First Metro Investments Corp. (FMIC) sees the economy contracting 7.5 to 9.5 percent for the year before gradually recovering next year.
Francisco Sebastian, FMIC chairman, said the Philippines is well-positioned to weather the effects of the new coronavirus disease 2019 (COVID-19) pandemic that caused the GDP to contract by 16.5 percent in the second quarter and by 9 percent in the first half.
Sebastian’s optimism stems from the country’s favorable investment grade credit rating, record gross international reserve at $93 billion and low inflation environment, compared to its macro-fundamentals in 1984, 1997 and 2008 when the country was engulfed in crises.
Dan Camacho, FMIC investment banking head for capital markets, said the business sector may expect continued support from monetary officials resulting to further rate cut in policy rate and a 1 to 2-percentage point reduction in bank reserve to 10 percent from the current 12 percent.
That can infuse an additional P100 billion to P200 billion in liquidity to the financial market.
Dr. Bernardo Villegas, economist at the University of Asia and the Pacific (UA&P), said should the Philippines get its footing back and return to its 6- percent growth trend, its per capita GDP may hit $4,000 by 2023, officially making it an upper middle income country.
That projection was originally set for the year until COVID-19 pandemic derailed it.
Villegas said the country’s consumption-led economy positions it among the Indo-Pacific region economies that will drive global growth in the next 10 years.
Cristina Ulang, FMIC head of research, said the current economic environment is an opportunity for stock market investors to pick up cheap stocks.
Ulang said the present level of the market is a rare buying opportunity not seen in the last 10 years, with the Philippine Stock Exchange index possibly closing the year between 6,500 and 7,000.
The range represents an earnings recovery from the depth of an estimated 30-percent correction in earnings per share growth this year and a 28-percent recovery next year. It also equates to a price-to-earnings ratio (PE) of 18x-19x, a reversion to the mean 5-year PE range.