What Q2 results mean

QUESTION: I read your Twitter post on the second quarter economic results. What does that mean and how will that affect us?—Name withheld upon request, via e-mail

Answer: While the nation was preoccupied with the “pork-barrel” issue and the surrender of Janet Lim-Napoles dominated the news and social media, a very important development with a monumental impact took a back seat—the news of the stellar economic growth of the Philippine economy for the second quarter.

Beating forecasts, the Philippines grew 7.5 percent in the second quarter despite a weakening regional economy. The macroeconomic fundamentals of the nation is very strong, something we should be jubilant about.

Despite the stellar numbers, a big concern looms, and that is sustainability and inclusive growth. Agriculture remains a laggard while employment generation still needs to hit momentum. For growth to benefit the nation as a whole, a robust economy should grow in a consistent and sustainable manner and more (and better) employment should be generated.

While the elections had an impact on the growth numbers, what is eventful and critical is the continued rebound of manufacturing growing at 10 percent. this is where the bulk of production is coming from. Manufacturing is shifting from traditional clothes and footwear manufacturing to higher value chemical, electrical and electronics manufacturing. Furniture are also providing strong growth support.  Construction, led by government initiatives, also posted a strong double-digit growth. Thus, industrial growth is pulling up growth. Finally, services led by growth in trading, finance and real estate, reflected double digit-growth. What can be observed from this current growth pattern is the emergence of new manufacturing bases as sources of competitiveness.

From an investment perspective, we see the economy to be conducive to business. Good companies will definitely benefit from it and profit will find its way into well-run corporations. The prevailing benign inflation rate, low-interest environment coupled with strong monetary and fiscal activity will ultimately be reflected in Philippine investments despite the current ambivalence and volatility of the market.

I’ve solicited the views of an economics professor who happens to be a good friend, Dr. Alvin Ang. This is what he said:

“The [second quarter gross domestic product] results proved that there are indeed fundamental strengths in the economy. At present, the main beneficiaries of this growth are mostly in the services sector, as the growing manufactures are relatively newer in terms of employing people. This points out the reality that there is a strong upside to these industries.”

What does all this mean? A growing economy, when sustainable, provides a fertile ground for good business. Good business will deliver good profits and, when properly harnessed, it should help the economy to even grow further. Investment values are ultimately derived from good profits and when the economy is robust, investors are hopeful.

To emphasize, the fundamentals of the Philippine economy have been really good, are still good and will continue to be good for years to come. The second quarter GDP result was just a reflection of how good our country has performed. As other Asean economies have slowed down, the Philippines showed how good and resilient it is as our nucleus is domestically driven compared to our peers. This makes our economy the fifth best in the world.

Looking at Philippine stocks, this validates the surge in our markets over the past few months. It shows that growth in our market is not just a fluke but is headlined by companies that are really earning. This means that our favorite stocks can be bought at an even cheaper price.

The debt market might be another concern though. While our debt instruments will attract people for its lower risk nature, the returns continues to be low and we will not see any hikes in returns anytime soon.

Growth in investments should be good in the long term, sans the typical volatility of a market—good economic news or not. To really participate in economic growth, it is time that more Filipinos invest their money rather than just spend it.

Be financially at peace by joining me at the No-Nonsense Personal Finance Conference on Sept. 14 with my guests Dennis Sy (author of ‘Rich for Life’) and Carl Dy (real estate investing expert). This program is made possible by BPI and RFP. To register or for inquiries, please send an email to [email protected] or text/call 0917-8146278.

(Randell Tiongson is registered financial planner of RFP Philippines. To learn more about financial planning and how to become RFP, attend our FREE personal finance talk on Sept. 5, 7 p.m. at PSE Ortigas. To reserve, e-mail at [email protected] or text <name><e-mail> <RFPinfo> at 0917-3464126.)