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In a press conference held early evening Thursday, Singapore-based JP Morgan Managing Director David G. Fernandez said the challenge, however, is how the country would be able to "unlock" this growth potential. JP Morgan viewed the domestic economy as measured by the gross domestic product (GDP) to inch up to 5.6 percent for this year, relatively higher assumptions compared to other foreign investment banks such as 5.0 percent and 5.1 percent predicted by ING Bank and Standard Chartered Bank, respectively. The administration economic team, though, is looking at a GDP growth aspiration of between 6.1 percent and 6.7 percent for this year. Fernandez explained all the necessary requirements for the GDP growth to pick up further steam have been established, citing the macroeconomic policies, which paved the way for a low interest rate regime, peso regaining its lost value versus the US dollar and fiscal strengthening through the implementation of revenues enhancement measures that include a hike in the rate of the expanded value-added tax. He believed the "key ingredients" in "unlocking the potential" for higher economic growth rate are well in-placed. "The External funds arising from the renewed foreign investors’ appetite for the country coupled by the unceasing uptick in dollar remittances of overseas Filipino workers (OFWs) have, in fact, boosted the value of the peso to rise to its high heights in recent years, now, trading at mid to high P46 levels. Still, JP Morgan chose to be conservative by keeping its P47 foreign exchange forecast this second quarter. For the third quarter of the year, the investment firm predicted the peso to loose some of value, depreciating by a P1 to a weighted average of P48 before recovering back to P47 end December 2007. Moving ahead, the investment firm forecasted the local currency to remain firm at P47 during the first quarter of 2008 and the appreciating to gather more steam during the next three months to P46.5 and P46 by end September 2008. The low interest rate regime will prevail and will be one of the major economic growth drivers, said Kelly Lim-Bate, JP Morgan Securities Philippines, Inc. The others include the strong balance of payments position, higher capital outlay for infrastructure projects by the state and renewed foreign equity and portfolio investments, specifically in the power and mining sectors. Lim-Bate opined the real estate sector will experience a more robust grow, propelled by OFWs’ purchases of residential abode as well as the emerging middle-class business process outsourcing (BPO) workforce. In this regard, she gave Ayala Land Inc., the real estate developing arm of Ayala Group of Companies, and MegaWorld shares a buy stamp. On the monetary side, Fernandez said Bangko Sentral ng Pilipinas (BSP) is unlikely to reduce its key interest rate policy "during the next policy meeting" neither will remove the tiering system on bank’s overnight placements. |
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