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By: Marvin Germo | January 25, 2018

Government spending pushes GDP growth

The market is zooming up 0.88% at 8,999.17! Congratulations to every investor out there!

The Philippine GDP grew by 6.7% for the fourth quarter of 2017. The said increase was due to improvements in the agricultural sector, government consumption and strong imports and exports. Although it is slightly below 2016’s GDP growth of 6.9%, it is still one of the fastest growing economies in Asia next to China and Vietnam.

Socioeconomic Planning Secretary and director general of National Economic and Development Authority (NEDA), Ernesto Pernia, said that the main driver for the growth was really public spending. Government consumption stood at 14.3% in the last quarter of 2017. The expenditures made by the government were for the assistance of the typhoon victims including those affected by the Marawi conflict, public scholarship grants and health programs.

Among the different sectors, industry grew fastest in the fourth quarter which stood at 7.3% followed by services at 6.8%. With respect to the growth in agriculture, it rebounded at 2.4% from a -1.3% in the same period last year. NEDA chief mentioned that it is optimistic of the growth of the agriculture sector this year based on the positive outlook of the rice and corn production. The quantitative restrictions on rice imports are still implemented and it is actually extended until 2020. Private traders can only ship 805,200 tons of rice annually. This will evidently encourage domestic production.

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Private construction dropped this year mainly due to miscellaneous services which includes the BPO industry. This year, the BPO sector expects its annual growth to slow down to 9% until 2022. The industry is basically reaching a plateau to which it is in a steady state as said by NEDA Undersecretary Rosemarie Edillon.

Another slowdown was present in the construction industry which stood at 2.8% compared to last year’s 10.7% in the same period due to a drop in private construction spending. The country’s economy started sluggish last year due to the slow implementation of infrastructure projects but it slowly started to pick up by the 2nd quarter.

One of the fastest growing economies in Asia

World Bank and Asian Development Bank (ADB) expect the Philippines to remain as one of the fastest-growing economies in Asia. The government also expects a higher growth this year considering it has a newly implemented tax reform law (TRAIN Law) and infrastructure program.

As for monetary authorities, such as the Bangko Sentral ng Pilipinas (BSP), they are expecting a steady sail this year since the country has been in an uninterrupted growth for 76 quarters. This will give them leeway to focus on meeting inflation target and pushing market reforms.


Looking at the chart below it is pretty evident that the PSEi is still in a uptrend for the short, mid and long term. Following the trend the market is still headed up with no sell signal insight. Our goal as traders and investors is to follow the trend and maximize the market while it is still headed up. Do not sell just because of emotion or you are trying to figure out the peak. Sell because the market is reversing and at this point in time the market is not reversing yet!

From a support and resistance level, there’s a short and weak support at 8,390 and another weaker one at 8,930. Failure by the market to go to 9,000, may cause the market to retrace to around 8,930 and if 8,930 does not hold, the closes support is at 8,390.


Economy moving up

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