The Philippine economy is likely to expand at a faster pace of 7 percent this year on the back of sustained fiscal and monetary stimulus, reduced mobility restrictions and the attainment of herd immunity against COVID-19, the chief economist of Maybank Investment Bank said.
This macroeconomic backdrop is seen supportive of local equities, which will likely propel the main-share Philippine Stock Exchange index (PSEi) to 8,200 by the year’s end, while corporate earnings may rise by an average of 19 percent, Maybank’s analysts said.
At a briefing, economist Suhaimi Ilias said sustained economic reopening would be a key theme for gross domestic product (GDP) growth across Southeast Asia this year as opposed to the recurring lockdowns of the past two years.
Pace of vaccination
One critical factor cited is the pace of vaccination. While Singapore and Malaysia have already reached the 70-percent vaccination rate associated with herd immunity, Ilias said the Philippines and the rest of Asia would likely attain the same within the first four months of this year.
This is seen to support the acceleration in the country’s GDP growth rate to 7 percent this year from an estimated 5.5 percent last year.
Maybank also expects the local central bank to maintain its interest rates at record-low levels before implementing a modest 25-percentage rate hike in the final quarter.
On the fiscal side, Maybank is expecting the government’s fiscal stimulus to largely remain in place, resulting in a budget deficit of 7 percent of GDP for 2022—still relatively large relative to the immediate pre-COVID-19 level of just under 3.5 percent deficit to GDP ratio.