The economy will grow faster and continue to be among the best performing economies in Asia this year with an expected growth of 6 percent, First Metro Investment Corp., or FMIC, said in its projections yesterday.

FMIC, the investment banking arm of the Metrobank Group, expects growth to be fueled by robust private consumption, increased government infrastructure spending, a strong labor market, and the recovery of domestic tourism.

“In the face of domestic and global challenges, the Philippine economy achieved a commendable 5.5 percent gross domestic product, or GDP, growth in the first nine months of last year, driven by strong domestic demand,” First Metro president Jose Patricio Dumlao said.

“This year, continue to anticipate external headwinds as the global growth outlook remains subdued,” he added.

While headline inflation has softened in many countries driven by the decline in food and energy prices, core inflation remains a concern.

“External uncertainties such as the movements of the Fed and a potential sharper slowdown in China could drag on growth. Amid all this, the country’s economy, with its strong macroeconomic fundamentals, is expected to expand by 6 percent,” Dumlao pointed out.

External sector stable

The country’s external sector remains stable, with manageable external debt, decreasing debt-to-GDP ratio and substantial Gross International Reserves exceeding USD100 billion, equivalent to seven and a half months’ worth of imports.

Inflation, which saw a 14-year high in 2023, is expected to ease to 3.8 percent this year, aligned with the BSP’s target range of 2.0 percent-4.0 percent. This will bring the much-needed respite for household income.

The peso will remain under pressure due to persistent uncertainties on when and by how much the Fed will cut policy rates. It is projected to trade within the P56 to 58 range against the dollar.

Following a cumulative 100-basis point increase in policy rates over the past year, interest rates are anticipated to decline underpinned by a decrease in inflationary pressure.

In the capital markets, the much-awaited policy pivot along with a slowdown in inflation is poised to entice debt issuers back into the market, capitalizing on reduced borrowing costs. On the equity side, the potential easing of bond yields should boost the attractiveness of the stock market, encouraging issuers to consider equity issuances as a valuable alternative for capital raising.

FMIC added that the Philippine Stock Exchange Index is bound to stage a recovery this year driven by improving investor sentiment and easing equity risk premium arising from declining inflation and interest rates, and resilient double-digit corporate earnings.

It is expected to hit 7,000-7,500 supported by earnings per share growth of 11 percent.