Consumption, gov’t spending to spur growth in 2020 - Slamci

FASTER economic growth is expected next year, with consumption and stronger government spending seen supporting country’s growth direction.

Valerie Pama, president at the Sun Life Asset Management Co. Inc. (Slamci), said the Philippines may see gross domestic product (GDP) growth inching up to seven percent in 2020.

“This is due to a combination of base-effects, increased consumption and stronger government spending,” she told SunStar Cebu.

Last quarter, GDP expanded 6.2 percent from a year earlier, quickening from 5.5 percent in the second quarter, when budget delays put a brake on government spending.

“Our estimates for GDP is 5.8 percent for 2019 and a stronger seven percent for 2020,” Pama said.

She said infrastructure spending should accelerate next year as President Rodrigo Duterte enters more than halfway through his term.

“With just two years remaining for the current administration, the recent realignment of Build, Build, Build expects accelerated expenditures on infrastructure projects,” the Slamci executive said.

In 2019, she said financial markets have had a “good” year as both fixed income and equities posted growth.

As of Nov 11, 2019, Pama said the Philippine stocks rose by 7.28 percent on a total return basis (8.89 percent price return) while the Bangko Sentral ng Pilipinas (BSP) rate cuts of 75 basis points augured well for fixed income as it surged by 21.44 percent for long-term bonds and 12.77 percent for short-term bonds.

“The peso also did well as it rose by 4.1 percent versus the US dollar as inflation normalized and foreign bond investors flocked to Asian fixed income in the hunt for yields,” Pama explained.

As the yearend nears, Pama said the Philippine stock market may see a “late-year rally” given the stronger growth in the third quarter and the positive forecast for the fourth quarter.

“For bonds, we see that this is fully-priced in as there are no foreseen rate cuts by the BSP until the end of 2019,” she said.

On inflation, while price growth is expected to slowly inch up, it’s already at its slowest pace at a low of 0.8 percent as of October, she noted.

In 2019, Slamci is expecting the benchmark Philippine Stock Exchange index to end the year at 8,600 and a 12-month target of 9,238.

“We see 2019 (corporate) earnings to grow by 13 percent and 10.4 percent for 2020,” Pama said.

“Externally, we are seeing a slowdown and even expect a mild slowdown in the United States by 2020. We also see a resolution to the US-China trade war sometime next year as well as a critical general election in the US,” she noted.

The Philippine economy must expand 6.7 percent in the fourth quarter for the government to meet the low end of its six to seven percent goal for the year.

Construction surged 16.3 percent in the third quarter from a year ago; agriculture and fishing rose 3.1 percent and finance climbed 10 percent.

Private consumption growth accelerated to 5.9 percent, while investment contracted for a second quarter, by 2.1 percent.


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