First Metro Investment Corp. (FMIC), the investment house of the Metrobank Group, said the second half of 2010 will be a period of economic consolidation while 2011 will lead to a full rebound of the Philippine economy.
In a presentation yesterday, FMIC president Francisco Sebastian said an accelerated recovery will be experienced this year, despite the dangers of contagion from the worsening eurozone debt crisis.
“The country’s stock market will continue to be exciting, the peso stronger, and inflation will remain benign,” Sebastian said.
The gross domestic product (GDP) will grow between 5.5 to 5.9 percent and the peso strengthening to 43 to the US dollar this year. Inflation will remain benign at between 4.3 percent and 4.5 percent as global oil prices will range at $80 to $85 a barrel, he said.
FMIC executive vice president Roberto Juanchito T. Dispo said the massive liquidity in the system will prove to be the biggest positive counterweight to all negative external factors such as Greece’s problems and other EU woes, uneven US economic recovery, perennial Japan economic weakness and possible China overheating, as well as internal threats like the budget deficit and other fiscal problems.
“Similar to a political honeymoon, we see monetary authorities giving the incoming administration a ‘policy honeymoon’ because there is no urgency and present policy is appropriate. The BSP may wait for the Aquino administration to unfold its economic and fiscal programs so that it may complement it with appropriate monetary policy,” Dispo added.
The Bangko Sentral ng Pilipinas (BSP) will likely have a bias towards a stable to lower rates as liquidity stays at higher levels.
The FMIC official said that it hopes that the new administration will rationalize tax incentives, plug tax loopholes, leakages, renew privatization efforts and high GDP growth for 2010.
“That will lead to higher revenues, thus the deficit target of P300 billion can be easily met. Second half of 2010 is economic consolidation and 2011 is economic rev up year for the country,” he said.
Private domestic savings will likely amount to P1.6 trillion which could offset the estimated P290 to P300 billion budget deficit.
Also, remittance inflow will continue to grow between six to seven percent per year, in turn fuelling domestic consumption, which has been driving the domestic economy through several economic and financial crises.
The stock market, meanwhile, is expected to breach the 3,600-level within the year, transforming from a ceiling to a support level. The benchmark index is forecast to reach a new record level of 3,800.