Philippine stocks and the peso face another testing week as investors weigh the third-quarter economic growth figures against stubborn inflation, with both developments likely to reinforce expectations of another interest rate hike before year-end.
Brokerage 2TradeAsia expects gross domestic product (GDP) growth of 2.3 percent to 2.7 percent in the July-September period, marginally above the second quarter’s 2.3 percent but hardly convincing evidence of an economic recovery.
The bigger concern is the government’s infrastructure spending, which plunged 34.6 percent in January-August, raising questions about the strength of public investment as a growth driver. Stronger electronics exports could offer some relief, although their contribution may not be enough to offset sluggish domestic activity.
“A miss at or below 2.3 percent is the bigger risk, as it means growth failed to recover even against an easy base,” 2TradeAsia said, warning that the combination of weak growth and elevated prices could heighten stagflation risks heading into 2027.
October inflation accelerated to 7.8 percent, while core inflation climbed to 5.4 percent, strengthening the case for another Bangko Sentral ng Pilipinas rate increase at its December 17 policy meeting.
The Philippine Stock Exchange index nevertheless gained 1.44 percent last week to 5,761.95. However, 2TradeAsia advised investors to stay defensive, identifying 5,700 as immediate support and 5,500 to 5,600 as the next downside range should selling pressure intensify.
Currency traders, meanwhile, are watching whether the peso can sustain its recovery toward P62.90 per dollar from record lows near P63.60.
RCBC chief economist Michael Ricafort sees the currency’s next support at P62.50 to P62.75. Softer oil prices and a weaker dollar have provided breathing room, but expectations of another US Federal Reserve rate hike in December could cap further gains.
For both markets, the coming days may offer little comfort. Weak growth and rising prices would leave investors confronting an uncomfortable combination of limited economic momentum and tighter monetary conditions.
