Foreign investments continue to exit the Philippine market as foreign investors gets alarmed by the country’s economic status. While the Philippines may be one of the best investment grounds in Southeast Asia, this might make a turnaround as it is currently experiencing problems with its economy. How is this possible, you ask when the country has been experiencing stable economic growth over the years? The answer can be simplified into understanding its current fundamentals – more specifically, its inflation rate.
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The problem here started with the country’s disappointing inflation rate. It stood at 6.4% last August which is way beyond the projected 4-4.5% projection of the Bangko Sentral ng Pilipinas (BSP) for this year’s inflation rate. The surge of the inflation rate is the aggregate effect of the administration’s implementation of the TRAIN law and the calamities experienced by the country. Recently last month, a typhoon hit Northern Luzon which only aggravated the circumstance. The public in general is doubtful whether the monetary authorities will still be able to reach their target this year.
Net foreign selling continues to dampen the Philippine market making it the worst performing index in Asia. It is the 20th straight day of the net foreign selling amounting to P520 million which was higher than that of the other day making the local bourse dip lower than its 7,300 mark, falling as low as 7,205.04 All of the indexes closed in negative territory expect that of property.
Today, the Monetary Board will conduct a meeting for monetary policies to be taken as the country’s inflation rate went beyond its 2018 projection. The monetary authorities were alarmed since this wasn’t just a slight deviation but in fact, a major one in years. More pressure is added to the newly appointed BSP Governor in taking the necessary steps for correction. The investors expect the BSP to increase the interest rates by 50 basis points but they are still waiting for any announcements.
While some investors are eagerly waiting for monetary actions of the BSP, some have chosen to leave the Philippine market to safeguard their investments. Foreign funds or hot money, in particular, are being monitored since it contributes a huge part of the economy. If the country is able to attract more local and foreign investors, businesses will flourish and so will the economy in general.
With regards to the Philippines’ GDP growth, the target is yet to be adjusted since inflation has worked as a major setback. Our country is considered the second fastest growing economy in Southeast Asia next to Vietnam. However, due to the unexpected inflation rate, it is going to sacrifice the country’s economic growth. By the next quarterly report of the Philippine GDP, we can only expect a minimal growth, if there be any. However, it is still not too late since we are still in the third quarter of the year.