Vincent Valdepeñas —CONTRIBUTED PHOTO
MANILA, Philippines – Global banking giant Bank of America sees the Philippine economy growing by 5.5 to 6.5 percent this year despite global headwinds, outperforming other emerging markets and opening up investment opportunities for long-term bondholders and foreign direct investors.
Structural reforms that liberalize the entry of foreign players in key sectors, alongside other initiatives to boost business activities, have likewise drummed up interest among global investors, Bank of America country manager Vincent Valdepeñas said in an interview with Inquirer.
“We see a lot of investor interest in the Philippines with the new government,” he said.
@philbizwatcher How will the Philippine economy perform this year? Bank of America country head Vince Valdepenas shares his insights. #banker #pheconomy #philbizwatcher #investingtips ♬ original sound – Doris Dumlao-Abadilla
“I think the Philippines should be doing well this year. I think we do see a lot of headwinds this year from the slowdown in other countries and at the same time, inflation is still sticky. But I think the Philippines should grow by around 5.5 to 6.5 percent this year, still higher compared to other countries or peers. And I see the government doing a lot in terms of getting new investors, and doing a lot of correct policies in terms of growing the business here in the Philippines,” Valdepeñas said.
Demographic dividend
He also cited the country’s favorable demographics. Based on the 2020 Census of Population and Housing, the Philippines had a total population of 109 million, with a young median age of 25.
As of February, the country’s inflation rate remained high at 8.6 percent versus the local central bank’s target range of 2-4 percent, but it has eased from 8.7 percent in January.
“It’s a concern, but inflation is high everywhere. Hence, we think, investors right now are looking at Philippines as a good buying opportunity, especially if they see some widening of credit spreads later in the year,” Valdepeñas said.A widening of credit spreads means that bond investors demand for a higher premium or compensation for what they perceive to be a higher risk that they are taking on.
Interest rates
“In terms of policy rates, we think the rates will peak at around 5.5-6 percent for the US [Federal Reserve] and between 6-7 percent for Philippines. At these levels, it’s good to buy fixed income or bonds. And before the rate cuts begin, [which] may be mid next year, equities too would look good. But right now, there is some good buy-and-hold opportunity for fixed income especially during dips,” he said.For long-term investors, Valdepeñas thus sees Philippine fixed income assets offering a good opportunity.
“When interest rates are high, it generally leads to an overall slowdown and when things do slow down, the central bank will cut rates, more likely next year. That is when your bonds will start to perform. Therefore, opportunistically, one should buy bonds now to lock in good rates and credit spreads,” he said.
@philbizwatcher I asked Bank of America country head Vince Valdepenas where he thinks the opportunities are for the Philippines this year. These are also the areas that the bank is keen on supporting. #investingtips #philbizwatcher #banker #pheconomy ♬ original sound – Doris Dumlao-Abadilla
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