First Metro Investment Corp. is confident of the economy’s continued rebound this year after a challenging 2022 amid easing of pressures coming from the high inflationary environment that necessitated successive rate hikes by central banks globally.
The investment banking arm of the Metrobank Group expects the economy to remain resilient and continue to grow this year, albeit slower than in 2022.
Jose Patricio Dumlao, First Metro president, pegged this year’s economic growth at 6 percent despite headwinds caused by slower global growth, still elevated interest rates and inflation.
“The country’s macroeconomic fundamentals remain strong. Our gross international reserves which stood at $96 billon is at a comfortable level. This is equivalent to over seven months’ worth of imports. Our debt-to-GDP (gross domestic product) ratio is still manageable — 63 percent in 2022 and 64-65 percent in 2023. This is anticipated to decline starting 2024,” said Dumlao.
Victor Abola, economist at University of Asia and the Pacific and consultant for First Metro, said growth will be driven by an environment of easing commodity prices globally, albeit still at an elevated level, a robust domestic demand and continued investment spending.
“That gives us a little bit of a breather from the dark clouds. We see more light coming from our domestic demand driven growth, fiscal space and infrastructure and housing spending and consumer spending,” he said.
Inflation is expected to remain elevated at 4.5 percent.
Remittances from overseas Filipinos are expected to grow by 3 to 5 percent this year compared to last year’s 3.1 percent.
The peso will trade within the P57 to P59 range against the dollar, First Metro said.
It said as central banks continue to manage stubborn inflation, interest rates will continue to rise from current levels.
“After rates peak in the second quarter of this year, the yield curve is expected to retrace its path to levels below end December 2022 by about 12.5-50 basis points. We see as well a slight steepening of the curve with the two-year versus 10-year spread increasing back up to around 150 basis points,” it said.
Daniel Camacho, First Metro head of investment banking, said debt issuers are anticipated to do refinancing activities while still cautious for a clearer picture of market prospects.
“Issuers may exhibit caution and would likely find their issuances by bridging their maturing obligations in the meantime. This could continue in the first few months of the year, until there’s a better picture of the trajectory of inflation and interest rates, that we may see a pickup in volume towards the second half of the year,” he said.
On the equity side, investors may opt to remain cautious but agile enough to take advantage of incoming economic and market data.
“The market is obviously hungry for clear positive momentum, which we believe we are starting to see during this first week of trading,” Camacho said.
Cristina Ulang, First Metro head of research, said the Philippine Stock Exchange is poised to reclaim the 7,000 level, with Philippine companies expected to post the second highest earnings growth in the region at 15 percent, next to China.
Ulang, however, said investors should still be strategic in their stock-picking amid headwinds.
She added investors should focus on companies with low debt and high capitalization as well as those with big market share and strong cash flow and are able to give out generous dividends.
“Stocks with exposure to themes that are linked to the basic needs of the country are projected to perform well. These themes include greater energy sufficiency, fuel security, disruptive technology, renewables and sustainability,” Ulang said.
