Metrobank upgrades PH forecast
Metropolitan Bank and Trust Co. has upgraded its economic growth forecasts for the Philippines for the year and projected a recovery of the peso’s value against the dollar to 41.50 by year’s end after the continuing volatility seen this third quarter.
The Philippines’ relatively strong economic fundamentals and favorable international liquidity position should continue to provide support for the peso, according to a third-quarter research report released by Metrobank last Friday. The report raised its gross domestic product growth forecast for the Philippines to 7 percent from 6 percent this year.
The Metrobank research expected the peso to continue trading at the 42-43 levels in the third quarter amid financial jitters and the importation season but projected a recovery to 41.50:$1 by the end of 2012.
“The subsequent rise in remittances in time for the holiday season is seen to help ease the downward pressure on the peso. Furthermore, a sharp depreciation is not seen as the BSP (Bangko Sentral ng Pilipinas) continues to intervene and smoothen exchange rate volatilities,” the report said.
Metrobank said in its research note that “remarkable” expansions in investment spending and the manufacturing sub-sector had been a major push to GDP growth for the first quarter. When sustained, the research said this “would lay the foundation for a more sustainable and inclusive growth moving forward.”
The report said consumer spending would still be supported by the sustained inflow of remittances and the well-anchored inflation expectations.
“The rosy outlook for the real estate and tourism sub-sectors is expected to still underpin the services sector growth. The sustained growth in private construction is also seen to support overall industry sector growth,” the report said.
The research added, however, that risks to the domestic economy remained given the still unresolved euro zone crisis, a slowing Chinese economy and the impact of the US Federal Reserve’s tapering of quantitative easing or aggressive bond-buying activities that have injected liquidity to global markets.
The Philippines’ 7.8-percent GDP growth in the first quarter was the fastest in Asia. Metrobank said this was driven by solid consumption and government spending, a revitalized industry sector and significant improvement in investment spending.
Meanwhile, Metrobank said it expected inflation to come in slightly lower at 3 percent from last year’s average 3.2 percent, banking on “soft” global commodity prices and adequate domestic supply.
“Pressure for interest rates to remain low is expected, at least in the short term, amid the unwinding of SDA (special deposit account) funds,” the research said. The SDA is a facility through which the local central bank borrows from the broader market to mop up excess liquidity.
