The Philippine economy is looking more firmed as a strong recovery in gross domestic product (GDP) is being solidified while inflation is decelerating and could end up even below 4 percent in 2010, according to Market Call, a capital market research of FMIC and UA&P.
Market Call noted that Meralco electricity sales, a proxy for economic activity, soared by almost 15 percent in May.
Its strong industrial sales were supported by manufacturing output (MISSI) which jumped by 25% in May following a revised 31 percent gain in April 2010.
Exports accelerated to a 37 percent pace in May, from 28 percent the previous month. Headline inflation eased further to 3.9 percent in June, from 4.3 percent the previous month.
Seasonally adjusted annual rates (SAAR), however, showed the second consecutive month of decline, indicating minimal inflationary pressures.
The report said that first half fiscal deficit was P197 billion, 28% higher than year ago, which makes fiscal stimulus continuing in the second half unlikely.
Overseas Filipino Worker (OFW) remittances were once again robust with a 6.5% rise year-on-year for May. In actual level, remittances reached $1.6 billion, the highest record since the year started.
January to May remittances inflow reached $7.4 billion, year-on-year growth of 6.6%. There is currently a stable demand for professional and skilled Filipino workers by the host countries leading to continued deployment, says Market Call.
The peso-denominated remittances also showed signs of recovery from being in the red in March and April 2010.
“Although these inched upwards by only 0.2%, it is still good news compared to the previous month. Also, the peso, after having appreciated by 5.9% in May, has been showing signs of stabilizing, as it only had a 3.3% appreciation based a fairly tight trading range.”
On the exchange rate, the peso has been trading sideways since the opening of July. The positive and negative national and global news have been pulling and pushing the peso.
At present, the peso is stuck in the P46.10 to P46.70 to the US dollar level without a clear lead as to where it will head.
On the other side, the improved GDP forecast of IMF from 3.6% to 6.0% this year, the expected appreciation of the yuan after China unpegged it from the US dollar, and the revised global economic forecast of the IMF from 4.2% to 4.6% led to the strength of the peso. These positive news created early optimism for the peso, Market Call said.