January 14 ------ The country’s economy is expected to reach six percent this year with the help of robust private consumption and government infrastructure spending, the Metrobank Group’s investment arm First Metro Investment Corp. said. In a breifing, First Metro President Jose Patricio Dumlao said that the country’s economy may face external challenges but will be offset by progress on the Marcos administration’s economic projects.
“This year, we continue to anticipate external headwinds– global growth outlook remains subdued. While headline inflation has softened in many countries driven by the decline in food and energy prices, core inflation remains a concern,” Dumlao said. “Amidst all this, the country’s economy, with its strong macroeconomic fundamentals, is expected to expand by 6 percent,” he further stated.
This is, however, still lower than Marcos’ economic team projections of 6.5 percent to 7.5 percent for this year, which was already narrowed from the previous 6.5 percent to 8 percent range. Victor A. Abola, an economist from the University of Asia and the Pacific, told reporters that the lower end is still possible if foreign investments come in. Foreign direct investments declined year-on-year by 29.6 percent to $655 million in October last year compared to $930 million in the same period in 2022.
Further, First Metro also forecast inflation, which saw a 14-year high in 2023, to ease to 3.8 percent this year, still within the central bank’s target range of 2 to 4 percent. This ease in inflation will prompt the interest rates to decline following the 100-basis point in policy rates over the past year, the corporation said. Despite this, it still projects the peso to remain under pressure due to persistent uncertainties “on when and by how much the Fed will cut policy rates.” “It is projected to trade within the P56 to P58 range against the dollar,” it said.
Meanwhile, this policy pivot along with slowdown in inflation will entice debt issuers back into the market that will capitalize on reduced borrowing costs, First Metro said. “On the equity side, 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,” it added.
Source: mb.com.ph