It is bound to be a better year for the Philippine economy as inflation has peaked and prices are returning to normal.

This was the market outlook presented by Sun Life Investment Management and Trust Corporation (SLIMTC) Chief Investment Officer Ritchie Teo in a recent media conference.

“Based on the latest gross domestic product (GDP) forecast, we anticipate a 6% growth for 2024, largely driven by higher consumption and private investments. On the other hand, consumer price index (CPI) will average 3.8% for the year,” Teo said. “However, a couple of risks may arise, such as a severe El Nino, which can affect commodity prices and delay the execution of infrastructure projects.”

As for policy rates of the Bangko Sentral ng Pilipinas (BSP), the SLIMTC executive said the improvement in inflation is a key consideration for the BSP to cut rates. “We expect rate cuts to start by late second quarter. We likewise anticipate a total of 100 basis points for 2024 to further provide liquidity in the system,” he stated.

Meanwhile, global investors are more optimistic this year compared to previous years as policy easing by the US Federal Reserve (Fed) should support both bonds and equities.

“We see Fed pausing on rates. Then, by mid-year, we expect three to four rate cuts, for a total of 75 to 100 basis points. US Inflation returning to target should put confidence in the Fed to finally cut rates this year,” Teo said.

As for Philippine equities, Teo expects the Philippine Stock Exchange index to reach 7200 by end-2024. He mentioned, however, that the market now needs to stay above 6,700 to maintain the momentum. An EPS growth of 8.4% is likewise anticipated, driven by property, banks, and consumer discretionary players in the stock market.

Given these developments, Teo advises both institutional and retail clients who continue to remain in the money market to also consider investing in the local equities markets.

“Corporate earnings remain strong, and EPS is already well above pre-pandemic levels,” he reassured. “Should foreign flows continue to come, this would by key to a rally towards our year-end target.”