Philippine Growth Forecast 2016 is RAISE by International Monetary Fund, ADB

ADB, IMF raise PH growth forecasts for 2016

MANILA — Despite the “political noise” just a few months into the Duterte administration, multilateral lenders Asian Development Bank and International Monetary Fund raised their respective 2016 growth forecasts for the Philippines on the back of solid economic fundamentals.

Following the conclusion of its executive board’s Article IV consultation with the Philippines, the IMF said in a Sept. 26 statement that the “outlook for the Philippine economy remains favorable despite external headwinds,” such that it raised to 6.4 percent from 6 percent previously its growth projection for 2016.

The Duterte administration targets a “conservative” 6-7 percent gross domestic product (GDP) growth this year following a 6.9-percent expansion in the first half.

“Risks to the outlook are tilted to the downside. The Philippine authorities are well equipped to respond as needed with suitable policies should any risks materialize, particularly given the strong fundamentals and ample policy space,” according to the IMF.

Manila-based ADB also raised it growth forecast for the Philippines to 6.4 percent from 6 percent in the earlier Asian Development Outlook 2016, an updated version of the report released Tuesday showed.

According to Richard Bolt, ADB country director for the Philippines, the rosy growth projection was on the back of robust, broad-based domestic demand, the solid foundation provided by favorable macroeconomic fundamentals, as well as plans of the Duterte administration to ramp up infrastructure spending.

Asked during a press conference if concerns on President Rodrigo R. Duterte’s controversial statements against leaders of top trading partners such as the US and the EU as well as the “war” being waged by the administration against illegal drugs allegedly causing extrajudicial killings were not seen diminishing investor appetite, Bolt replied: “So far, we are not seeing number [showing slowing investments]. We should separate what is perceived political performance versus the economic prospects to growth. Our growth projection is still good.”

Bolt said particularly encouraging about the Duterte administration has been its “very solid” 10-point socioeconomic agenda aimed at slashing poverty to 17 percent by 2022 from 26 percent at present.

While the jobless and poverty rates have remained high, Bolt said the new government has started addressing these challenges, and has gone “on the right track” given its higher infrastructure spending tack, plans to ease foreign investment restrictions, and moves to further cut red tape and improve the ease in doing business.

It also helped that the Dutrte administration had committed to continue the effective macroeconomic policies of previous administrations, he said.

For Bolt, advancing the reform agenda will be vital to lessen risks to the Philippines’ growth outlook, which is already being impacted by weaker than expected economic growth in its top trading partners.

“Risks to the outlook are tilted to the downside. The Philippine authorities are well equipped to respond as needed with suitable policies should any risks materialize, particularly given the strong fundamentals and ample policy space,” Bolt said in a statement.

The IMF, meanwhile, said its executive directors “commended” Philippine authorities “for their continued strong macroeconomic management, with robust growth and low inflation.”

But just like the ADB, the IMF also noted that “the favorable macroeconomic performance has not led to corresponding improvements in poverty reduction, inequality and unemployment.”

“[The IMF’s directors] considered that the new administration has an opportunity to put the economy on a higher and more equitable growth path. [They] encouraged efforts to increase investments in infrastructure and human capital, improve targeting of social spending, enhance competitiveness and foreign direct investment, and making the financial system deeper and more inclusive,” the IMF said.

The IMF also backed the plan to widen the budget deficit target to 3 percent of GDP in the medium-term to boost infrastructure development.

“They noted that this would allow a welcome boost to infrastructure and social spending, while ensuring fiscal sustainability,” as long as the government could raise additional revenues through a comprehensive tax reform program.  SFM– Inquirer

Continue reading

Philippines' Stocks PSEI seen to Rise

PSEi seen to rise

The local stock barometer is seen attempting to climb the 7,800 level this week as certain large-cap stocks are expected to benefit from month-end and quarter-end window-dressing activities.

Last week, the main-share Philippine Stock Exchange index (PSEi) rose by 2.25 percent to close on Friday at 7,723.60, rising for the first time in six weeks as investors correctly anticipated that the US Federal Reserve would keep its key interest rate unchanged.

“Chartwise, the week’s close at 7,723.60 encourages more tests toward the 7,800 levels, despite the near-term bias remaining for a test of the 7,200-7,500 levels,” said BDO Unibank chief strategist Jonathan Ravelas.

“Only a move above the 7,850-7,870 could entertain a reversal is in place,” he said.

Luis Gerardo Limlingan, managing director at Regina Capital Development, said mixed trading might be seen this week as the PSEi attempts to establish a support base at 7,700. “This is an important level to watch because a successful hold will create enough demand to sponsor further recovery toward 7,800-7,850 resistance targets.”

On the other hand, Limlingan said failure to hold the 7,700 support would shift weekly trend to bearish, which, in turn, could lead to a retesting of the 130-day moving average at 7,600.

“Though lower week-on-week, intraday volatility is still a concern as we are to expect moderate to sharp price movements—fortunately, the mood of the current price reaction is more on recovery rather than corrective,” he said.

Based on technicals, Limlingan said both directional and momentum indicators remained below trigger points despite the recent run-up. As such, he said putting “tight stops” on trading positions would be important until all corrective threats have been fixed.

“For this week, a cautious buying strategy is advised especially for issues that have just broken out of their key resistance points,” he said. Doris Dumlao-Abadilla– Inquirer

Continue reading

Philippine Largest Bank BDO UNIBANK sets ₱60 Billion Php ($1.2 Bln USD) Capital Build up

BDO sets P60B capital build-up

THE COUNTRY'S leading lender BDO Unibank is raising ₱60 Billion Pesos ($1.2 Billion USD) in fresh capital to support growth objectives in the following years and brace for higher capital requirements.

BDO's board approved the increase in additional capital through the sale of new shares to existing investors, the bank disclosed to the Philippine Stock Exchange on Monday.

"The fresh capital will support the bank's medium-term growth objectives amid the country's favorable macroeconomic prospects, and provide a comfortable buffer over higher capital requirements with the forthcoming imposition of the domestic systemically important bank (DSIB) surcharge," the bank said

The Bangko Sentral ng Pilipinas (BSP) has classified banks depending on the extent of their systemic importance using pre-defined indicators for size, interconnectedness, substitutability and market reliance as a financial market infrastructure as well as complexity. The DSIB framework is in line with the initiatives pursued under the globally-accepted Basel 3 reform agenda.

As of end-June, BDO said its consolidated CET1 ratio and capital adequacy ratio (CAR) of 11.3 percent and 13.1 percent, respectively, were above the current regulatory minimum levels, even with the gradual implementation of the DSIB surcharge.

The bank said the additional capital will allow it to sustain its momentum and take advantage of the country's growth opportunities. Over the past five years, BDO's customer loan portfolio grew at a 19 percent compounded annual growth rate (CAGR), outpacing the industry's 17 percent CAGR.

"Going forward, the bank hopes to further expand its presence in emerging growth areas particularly the consumer, provincial middle market and SMEs (small and medium enterprises) and the underserved segments, as well as in infrastructure-related lending/project finance in line with the government's thrust to promote countryside development and ramp up infrastructure spending," BDO said.

Sy family-led SM Investments Corp. (SMIC), the controlling and majority shareholder of BDO, has expressed its full support for the bank's expansion plans and the rights offer.

"SMIC commits to subscribe to its proportionate share and is willing to underwrite any shares not taken up by minority shareholders," the disclosure said. – Inquirer

Continue reading