Financial Firm Says Negative Sentiments Weaken PHP

ANZ says negative sentiments weaken PHP
By Joann Santiago

Australian financial giant ANZ lamented the latest weakening of the Philippine peso and the pull out of some foreign funds due to negative sentiments.

In a research note, ANZ said negative media coverage on the country “has resulted in foreign investors turning cautious.”

It said “Philippine asset prices including the peso has weakened, driven by almost two months of foreign investor selling in the equity market.”

“A perception gap has clearly emerged. Amidst the portfolio selling by foreign investors, the Philippines’ GDP (gross domestic product) growth forecasts for 2016 and 2017 have been upwardly revised,” it said.

Manila-based Asian Development Bank (ADB) revised upwards its 2016 growth forecast for the country to 6.4 percent and the 2017 projection to 6.2 percent.

These were previously both at six percent, with the hike attributed to strong output, as measured by gross domestic product (GDP), in the first half of the year at 6.9 percent, one of the highest in Asia for the period.

The International Monetary Fund (IMF) also hiked its growth projection for the Philippines for the two-year period.

The 2016 figure was upped to 6.4 percent from six percent and the 2017 to 6.7 percent from 6.2 percent. The upward revision was also attributed to the strong domestic expansion from January to June this year.

“The growth’s positive policies and the Philippines’ solid macroeconomic fundamentals are being overlooked at present. While the contribution of foreign investment to the Philippines has always been low, negative sentiment could persist, putting pressure on domestic asset prices and PHP (Philippine peso),” ANZ said.

For one, the Philippine peso has depreciated since the start of the year and is now trading at 48-level against the greenback.

The report said the Duterte administration has presented policies targeted to fast-track implementation of infrastructure projects, among others.

The Department of Finance (DOF) has also submitted to Congress the administration’s first of four proposed tax reform programs.

Part of these proposals is the broadening of the tax base and increase in the value added tax (VAT) rate from the current 12 percent.

“So far, economic policies are aimed at achieving more equitable growth, diversifying away from the National Capital Region,” the report said.

Meanwhile, the report eyes a big drop in the country’s mining production and export revenues as a result of the audit being conducted by the Department of Environment and Natural Resources (DENR).

“While we see limited impact on growth, the risk is that more suspensions in mining production could lead to a further deterioration in the trade deficit, resulting in a much narrower current account surplus next year,” it said.

“However, we expect ongoing remittances and growth in the business process outsourcing (BPO) sector to provide an offset,” it added. (PNA)

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