Growth may return to 7% level in ’20, Sun Life exec says

The Philippine economy may return to the 7-percent growth trajectory for the first time in six years in 2020 assuming that the government budget delay that gnawed on production this year will not happen again, an investment expert from Sun Life of Canada said.

This could, in turn, boost the Philippine Stock Exchange index (PSEi) to a new record high of 9,460 next year, as the upbeat macroeconomic prospects could support an earnings growth rate of 10.4 percent, Sun Life of Canada Philippines chief investment officer Michael Enriquez said in a briefing on Friday.

The PSEi outlook suggests that investors will be willing to buy local blue-chip stocks at 18.2 times the projected average corporate earnings per share next year, he said.

“Next year will be a much more favorable year for Philippines. Hopefully, we will see 7-percent (growth) again,” he said.

This year, Enriquez expects the domestic economy to grow by 5.8 percent for the full year.

Enriquez said banks and property would likely continue to perform well in the coming year. The consumer sector may rebound as higher growth favors spending while the decline in input costs will be good for the producers, he said.

The risks to watch out for in 2020 would be a potential US recession, which could be shallow and short-lived, he said. On the domestic front, there could be execution risks on the part of the government’s big-ticket projects, he said.

But if the government could pass the budget before the end of this year, Enriquez suggested that economic pump-priming could start from day one of 2020.

This year, he said many investors had been caught by surprise when the government was not able to pass the budget for them, resulting in sluggish gross domestic growth early in the year.

“On the positive side the (Bangko Sentral ng Pilipinas) has delivered better-than-expected. We didn’t expect reserve requirement cut to be that aggressive at 400 basis points. The new BSP Governor (Benjamin Diokno) is really pro-growth and that has been translated into his policies, and next year we will see more of this happening,” Enriquez said.

After the 75-basis point overnight borrowing rate reduction so far this year, he said the BSP could sanction one more cut this year and at least one in 2020.

Inflation is seen to remain benign in 2020, averaging at 2-3 percent, within the BSP’s 2-4 percent target range.

Also, Sun Life is targeting the PSEi to close the year at 8,600, marking a 15.15 percent upside from the end-2018 level. –DORIS DUMLAO-ABADILLA