The Economy
Looks Promising (And So
Do Your Stock Market Investments)
I guess it happens every time
there's a new President.
People keep asking me, "With a Duterte presidency, what will happen to our economy? Will the stock market continue to rise?"
People keep asking me, "With a Duterte presidency, what will happen to our economy? Will the stock market continue to rise?"
Our happy diagnosis: In the
coming years, we believe the economy will continue to rise. We're NOT saying
there will be temporary downturns—we will always have them. Up, down, up, down.
But our long-term trajectory remains the same: The Philippines will rise!
And so will your investments.
Hallelujah.
But if you want to know what will happen to our
economy (and therefore to our favorite stocks) before you look at what
the new President will bring to the table, you must first look at the two huge pillars of the
Philippine economy...
Economist Dr. Bernie Villegas
said (before the elections), "The six to seven percent (GDP) growth we
experienced for the last four years is going to be sustained whoever is elected
as president."
So even without a new President, our economy was already
going gangbusters. Because of these two drivers.
OFW remittances (sometimes the
only good news of our economy at certain stages of our history) gave us $25.8B
in 2015. No matter how incompetent past administrations were, this kept our
economy afloat.
Today however, there is a real
concern that it may slow down, especially from the Middle East, because of low
oil prices around the world. (From $100-plus a barrel, it's down to $30-plus.)
Note that there are 2.5 million Filipinos who work in that part of the world,
40 percent of them in the Kingdom of Saudi Arabia.
Despite this, the government is
still projecting three percent to five percent growth rate of the remittances.
But more conservative analysts put it between two percent to three percent
growth.
And then there's this sector that was started 15 years
ago.
Last year, BPOs employed 1.1
million Filipinos and earned $21.2B for the country. Very soon, its yearly
earnings will surpass OFW Remittances, because the BPO Industry grows 17
percent a year.
Some analysts are questioning the future of this
industry—particular voice (call centers)—wondering if the demand for them will
remain the same if the younger generation is adept at dealing with (mobile)
websites, requiring
no human intervention. While enjoying the fruits of its aggressive growth,
industry leaders will need to adapt to the coming winds. Just based on these two
drivers, the Philippine economy will be difficult to beat.
The big question: Will the Duterte Presidency add or subtract to this growth scenario?
The big question: Will the Duterte Presidency add or subtract to this growth scenario?
Some economists are saying it
will add.
I must repeat what I mentioned in the last Stocks Update:This essay is NOT about
Duterte from a spiritual or moral perspective, especially with his conflict
with the Catholic Church. This is also NOT the venue for my personal views
about him. This is purely an economic discussion. With a Duterte Presidency,
economists say there may be four potential positives:
The new administration promises
to make it easier for foreign investments to come in. Duterte also wants to
create more Economic Zones in Mindanao. If done, there is a chance that the
control of our economy by a handful of families (oligopoly) will be broken, and
our economy will expand.
Big businesses who've built
their presence in Davao report of their hassle-free, bribery-free experience
with government agencies there. Transactions that would otherwise take many
months to file in other cities would only take 72 hours in Duterte's city. The
big question is if Duterte can replicate this "business friendly"
scenario all over the country. Only time can tell.
4. Increase Tourism
4. Increase Tourism
Last year, Amazing Thailand attracted 25 million
tourists. "It's More Fun in the Philippines"? Five million. Why do we
only get a fraction of the tourists they get? Doesn't the Philippines have the
same glorious beaches and amazing islands? We believe that if enough infrastructure
is built and peace is established, we will see an increase in tourism in the
coming years—boosting the economy of the provinces.
Will this rosy picture happen?
Resolution?