The Philippine economy can grow at a faster pace of 5-6 percent this year on the back of higher government spending and robust overseas Filipino remittances that help drive up consumption, according to First Metro Investment Corp.
In a recent briefing, top officials of the Metrobank group’s investment banking unit also said that an upgrade to “investment” credit rating would be a key theme for the Philippines this year. The country’s upbeat credit fundamentals are seen supported by robust investment inflows, strong market appetite, lower borrowing cost, liquidity and faster-than-expected capacity to pay debt.
“The Philippines has shown vigorous economic growth in the past couple of years and the outlook for 2012 is very positive,” said FMIC chairman Francisco Sebastian.
“Everybody is expecting an upgrade but the financial markets and investors in general have upgraded the Philippines already,” Sebastian said, noting that the government was now able to tap the long-term debt markets at a cheaper rate than investment-graded Indonesia.
Public debt has been steadily reduced, inflation rate remains low, jobs created last year reached 2.1 million and the government has shown determination in implementing fiscal policies and reform measures, Sebastian pointed out.
FMIC sees inflation rate in the country easing to 3.5-3.7 percent this year on a relatively stable crude oil assumption.
Despite the fiscal woes in Europe and slow recovery in the United States, remittances from overseas Filipinos are expected to increase by 5 to 7 percent this year.
At the same time, FMIC sees recovery in exports this year, projecting a 5-7 percent rise in export receipts versus a contraction in 2011.
Vic Abola, an economist from the University of Asia and the Pacific, which is FMIC’s institutional partner in macroeconomic research, said the country’s dependence on exports to the European Union had already dropped to 12 percent from 18 percent a decade ago. “We’re now more dependent on East Asia, which accounts for half of exports,” Abola said.
The 5-6 percent projected growth in gross domestic product for 2012 was seen as an improvement from 2011, when a global slowdown and fiscal underspending likely capped the country’s domestic expansion to below 4 percent. This outlook also suggests that the Philippines can return to its trend growth rate seen prior to 2010 despite a bleak global economic outlook.
FMIC president Roberto Juanchito Dispo said the capital markets would likely see increased activities particularly in mid-tier merger and acquisitions (M&As), debt financing and retail bonds, aided by a low-interest rate environment.
The Bangko Sentral ng Pilipinas is expected to ease its monetary policy in the first quarter and to keep interest rates for the rest of the year.
“We anticipate more active greenfield sectors, particularly in toll roads and power. We also see opportunities with the implementation of the minimum public ownership requirement,” Dispo said.
The Philippine Stock Exchange has all publicly listed companies to widen their public float to at least 10 percent within this year or face trading suspension January 2013.