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A bit brighter outlook of both firms and consumers greets the economy in 2021. Not only do the Bangko Sentral ng Pilipinas’ (BSP) consumer and business surveys say so, but the financial markets say “Aye” as well. The country has issued 10.5- and 25-year ROPs totaling $2.8-B at record-low coupon rates, while PSEi has stayed well above 7,000 since early December despite some exits by foreign investors. The country’s gains vs COVID-19 and rollout of vaccines, support the relaxation of lockdowns while Christmas season spending climbs. Thus, we see a good economic recovery with a cautionary note. Positive data included Manufacturing PMI at 49.9 in December, while OFW remittances posted the third straight month of growth in October, and the country’s gross international reserves (GIR) hit another record high of $104.5-B or 11.2 months of import cover by end-November.



Signs of the nascent recovery emerged once again in October. Exports growth moved into positive territory (2.2% in September), while Overseas Filipino Workers’ (OFW) remittances had the highest growth for the year with a huge 9.1% uptick in September. Industrial production improved to single-digit decline. Bond markets remained tentative with the return of fears for higher interest rates as U.S. 10-year T-bond yields rose by 22 bps, while October inflation raced to 2.5% from 2.3% a month earlier. The stock market outperformed other bourses in the region with foreign net buying, albeit still small by early November, began to emerge. Thus, sentiment has turned more constructive, specially with the government relaxing further quarantine restrictions and Congress approving the Financial Institutions Strategic Transfer (FIST) and Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bills that will provide P70.0-B for lending to MSME’s by government banks and allow banks to transfer to distressed assets management firms beleaguered loans to MSMEs.



A shower of good news and less downbeat economic data suggest that the economy has surely, perhaps slowly, alighted on the recovery mode. Manufacturing PMI appeared to expand in September, inflation continued to ease to 2.3% in September, while the tax revenues dropped just beyond double-digit pace despite the lockdowns support this view. We do expect this to gain traction as the government has indicated willingness to ease COVID-19 induced restrictions in Q4, which should result in significantly greater construction and manufacturing activity as we approach the end of this dreadful 2020.










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Market Outlook

Will Gov’t Sustain Fastest 2020 Pandemic Spending in Decades?

October 9, 2020


Despite the lockdown that hobbled infrastructure spending, down by 9.4% eight months into the year, government (gov’t) total spending for the period jumped 21% versus last year, same period. While there’s been a deceleration of gov’t spending in the last three months until last August, the pace of growth has never been this fast since 1995. It was only in 2018 when growth matched the current 21% upturn.

Weak Consumer Amid Higher Rates

Weak Consumer Sector Face Interest Rate Challenge

September 18, 2020


Unfortunately, interest rate upticks come at this time of still weak Philippine consumer sector based on several indicators: mobility index, consumer sentiment (reflected in a lowest reading since 2009 based on Social Weather Station survey), widespread joblessness and the still raging virus infection (increase in new daily Covid-19 cases to 3,903 in the past seven days compared to 2,593 in the first week of September).

NG Financing

Peso Yield Curve Inches Up

September 7, 2020


The country’s fiscal program has evolved faster than expected. The National Government (gov’t) budget deficit was revised higher to Php1.8T as the GDP growth forecast deteriorated to -6% based on last July’s revision by economic planners from -2% last March. The deficit came from a lower full year forecast of Php678bn this year.







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