The economy’s 7.6 percent economic growth in 2022 should spill over into 2023 through a multiplier effect on the back of strong consumer spending despite rising inflation, First Metro Investment Corp. and the University of Asia and the Pacific Capital Markets Research said on Tuesday.

FMIC and UA&P said in the Market Call report for January released yesterday that robust employment, construction, manufacturing, exports and overseas Filipino workers’ remittance data propelled the country’s gross domestic product to grow by 7.2 percent year-on-year in the fourth quarter last year.

FMIC and UA&P also said in the same report that the country’s growth last year was “far better” than market expectations of 6.8 percent.

“Besides, infrastructure spending should provide additional impulse as (the Department of Public Works and Highways’) budget increased by 12.1 percent for 2023, while mega projects like the Metro Manila subway and North-South Commuter rail will go full blast,” FMIC and UA&P said.

The report also added that inflation (seasonally adjusted) showed signs of deceleration with lower highs and lower lows.

FMIC and UA&P mentioned that the Philippine peso will “more mildly” renew its depreciation as the United States Federal Reserve would continue to hike policy rates while the PH trade deficit remains above $50 billion.

“All told, we see GDP expansion in 2023 to hover at 6 percent,” FMIC and UA&P said.

Equities outlook

In the same report, FMIC and UA&P said the Philippine Stock Exchange index soared by +7.4 percent in the first four weeks of 2023, thus providing PH equity investors an adequate head start for 2023.

FMIC and UA&P also mentioned that the 6-month high and 14-month expansion record of Manufacturing PMI by +53.1 points would likely drive up earnings per share by 15 percent in 2023.

As global uncertainties about inflation and interest rates remain, FMIC and UA&P urged investors to “practice selectivity.”

“If earnings grow as expected, the PSEi should hit 7,500 in 2023. Therefore, investors can look forward to a better 2023,” FMIC and UA&P said.

Fixed income

Despite faster local inflation at eight percent in November and 8.1 percent in December, FMIC and UA&P said the 10-year yields fell sharply to 6.03 percent by the fourth week of January as markets priced in much slower Fed policy rate hikes in 2023.

However, both FMIC and UA&P see the Fed raising rates to at least five percent to 5.25 percent in 2023 amid a tight labor market.