The Philippines has not been spared from the effects of the global economic turmoil that has spread to European and Asian markets but a resilient banking system, remittances from an estimated 11 million overseas Filipinos, and an improved liquidity position will give it enough strength to withstand the crisis, a top central bank official said.
In a forum sponsored by online brokerage house CitisecOnline, Bangko Sentral ng Pilipinas (BSP) Governor Diwa Guinigundo said the country is in a much better position to withstand the current global credit crunch than during the 1997-1998 Asian currency crisis.
“Volatility will persist for sometime. There will be ups and downs but our country has so many sources of strength — a well-capitalized banking system, manageable external payments position, easing inflationary pressures, and OFW remittances,” he said.
Guinigundo said inflation is expected to decelerate in 2009 with the November to December 2008 figure easing to between nine percent to 10 percent as oil and rice prices continue to fall. This is lower from the October inflation rate of 11.2 percent
Gunigundo said OFW remittances will continue to prop up the economy despite the global economic downturn. Remittances are estimated to grow from $14.7 billion last year to around $16 billion this year.
The Philippines is the world’s fourth largest source of migrant workers after China, India and Mexico.
Guinigundo said the country’s balance of payments (BOP) surplus, however, is expected to decrease from a record $8.6 billion in 2007 to about $2 billion by the end of the year and could go down further in 2009.
The financial turmoil, which began with the bursting of the housing bubble in the United States and high default rates on subprime mortgages, has already resulted in the bankrupty of many large and well-established investment and commercial banks across the world.
Guinigundo said the government is committed to sustain key financial and banking sector reforms that will lead to greater efficiency, risk management and stronger capital base and improved corporate governance standards in the banking system.
He, likewise, reiterated government’s support to pass a legislation that will increase deposit insurance coverage.
Meanwhile, CitisecOnline chief technical analyst Juanis Barredo said while the threat of inflation is gone with the prices of commodities and oil going down, it would take some time for the stock market to fully recover from its deep slump. He, however, advised investors to gradually accumulate shares of oversold stocks.
CitisecOnline research head April Tan noted that listed companies are now irrationally cheap as they have become victims of indiscriminate selling despite them being fundamentally sound.
“We do not think all of these battered issues deserve to trade at their current price. Some companies possess very strong balance sheets with minimal debt.
Some are engaged in businesses that generate recurring profits (ex. rentals, power generation). Although profits will most likely be negatively affected by the prevailing economic slowdown, we think they possess qualities that will allow them to survive the crisis,” Tan said.
Conrado Bate, president of CitisecOnline, said many shares are currently priced at only a fraction of their real worth. “Some are actually priced at only 30 percent of what their owners paid for them. Now is the time to buy stocks for the long-term.”
Among CitisecOnline’s stock picks are Manila Water, Jollibee, SM Prime, Ayala Land, Bank of the Philippine Islands and Philippine Long Distance Telephone Co.