MANILA - Sun Life Asset Management cut its growth forecast for the Philippines to between 3.9 to 7.1 percent from an initial forecast of 7.5 to 9.7 percent.
The asset manager cited the return to tighter quarantine conditions and the recent spike in COVID-19 cases as the primary reason for the lower forecast.
Sun Life’s Chief Investment Officer Mike Enriquez said household consumption will take a hit alongside private investment, and government spending won’t be enough to offset slower activity.
Enriquez noted the fiscal response of the Philippine government has been lacking.
“There has been clamor for fiscal stimulus. That has been lacking. There has been Bayanihan 1 and 2. But these have been lacking. The DOF is really tight on maintaining its budget. There hasn’t really been any response on the fiscal side, we only saw aggressive easing of monetary policy.”
Enriquez added, the monetary policy easing, or the lowering of interest rates and easing of bank’s reserve requirements, has only benefited larger companies.
“The major companies, they have been able to participate. It's just the SMEs, the ones that really need, who need extra funding, which could not access loans. But the bigger companies were able to take advantage. Toward the end of last year, we saw a lot of bond issuances, short term to fund capital needs," he said.
Enriquez said the approval of a new stimulus package would also help boost the Philippine Stock Exchange, which is currently the worst-performing stock market in the world.
“That will definitely add a boost, I think, we are all waiting for the fiscal stimulus. We have been, I think investors have been clamoring, people have been clamoring for that. Hopefully, that will help consumption and help consumer-related companies."
Enriquez said from its current levels of 6,200, the PSEI could test the support level of 6,000 before buying picks it up. Their target for the end of 2021 is 7,648, lower than the initial goal of 8,000 given at the start of the year.
Aside from this, Enriquez said he is also banking on a successful vaccination program to help lower COVID-19 cases and get the Philippine economy up and running again. Any developments in the delivery, rollout, and inoculation program could provide upside for local shares, he said.