Exports, investments to boost PHL economy — Metrobank Research

A recovery in exports plus more investments are keys to a higher growth trajectory for Philippine output this year, the research arm of Metropolitan Bank & Trust Co. noted in its latest report. In the Economic Weather Report, released to reporters late Tuesday, Metrobank Research said it kept the gross domestic product (GDP) forecast for 2013 at 6 percent. The Metrobank forecast is at the lower end of the government's 6 to 7 percent goal in this year and is slower than the actual 6.6 percent GDP posted in 2012. “The increase in investment spending and sustained recovery in external trade could further propel GDP growth this year,” Pauline Revillas, Metrobank research analyst, noted in an e-mail to GMA News Online. In February, Philippine exports fell 15.6 percent to to $3.74 billion year-on-year, the fastest pace of decline in 14 months. The 6-percent growth projection relies on both consumer and government spending, and favorable outlook for the real estate and tourism sub-sectors, said Metrobank. “On the demand side, household consumption will remain as the growth driver,” the report read, emphasizing that remittances by overseas Filipinos and benign inflation will support consumer spending. “Government spending will also support GDP growth amid the expected boost from mid-term election spending,” the report read. Filipinos working and living abroad sent home $1.9 billion in personal remittances in February, up by 6.9 percent from $1.7 billion a year earlier, latest Bangko Sentral ng Pilipinas data showed. The government spent P281.996 billion in the first two months of the year, 12 percent more than in same comparable period in 2012, the Finance Department reported early this month. Year-end peso at 39.4:$1 With the economy barreling amid external headwinds, Metrobank sees the peso settling at 39.4:$1 by year-end. “The Philippines’ relatively strong economic fundamentals and favorable international liquidity position should continue to provide support for the peso,” the report read. “The peso continues to be highly favored by foreign investors,” it added. According to the central bank, foreign portfolio investments or FPIs registered a net inflow of $1.086 billion as of end-March, from $464.45 million a year earlier. FPI is also called hot money, given the ease with which the funds can be placed in and taken out of an economy. Unlike foreign direct investments, hot money is speculative fund and does not directly strengthen industries and create jobs. Hot money also cause volatility in the foreign exchange market. “A steep appreciation however is not seen as the BSP (Bangko Sentral) continues to intervene and smoothen exchange rate volatilities,” Metrobank noted. Amid its growth expectations and continued inflow of funds, Metrobank sees inflation settling at 3.6 percent because of “tight supply in some commodity sectors.” Its inflation numbers fall within the central bank's 3 to 5 percent target.  — VS, GMA News