BPI Asset Management bullish on economy

Bank of the Philippine Islands Asset Management said it was bullish about the economy’s growth and local investment prospects as it noted more indicators pointing to a definite recovery.

Emilio S. de Quiros, Jr., executive vice president and Adelbert A. Legasto, senior vice president, of BPI Asset Management and Trust Group, expressed the optimistic investment scenario at a press briefing at Club 1851 of the BPI Building in Makati City.

Preliminary growth indicators point to an upgrade of growth targets with a high confidence level of success, BPI Asset Management said. It cited that the National Economic and Development Authority’s baseline GDP growth rate of four percent is almost a certainty, while the 4.5 percent upper limit is now the fighting target. Bouyant consumption activity is seen driving the economy.

The downward trend in interest rates – with the 91-day T-bill rate at a 16-year low of 5.17 percent – may have bottomed out at current levels but remain low and stable. The fully-year average target rate still stands at a range of six to seven percent.

The government’s fiscal performance for the first month of 2002 provides an encouraging harbinger of what may come, said BPI Asset Management, adding that the January deficit of P14.9 billion is not even a third of the first quarter target of P52.9 billion. While the latter is already far greater 25 percent of the P130 billion deficit target for the year, this is due to the government’s front loading of its expenses for the first half to pump-prime the economy.

The Arroyo administration’s fiscal policy is development-oriented with 65 percent of new money sourced from abroad. The sovereign credit rating upgrades from "negative" for the past two years to "stable" first by Moody’s and then by Standard & Poor's further reduced the interest costs of the country’s foreign borrowings.

Inflation is seen to remain in single-digit historic lows in the four to five percent range barring a major unforeseen crisis in the Middle East that would send the price per barrel of crude beyond $30.

The peso is also seen to remain stable, with the full-year forecast average at P51 to P51.50. A temporary weakening towards P52 or higher is seen during the traditional import season in the third quarter. But this should appreciate back to P51 by yearend with the peso strength boosted by overseas remittances from overseas Filipino workers.

Responding to these and other factors, the Philippine stock market has come out of the doldrums and is keeping its third best-performing slot in Asia with an appreciation of 22 percent since the start of the year. Foreign investors have been buying up the market to the tune of P3 billion so far this year, and nearly doubling the market’s daily average value turnover to P700 million, with blue chips again spearheading the recovery trend.

Summing up, BPI Asset Management said the investment scenario is gradually clearing up and the macroeconomic numbers are undeniably a cause for optimism.