Bullish in 2019

WITH THE INFLATION scare fading gradually toward the end of 2018 and the element of uncertainty in the economy subsiding, we can look at 2019 with optimism.

I am quite bullish on the Philippine economy after a volatile year that saw the inflation rate spiking to a nine-year high in September and October. We had good corporate earnings in the third quarter of 2018, while household consumption appeared to have rebounded after growth slowed from July to September.

It looks like the Philippines has weathered the global market volatility. We can safely say that our local stock market has bottomed out — the Philippine Stock Exchange index is now well above 7,000 points — while the peso has appreciated to around 52 against the US dollar from about 54 just a few months ago.

The Philippines has overcome the global economic turbulence — from the US-China trade tit-for-tat, the gyration in global stock markets, the series of US interest-rate hikes to the foreign exchange crises in Turkey and Argentina — because the Duterte administration did not waver and kept its macroeconomic fundamentals strong.

The inflation rate finally decelerated to 6 percent in November after the government ordered more rice imports to address the supply side problem. Global oil prices, meanwhile, have dropped, with the West Texas Intermediate Crude Oil prices slipping to below $50 a barrel from nearly $70 in October.

The sudden turn of events gives hope that 2019 will be a good year for the economy. We have seen solid corporate earnings in the third quarter that indicate consumer confidence will be stronger in the fourth quarter of 2018 and the first quarter of 2019.

Retail sales, for one, are picking up, and I am confident they were higher in the last two or three months of 2018. Sales from the retail operations of SM Retail Inc. grew 11 percent to P227 billion in the first nine months, while the unit’s net income rose to P7.9 billion, from P7.7 billion.

Restaurant chain operator Jollibee Foods Corp. booked a net income of P2.03 billion in the same period from P1.61 billion a year ago, up 25.9 percent following the expansion of its store network and contribution from recent acquisitions.

Other conglomerates are also doing well. Alliance Global Group Inc., which is into property and the liquor business, reported hefty earnings of P12.1 billion in the third quarter of 2018, up 18 percent from P10.2 billion year-on-year. Conglomerate Ayala Corp., which is into the property and telecom businesses, booked a profit of P23.9 billion in the nine-month period. LT Group Inc., the listed holding company of tycoon Lucio Tan, reported that unaudited net income in the first nine months of 2018 jumped 84 percent to P12.57 billion, from P6.83 billion year-on-year, boosted by the strong performance of the banking and
liquor businesses.

These conglomerates are selling liquor, tobacco, cell-phone products, grocery items, houses and lots, and  fast-food items. Their impressive sales performance and income reports suggest a strong consumer demand despite the high inflation rate in the third quarter of the year.

The uncertainty and speculation in the economy caused by rising inflation appeared to have ebbed. This bolsters my confidence that the economy will perform much better in 2019.

The World Bank shares the same sentiment in its latest outlook on the Philippine economy. World Bank senior economist Rong Qian said a strong, consistent delivery of the infrastructure investment agenda while sustaining improvements in health, education and social protection would be key to maintaining the robust and inclusive growth outlook of the Philippines.

He said while persistent high inflation might have still tempered private consumption growth in the fourth quarter of 2018, a moderation in inflation in following quarters would be expected to boost
consumer confidence and raise private consumption in 2019. The Philippines, he said, remains one of the fast-growing economies in the East Asia and the Pacific region.

The Philippine economy did quite well in 2018 considering the volatility in the global markets. I believe it will perform  much better this year with government’s resolve to ramp up the “Build, Build, Build” infrastructure program.

Happy New Year to all!

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This piece first came out in Business Mirror on Dec. 25, 2018 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN