BEFORE every election year, the Philippines sees a spike in economic growth. An investment manager believes 2015 will show the same results.
Sun Life of Canada Philippines Inc. (SLOPCI) chief investments officer Michael Gerard Enriquez, in a briefing with reporters yesterday, said the time is right to invest, as the economy is poised to grow, as are the equity markets.
Enriquez showed the country’s solid consumption growth and expected boost in infrastructure spending as factors that will lead to higher economic growth.
He cited the Philippine Stock Exchange as having a year-to-date growth of 10.66 percent as of April 6, placing it in the top seven best performing markets in the world alongside the more developed ones in Europe. The peso has also appreciated 0.76 percent against the US dollar, which he said will attract more investors into the country because it brings up the performance of equities and bonds.
Taking the currency into consideration, Enriquez said the Philippines ends up being the third best performing market, as most currencies in Europe have been depreciating.
He credits the government’s ability to bring down its debt and the well-performing banking sector, which has managed to drop non-performing loans and grow its loan portfolio. He added that low interest rates have allowed more companies to expand and more consumers to buy big-ticket items. And with the budget allocated for foreign debt much lower, he said the government has been able to allocate for more socioeconomic services, benefiting the economy.
As for growth in the gross domestic product (GDP), many expected the country to grow higher than the 5.8 percent it registered in 2014, but he noted that many government projects were halted by issues hounding the Priority Development Assistance Fund and the Disbursement Acceleration Program.
He projects the country’s first quarter growth to be at seven percent and the whole year to be between 6.5 and 6.7 percent.
Sustaining gains after 2016
This year being a year prior to a presidential election, Enriquez expects accelerated spending for infrastructure, as incumbent officials race to get their projects approved before a ban is enforced during the election period. “We see it every time there is an election, especially the year prior to a presidential election,” he observed.
He said the government has also highlighted infrastructure spending in its budget for the year on top of public-private partnership projects, which could accelerate growth even further.
With a new administration in 2016, some fear that the gains in the economy will not be sustained. Enriquez thinks otherwise, noting that even foreign investors are seeing the Philippines in a good light. He added that when foreign investors decide to pour their investments in a country, they are in it for the long haul.
Being rated investment-grade also makes the country more marketable to foreign investors.
He believes the country’s young population is a strong reason for investor confidence, as its presence drives up consumption and is supported by infrastructure spending.
“If we have a consumption-driven economy, we can self-sustain our economy by our internal spending.” He pointed out that this consumption is not concentrated in metropolitan areas, as mall developments have been observed in second and third-tier cities and provinces.
Enriquez said the Filipinos’ incomes have been expanding even beyond Manila and Cebu, mostly due to overseas Filipino remittances and business process outsourcing. In spite of global crises hitting the US and Europe, remittances have continued to come in and have continued to grow. However, the BPO industry is seen to overtake remittance growth in five to six years.
With higher incomes, he said more Filipinos can invest in the equities market. For those uncomfortable investing on their own, mutual funds managed by professional fund managers are another option.
Sun Life Asset Management Company Inc. (SLAMCI) President Valerie Pama said that they are about to introduce the Index Fund, a fund that monitors the performance of the PSE index.
In 15 years, their assets under management (AUM) now total P47.7 billion, from P150 million when they first started in 2000. She hopes to encourage more Filipinos to save their money for the long term and take advantage of the country’s economic progress in building their wealth.