First Metro Investments Corp. (FMIC), the investment banking arm of the Metrobank Group, said Thursday it expects the Philippine economy to expand by 6 percent this year despite external headwinds.
FMIC president Jose Patricio Dumlao said the growth this year will be driven by robust private consumption, increased government infrastructure spending, a strong labor market and domestic tourism recovery.
“This year, we continue to anticipate external headwinds―global growth outlook remains subdued. While headline inflation has softened in many countries driven by decline in food and energy prices, core inflation remains a concern,” Dumlao said
“External uncertainties such as the movements of the Fed and potential sharper slowdown in China could drag on growth. Amidst all this, the country’s economy, with its strong macroeconomic fundamentals, is expected to expand by 6 percent,” he said.
Amid easing food and fuel prices, inflation is expected to ease to 3.8 percent this year, which is aligned with Bangko Sentral ng Pilipinas’ target range of 2 percent to 4 percent.
The peso is also expected to trade within a range of 56 to P58 against the US dollar as the local currency will remain under pressure amid persistent uncertainties on when and how much the US Federal Reserve will cut policy rates.
FMIC said following a cumulative 100-basis-point increase in policy rates over the past year, interest rates are anticipated to decline, underpinned by a decrease in inflationary pressures.
It said that in the capital markets, the much-awaited policy pivot along with a slowdown in inflation would entice debt issuers back into the market, capitalizing on reduced borrowing costs.
The potential easing of bond yields should boost the attractiveness of the stock market, encouraging issuers to consider equity issuances as a valuable alternative for capital raising, FMIC said.
The Philippine Stock Exchange Index (PSEi) is bound to stage a recovery this year, driven by improving investor sentiment and easing equity risk premium arising from declining inflation and interest rates, and resilient double-digit corporate earnings.
It is expected to hit 7,000 to 7,500 points this year, supported by earnings per share (EPS) growth of 11 percent and a PE range of 12.6x to 13.6x. With Darwin G. Amojelar