Latest Views

July 2022


The country’s economic recovery should remain on track, despite likely slight easing starting Q2. More robust economic data—higher employment, NG spending and capital goods imports—as well as firm growth in exports and OFW remittances should provide the impetus. Thus, we expect the economy to expand by 6% to 7% for the entire year. Unlike other countries, the peso depreciation's positive effects should mitigate a good part of consumer spending weakness dogged by high inflation. The peso should also recover in the short-term as the U.S. dollar has started to reverse its recent sharp rise and the PH balance of trade deficit slightly softens by H2. The bond markets show some opportunities since 10-year bond yields may react only meekly to the expected Fed policy rate hikes. PSEi has withstood unabated foreign selling and it has remained above 6,000. Investors should look into stocks which have dividend yields, benefit from wider economic reopening, and have logistics component.

June 2022


Solid data emanating from the industry sector and meaningful recoveries in previously depressed sub-sectors in the Service sector suggest only a slight weakening of the growth momentum starting Q2-2022. YTD National Government budget deficit leaves some P1.2-T available for the rest of the year, amidst stronger tax revenues. Inflation should generally exceed 5.5% in H2, but the positive forces above, together with the stimulative effect of the peso depreciation on OFW remittances, BPO earners, and exports may negate some of inflation’s negative effect on consumption spending. Bloating trade deficits and strength of the U.S. dollar should keep the USDPHP rate on a depreciation mode. Lacking strong downward forces this year should lead to higher interest rates here and abroad. Bond investments may remain unappealing until Q4. Equities, while still on consolidation phase, may still avoid a bear market. The PSEi remains above 6,000 which it has so far done despite continued foreign selling, and as the economy recovers and corporate earnings expand.

May 2022


The May report that GDP growth in Q1-2022 at 8.3% left our ASEAN and East Asia neighbors’ economies way behind has revived business confidence. The latter had somewhat waned in the financial markets— bonds and equities—as the prolonged Russia-Ukraine war and faster inflation, lockdowns in China, and the prospect of substantially tighter U.S. monetary policy all weighed on sentiment, on yields and on share prices. However, we expect Q2 economic expansion to remain robust, albeit a slightly slower pace than Q1, and technocrats likely to form part of the new President’s economic team can properly manage the economy to weather the lurking headwinds.

April 2022


The economy looks poised for another strong GDP growth in Q1-2022 as business firms’ optimism gained additional ground. The quick rebound in employment in February, Manufacturing sector’s outsized gain in February likely to spill over into March with a 3-year high PMI, and export growth at a 6-month peak should provide solid support to the growing optimism. Despite the Russia-Ukraine war driving crude oil, commodity prices and in turn domestic inflation higher, we don’t expect a policy rate hike until Q1 growth performance meets government expectations. With interest rates, both abroad and domestically, continuing to rise, risk aversion towards long tenor bonds will likely play out. Nonetheless, we remain cautiously optimistic about the equities market due to robust earnings growth.

March 2022


The Russian invasion of Ukraine, which resulted in sky-high crude oil and commodity prices, may have dampened the inflation and economic outlook of the country, but domestic demand fueled by the robust recovery and heavier election spending in H1 will likely offset much of the negative impact. Inflation may speed up to 4% by March, but the early food prices slowdowns should partly cushion future increases. We expect monetary policy to remain unchanged to favor growth until Q4 at the earliest. Pressure on the peso should continue until a reasonable resolution of the Russia-Ukraine conflict emerges.

February 2022


It appears quite clear that the outsized 2.7-M increase in jobs in Q4-2021 drove the GDP growth of 7.7% in that quarter. These have sparked greater optimism for 2022, even as the economy and the equities market had a good start for the year. The bond market, however, did not enjoy that as the specter of higher interest rates in the U.S. and crude oil prices spoiled the mini-rally in January. We think that the economy will accelerate in H1 and the full year, partly due to the overflow of jobs and spending into H1, bolstered by infrastructure and election spending and loose monetary policy. A January spike in Omicron-variant cases notwithstanding, the variant now appears much less deadly than its forerunner and so we expect less mobility restrictions looking forward.

January 2022


Economic data releases in December and early Jan- uary further boosted confidence of firms and consumers that growth will accelerate in 2022. Highest employment of 45.5-M in November due to massive addition of jobs, inflation easing to 3.6% YoY in December, to within the BSP’s target range, capital goods imports surging by 25.4% YoY and NG spending sustained at 10.3% YoY, all contributed to the brighter outlook. The bond market held its ground in December while the equities market slightly eased. Moving forward, we expect an additional 1 percentage point, at least, to boost GDP expansion by 6% to 7%, which will reflect the biggest impact in H1. However, both the bond and equities market face important uncertainties in Q1 and may go sideways for that quarter. Over the year, we remain bullish towards the equities market where we see PSEi reaching 7,900-8,100.










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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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