The Philippine economy is projected to expand close to 7 percent in the first quarter of 2013r on the back of election spending, booming construction, strong government, a manageable inflation and a modest rebound in exports.
In its latest market report, FMIC & UA&P Capital Market Research expects inflation rate in March at 3.3% but a quick reversal is expected in the second quarter to below 3% as crude oil prices are expected to soften significantly after the winter season.
The fiscal sector is expected to continue its deficit spending spree in the first quarter but would likely ease in the second quarter.
FMIC & UA&P noted that above target deficits may be expected in the first half but this will be brought down in the second half with full year targets to be achieved.
The report said that Bangko Sentral and other government officials have become wary of the peso appreciation and appear ready to apply stronger measures to curb the negative impact of large portfolio capital inflows.
“We expect the BSP to further cut the SDA rate by another 50 bps to signal its determination to the market,” said FMIC & UA&P.
The fruits of the efforts of President Aquino in forging the country’s relations with Australia, Italy, United Kingdom, and other countries could be reaped in 2013 reviving the exports industry especially the exports of electronic products.
The revival of China’s economy and the expected stimulation of Japanese exports would most likely contribute as they are the major markets of the country’s exports.
The bias by a number of foreign investors towards Philippine peso would most likely continue especially that the US decided to use sequestration, while France and Germany have low first quarter GDP growth forecasts.
The appreciation of the peso is also supported by the rise in both the foreign portfolio and foreign direct investment (FDI) as Japanese and other multinational companies are firming up their operations in the Philippines.