2013 Mid-Year Economic and Financial Outlook
Investors will invest where there is growth, and currently there’s growth in the Philippines.
“The fundamentals in the Philippines are indeed very rosy,” says Citibank Savings investment consultant Ed Martinez at the 7th PANA GMM.
“GDP growth in the first quarter was at 7.8 percent and we’re looking to end the second quarter at 7 percent, which is dramatically higher than the average.”
We’ve heard this spiel from finance experts quite a number of times at the PANA GMM. That’s because Mr. Martinez counts, the Philippines has had 18 straight quarters of growth.
“Increasing growth forecasts creates an environment for corporations to be more profitable,” he says.
“When the firms earn above expectations, it also pays wages above expectations, and you start a vicious cycle of growth.”
In economics, high growth brings with it high inflation. The sweet spot for the Philippines is we’re enjoying an environment of disinflation – the country is experiencing high growth but low inflation.
Borrowers should make the most of this sweet spot, as it should end soon enough.
“We firmly believe that the interest rates are bottoming now. We think that it cannot go lower any further,” Mr. Martinez says.
“We also believe that disinflation will end this year. Meaning, inflation will start to creep up causing interest rates to go up. If you have borrowings, better to do it this year than next.”
The forecast for inflation in 2013 is 2.9 to 3.1 percent. In 2014, it’s projected at 3.2 percent.
While economists have traditionally attributed the Philippines’ growth to business process outsourcing, Mr. Martinez also looks at public-private partnerships with optimism.
PPP creates the necessary infrastructure in the country. It also sets in motion long-term effects that the economy at large will enjoy long after development is completed.
“PPP doesn’t only bring you expenditure in cement and bridges and towns and buildings, but the potential to double your GDP per capita over the next 10 years,” he says.
“When you have a double GDP per capita you also have people now starting to afford more expensive things.”
The growth industries to watch out for in the near future are infrastructure-related industries, which are pegged to grow faster than expected. Banks will see higher returns as a result.
Technology comes next, following a strong digital and mobile trend in the country, and in the very long-term, consumer companies are expected to enjoy growth as well, as people start gaining power to purchase more.