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Economists and bankers see 2013 as a better year

By Manila Standard Today | Posted on Jan. 13, 2013 at 12:01am
Economists and investment bankers are optimistic about the economic prospects in 2013.  In a recent roundtable briefing, six of them gathered in front of journalists to share their forecasts and insights about the economy and the financial market.
Victor Abola, one of the country’s top economists known for his nearly precise forecasts, sees the country’s gross domestic product growing between 7.5 percent and 8 percent this year.
“GDP growth will accelerate due to higher public spending and robust private sector consumption,” says Abola, the current program director of the Strategic Business Economics Program at the University of Asia and the Pacific.
Abola, who once served as the chief of party of the fiscal policy analysis activity of the Finance Department, sees the industry sector expanding 8.2 percent and the services sector, 8 percent this year.  He says despite the strong growth, inflation rate is expected to soften to 2.8 percent in 2013 from 3.2 percent in 2012.
He says the external environment may be friendlier this year, with the resolution of the so-called “fiscal cliff” issue in the US and recovery in Europe.  Global growth is expected to pick up to 3.6 percent in 2013 from around 3.3 percent in 2012.
Gross international reserves are expected to climb further to $95 billion by end-2013, as the Central Bank manages the exchange rate at 41 to 43 pesos per US dollar.
Francisco Sebastian, an investment banker, shares a very optimistic outlook for the Philippine economy.  “With a 7.1-percent increase in GDP in the third quarter of 2012, a lower than expected inflation rate of 3.2 percent, gross international reserves rising rapidly that has reached $84.1 billion, and a debt-to-GDP ratio that has fallen below 50 percent, the Philippines is definitely now on the rise,” he says.

Sebastian, currently the chairman of First Metro Investment Corp. and vice chairman of the Metrobank Group, says the economy is in an unprecedented growth momentum, supported by solid fundamentals.
He says the country’s GDP growth in 2013 will be driven by heavy election spending, increased infrastructure projects, robust consumer and service sector and stronger tourism and gaming.
He says the national government is spending more money in agriculture in the form of rehabilitation and construction of more irrigation systems, farm-to-market roads, and storage facilities. This will contribute to stable inflation.
Sebastian, who graduated magna cum laude with an AB degree in Economics at the Ateneo de Manila University in 1975, says a further softening of oil prices is expected as a result of larger surplus capacity with the continued expansion of shale oil and gas output in the US and Russia. Oil price forecast is $93 per barrel this year.
He says remittances will remain resilient this year, growing 4 percent to 5 percent despite the Israeli-Palestine conflict, Eurozone debt problem and the fiscal cliff in the US. Demand for Filipino workers will be sustained, which will continue to stimulate and intensify domestic consumption.
Imports are expected to rise between 10 percent and 15 percent, supported by high domestic growth as well as resurgence of the strong manufacturing sector.  Interest rates are anticipated to further compress attributable to lower inflation, credit upgrade, massive inflow of funds and limited supply of papers, he says.
Roberto Juanchito Dispo, currently the president and a director of First Metro Investment Corp., says with robust economic growth, the government’s anti-corruption stance that has improved tax administration and with new tax revenue sources, budget deficit is expected to remain low and may not reach P200 billion or 1.5 percent to 1.6 percent of GDP.
“Debt-to-GDP ratio is expected to fall further and it will be lower than Thailand,” says Dispo, who had an extensive experience in government as deputy treasurer.  He also served in the Defense, Trade and Finance Departments as well as the Central Bank.
Dispo says the equities market will remain bullish this year, with the benchmark index expected to hit 6,800 and price earnings ratio reaching 17x.  This is because with a projected GDP growth of 7.5 percent to 8 percent, corporate earnings will likely grow by another 20 percent in 2013, he says.
He says there are growth opportunities in real estate properties specifically those serving tourism, gaming and retailing; construction; infrastructure/utilities; consumer-related manufacturing; gaming and tourism. A revival of the existing mining companies in order to sustain the resurgence of the manufacturing sector is also in the offing.
“We expect a robust corporate bond market this year,” he says.
Bede Lovell Gomez, the assistant vice president and deputy group head of investment advisory group of First Metro Investment Corp., says while Philippine stocks look expensive at present, given the new record highs achieved in the past several months, they are not too expensive at all.
In fact, he says there is further room for the benchmark PSEi to climb to 6,800 points, supported by a 20-percent improvement in earnings per share.
Gomez, who graduated from Loyola University of Chicago (USA) and took postgraduate course in investment management from the Wharton School of Business in University of Pennsylvania, says among the sectors that have scope to rise are financial, property, holdings firms, services and industrial stocks.
He says these stocks will be driven by strong economic growth on the back of robust household spending.  The low interest rates and expanding affluent mass market will also boost stocks.
Among his stock picks in 2013 are consumer-oriented issues such as Puregold Price Club Inc., Pepsi Cola Products Philippines Inc. and San Miguel Pure Foods Co. Inc.   For holding companies, he recommends GT Capital Investments and Alliance Global.
Justino Ocampo, the head of investment banking of First Metro Investment Corp., says more companies are expected to raise capital from the domestic debt market this year to finance their operations and expansion plans.
Ocampo, who graduated cum laude from the University of the Philippines with a degree in Business Administration, says the private sector raised P99.3 billion in corporate bonds in 2012, up by 373 percent from just P21 billion in 2011.
Among the largest fund- raising activities last year were San Miguel Brewery Inc.’s P20-billion issue; Ayala Corp.’s P10 billion; SM Investment Corp.’s P10 billion; and First Metro Investment Corp.’s P7 billion.
Meanwhile, the government raised P758.9 billion worth of retail treasury bills and fixed rate bonds in 11 months to November 2012, which was about 34 percent higher than the previous year.
Foreign currency denominated transactions, on the other hand, amounted to $9.35 billion, also up by 42 percent from a year ago.
At the stock market, companies raised P228.3 billion in 2012, climbing 81.3 percent from the year before.  This was recorded as the PSEi rewrote record highs 38 times last year and ended 33 percent higher than the previous year’s close.
One of the largest successful equity capital raising in 2012 was GT Capital‘s P21.6 billion initial public offering.  Another notable issuance was San Miguel Corp.’s P80-billion series 2 preferred shares., the largest private capital raising transaction ever, he says.
Ocampo says in 2013, the recent tax regulation will spur refinancing activities.  The new tax rules will tend to further promote bonds vs. notes.  He says there is further growth opportunity for the bond market.
Among the companies that are expected to raise funds this year are banks, exchange traded funds and property developers.
Reynaldo Montalbo, the senior vice president and group head of treasury of First Metro Investment Corp., expects the fixed-income market to further grow, despite the lower yields.
Montalbo, who graduated from the University of the Philippines with a degree in Business Economics and completed his Master in Business Management from the Asian Institute of Management, says 25-year and 20-year yields are expected to fall below 5 percent in 2013.
Treasury-bill interest rates are projected as follows: 91-day at 0.25 percent to 0.5 percent; 5-year at 3.5 percent to 3.625 percent; 10-year at 3.75 percent to 3.925 percent; 20-year at 4.75 percent to 4.9 percent; and 25-year at 4.925 percent to 5 percent.
He says this is because supply of funds will continue to overwhelm demand.  He estimates the gap at about P1 trillion, with supply of funds reaching P4 trillion and demand, P3.1 trillion. RTD
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