By Joann Santiago
MANILA, Jan 27 (PNA) — BDO Capital and Investment Corp. President Eduardo Francisco expects the domestic economy to remain resilient in 2014 amidst the volatility in the financial market and slight investments outflows given the improvement in advanced economies.
He eyes a 6.5 percent to seven percent output for the domestic economy this year, within the government’s 6.5-7.5 target for the year.
At the end of the third quarter of 2013, the economy grew, as measured by gross domestic product (GDP), by 7.4 percent, higher than the government’s six to seven percent target for last year.
The government is scheduled to report the 2013 full-year output in the last week of this month.
Francisco eyes inflation to increase a bit this year but believes that it will “still be very sustainable.”
Last December, rate of price increases inched up to 4.1 percent from month-ago’s 3.3 percent but average rate for the year stood at three percent, the lower end of the government’s three to five percent target for 2013 and 2014.
The projected rise in the inflation rate is the reason why Francisco expects a 25 basis points hike in the Bangko Sentral ng Pilipinas’ (BSP) policy rates in the second half of the year.
“There’s no need to increase rates now because it would also temper growth,” he said.
To date, the central bank’s overnight borrowing rate is at record-low of 3.5 percent and the overnight lending rate is at 5.5 percent.
These were kept steady since the last 25 basis points cut in October 2012. The central bank’s policy rates were slashed by a total of 100 basis points in 2012 to boost domestic growth.
Relatively, Francisco expects the Philippine Stock Exchange index (PSEi) to improve in the latter part of the year and reach the 7,000-level if volatilities caused by the tapering of the Federal Reserve’s stimulus program will not be considered.
But since worries on the cut in the stimulus program continue to affect global financial markets for some time now, Francisco eyes the main equities index to reach the 6,500-6,800 level.
At the end of last week, the main index ended at 6,100-level. (PNA)