreciation mode due to higher interest rates in the US and increasing trade deficits. It is projected to hover at P54-55 against the US dollar at the end of the year.

As central banks continue to rein in elevated inflation, interest rates are expected to rise from its current levels by an average of 100 basis points across the curve.

In the capital markets, corporate bond issuances in the first half have already exceeded last year’s full year volume. With the current interest rate environment, corporate bond issuances could slowdown in the second half of the year.

In the equities market, earnings per share (EPS) growth is seen to hit 10% and 17x PE. The Philippine Stock Exchange index (PSEi) is projected to reach 7,100 by yearend fueled by attractive valuation and positive investor sentiment. Expected to drive the market upward include the new government’s pronouncement of the continuation of policy reforms; economic expansion; infrastructure rollout; and market-friendly reform measures.