The Philippine economy is expected to grow slower by 5.5 percent in 2023 from 7.6 percent in 2023 due to a global slowdown, First Metro Investment Corporation and the University of Asia and the Pacific Capital Markets Research said on Wednesday.

In their September 2023 market call, the two firms said that elevated government spending in the third quarter of 2023, along with a strong rebound in employment and consumer spending starting September, should stimulate the economy.

The industry sector expansion is seen to be broad-based, with manufacturing taking the lead. The services sector is also expected to see growth, driven by domestic and foreign tourism in trade, transportation, storage, and accommodations and food services starting in September.

"We still see sufficient strength in the economy to get a 5.0 to 5.2 percent year-on-year third quarter GDP growth, while the acceleration of the above sectors plus consumer spending should bring back fourth-quarter growth above 6 percent," the market call said.

The market call also noted that market uneasiness returned in August amid higher US Treasuries on the back of inflation woes, a hawkish Fed, and a stronger-than-expected US economy.

Locally, the trepidation resulted in a decline in volume in both primary and secondary markets rather than in yields in August.

Furthermore, local products initially jumped in September following the faster August inflation print at 5.3 percent.

"We see the recent crude oil and rice price gains as transitory with inflation likely heading back to within target in Q4. Given the inflation outlook and pause in monetary tightening from the BSP and Fed, we expect sideways movements, with a slight northward bias, in the local 10-year yields, which should last until the end of 2023," the market call said.

Equities Outlook

The Philippine Stock Exchange index is seen to move sideways in September between 6,000 and 6,350, as investors scrounge for some excellent news.

While price-to-earnings ratios reached lows last seen during the World Financial Crisis, local investors seem hindered by higher interest rates and margin calls.

However, the market call kept a constructive outlook, especially concerning oversold issues and high dividend plays.

"We believe that the market is now trading at a compelling valuation and that investors should start to nibble at oversold issues and high dividend plays. We expect the market to grind higher in the fourth quarter, with the PSEi breaching its 2022 high of 6,800 by year-end," the market call said.