FX Primus Ltd.

FX Primus Ltd.

June 02, 2013 22:25 ET

ASEAN Market Review: Philippines 1Q Growth Tops Forecast

SINGAPORE, SINGAPORE--(Marketwired - June 2, 2013) -

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In FXPRIMUS' ASEAN Market Review for 31 May, leading global foreign exchange educator and author Mario Sant Singh - whose views are widely sought after in the Forex industry, focuses on Philippine economic performance, led by external investment and Government spending.

Economic Insights

Philippine 1Q Gross Domestic Product (GDP) unexpectedly grows 7.8% beating all forecasts

The Philippine's released its 1Q GDP growth figure yesterday and topped all earlier forecasts, reporting a 7.8% YoY growth and 2.2% QoQ, from the previous 6.8% YoY and 1.5% QoQ. According to earlier median forecasts, it stood at around only 6%.

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Source: Bloomberg, FXPRIMUS

Compared to many other Asean countries cutting their benchmark interest rates to cope with cooling economies, such as India, Thailand and Vietnam, the Philippines tends to boost its investment and state spending with budget deficit narrowing.

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Source: Bloomberg, FXPRIMUS

Breaking down the growth into different components, it is clear that the Philippine economy works toward to an infrastructure investment-leading model, similar to what China did in the past ten years. According to data, investments climbed 47.7% YoY, compared to the 9.5% YoY growth in 4Q last year. Government spending also surged 13.2% YoY.

We expect the central bank to keep the record low interest rate at 3.5% toward the end of the year, given the low inflation environment. The Special Deposit Accounts (SDA) rate was cut three times to 2% this year, limiting capital inflow to strengthen its currency and dampening exports competence.

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Source: Bloomberg, FXPRIMUS

Thai economy faces great challenges from recent data

Recent economic releases from Thailand were not cheerful at all, with a much slower growth in 1Q and dampened exports as well. The slower growth triggered the first rate cut by Bank of Thailand in 2013.

Thai 1Q GDP ridiculously expanded only 5.3% YoY from an 18.9% YoY growth in 4Q last year. Exports also fell sharply to 2.89% YoY from the previous 4.55%. Decreasing exports with increasing imports widened trade deficits, prompting the central bank to join the global rate cut wave.

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Source: Bloomberg, FXPRIMUS

Currency Insights

Philippines Peso could continue its weakening trend

The Philippine Peso strengthened recently on strong economic data, together with the effect of a weaker U.S. Dollar. However, the effect might be treated as a "knee jerk" reaction. The downside for the Peso still significantly exists since weaker Asian growth limits the country's exports, which contributed 30% to the total Philippine growth.

In the technical analysis, the USDPHP could be supported at 42.00, and the direction for the current trend still points upward. At this moment, the Greenback selling off might also be due to technical consolidation instead of its weaker fundamentals. Hence, I remain with the view for a slight "bull" bias for the USDPHP.

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Source: Bloomberg

Previous Daily Market Report: ASEAN Market Review for 17 May 2013: Indonesia's & Malaysia's 1Q Growths Decelerate.


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