As I end the 2012 Outlook series, I am proud to feature the views of a highly respected academic and economist from the University of Santo Tomas. I had the privilege to meet and collaborate with Mr. Alvin Ang and I admired his astute grasp on economics. However, more than his brilliance in his field, I admired the heart of Alvin — in the academe and in his desire to make a better life for our brothers and sisters. He is someone who I hope was my teacher in my student years, but its never too late to learn from a brilliant guy who has a heart of gold.

The 2012 Outlook of Alvin P. Ang

Few weeks into 2012, the fluidity of the global and local markets make it difficult to even give a quarterly outlook on the economy and markets. Nonetheless, there are general trends that we could follow and assess their direction through the year. Let me focus on the 3 critical components of the economy.

First, GDP growth. GDP growth for 2011 will likely fall around the 3.5 and 4.% forecast made by agencies and fellow economists. This expected growth is respectable considering that the economy treaded a difficult global scenario brought about by the political problems in the Middle East, the Eurozone debt problems, the tsunami in Japan, lower exports and our own local political concerns. Growth drivers remain to be the components of the service sectors boosted by demand in the tourism, finance, real estate and the BPOs. For 2012, tourism will be on overdrive with expected external demand for Palawan and the direct flights to Kalibo by regional airlines. This industry’s huge forward and backward linkages will spur hotel and leisure activities, apart from travel. With construction taking time, rentals in tourist destinations will surely be boosted. BPOs also continue to expand albeit selectively in highly trained skilled manpower. The flock to quality of BPOs ensure that the threat of US withdrawal will not significantly affect the country. Meanwhile, the local manufacturing sector continues to consolidate due to the China and fellow ASEAN dominance of the global industry. But the Philippines continue to have competitive advantages in the food, beverage, furniture and paper industries. These will continue in 2012. OFW remittances continue to be resilient despite global challenges. Studies have revealed that it is countercyclical to crisis particularly where the OFWs are located. For 2011, it is expected to have reached US$23Bn growing at about 7%. Although this has slowed down from recent years, in absolute numbers it has breached more than 1/3 of total exports. A growth of 5% in 2012 will surely be achievable. These sectors will continue to lead growth for 2012, especially as the country shakes its weak institutional and capacity image abroad. Foreign Direct Investments (FDI) will likely reconsider the country as the transparency and corruption-cleaning of the government take effect. The improvement in the perception of the country’s capacity is a crucial ingredient in ensuring sustainability of growth in the medium to long-term. The investment of the current government in this direction is a step in the right direction. Thus, 2012 growth will most likely better 2011 to between 5 to 5.5%.

For 2012, two critical indicators remain important challenges. Inflation is under threat from the fluctuating oil prices. The BSP will take a stance to ensure that it oscillates around the 4.5 to 5% band. With the new basket and base year (2006), food share to the CPI basket has declined from 42% to around 37%. Housing and related expenses remain above 20% and transportation increasing to close to 10%. Managing inflation will entail ensuring adequate food supply chain and stability of oil prices. The focused manufacturing and services sectors do not have enough demand for funds and the ease of raising funds through the bond markets by the conglomerates will continue the low interest rate regime for 2012. This is coupled by the government’s good cash position as shown by the average 91 T-Bill rate of less than 3% – the lowest in decades. Foreign exchange, on the other hand, will likely hover around 43.50 to 44 as the supply of OFWs temper the rising demand of imports for raw materials and capital expansion. The global uncertainty will continue to make precious metals a safe haven for long term liquidity. Gold reached all time highs in 2011 and will likely attempt it again this year.

Lastly, unemployment continues to be the bane in the economy. The limited growth drivers and the large and institutionalized educational system in the country are causing supply choke points. It is critical for the government to ensure sustainable growth to create an environment for long term employment. The recent improvement in the economic freedom ranking gives the hint where to focus. A fast, reliable and standardized business registration system all over the country remains the single most important obstacle for business growth and employment generation. Efforts to making this a reality is underway in different fronts. a fully operational public-private partnership coupled with renewed vigor of government expenditures will be great signs for this year. A special focus on disaster preparedness and management is also a crucial government activity. Overall, 2012 is a breakout year for the economy – rebuilding the base and renewing confidence in both local and international investment are taking roots for a better medium to long term outlook.

Alvin P. Ang has more than 20 years of professional experience in both public and private sectors.  He started his Economist experience with the National Economic and Development Authority (NEDA) of the Philippines where he developed his skills in Development Planning, Policy Formulation and Analysis.  He also worked in Investment Research and Economic Forecasting with his stints at the Philippine National Bank and All Asia Capital as Chief Corporate Planner and as Economist, respectively.  Within those periods, he has been teaching part-time at the University of Santo Tomas in Manila.  In 1999, he joined the academe as full-time Faculty member after completing his Master in Public Policy at the National University of Singapore as a Scholar of the Singapore Government.  He went on to complete his Ph.D. in Applied Economics at Osaka University in 2006 as a Japanese Government Scholar.  He has published in renowned journals such as the Review of Development Economics, Asia Pacific Social Science Review, among others.  His research fields are in Labor and Development Economics and his research interests include Privatization and Development Finance.  His researches on Remittances and Economic Growth in the Philippines have been widely circulated.  He has also consulted for the World Bank, World Health Organization, the European Union, Asian Development Bank, International Labour Organization and the USAID on policy matters. He recently won the first prize (together with Jeremaiah Opiniano) in the Outstanding Research for Development in the 2011 Global Development Awards (besting 400 entries worldwide)  held in Bogota, Colombia.  He is a lifetime member of the Philippine Economics Society where he currently is Vice President.  He is an advocate of responsible personal finance and has lectured on this topic in many fora.  Presently, he is Director of Research for Culture, Education and Social Issues and a Full Professor of Economics at the University of Santo Tomas and Visitor Professor at the Ateneo School of Government.

I’m really encouraged by the potential of the younger breed of financial practitioners. Through time, I came to realize that age has nothing to do with wisdom and that we can learn much from the young. I am proud to feature the 2012 Outlook of a very young and bright financial planner who is full of zeal, insight, knowledge — but I am most impressed by his passion to educate Filipinos financially and promote stewardship, Mr. Marvin Germo.

2012 Outlook of Marvin Germo

The Philippine market has been moving sideways for the past year and based on history the  longer a certain market is sideways the stronger the upward or downward push that would follow.  Amidst the doom and gloom that people are projecting in the financial markets of 2012, my outlook is quite optimistic brought about by:

-The move of the world economies to the emerging markets like the Philippines, as money have been flowing to these markets due to cheaper costs, bigger growth potential  and the murkiness of the European and American markets, have made a stronger case to build businesses in emerging economies.

-More government spending, cleaner transactions, higher approval ratings would certainly boost business confidence in the country which would translate into more jobs and bigger business ventures.

-Robust fundamentals in Philippine based companies which are in expanding industries such mining, energy, and construction will see continued growth this year and thus bring in more jobs and business.

To top all this things, I remain optimistic due to the fact that I know God’s Blessing is in the Philippine and because of that I know that the great days of this nation are still right ahead of us!

Marvin Germo is the General Manager of Ephesians Management Corporation and is a Financial Planner and Advisor who is one of the up and coming personal finance gurus that this generation has ever seen. His Passion and zeal to educate the Filipino people has translated into transformed lives, financially free families and has moved ordinary consumers into investors.

He is an Entrepreneur and Financial Resource Speaker who out of his eager desire to make an impact in this nation has spoken in different spheres of society – corporations, government agencies, churches, schools, clubs, organizations, and numerous public events. His ability to breakdown complicated investment concepts and translate it into something that is simple, basic and understandable has made him one of the most sought after money speakers in the land.

He completed the Registered Financial Planners Institute (RFPI) program, he is a Stock Market Trader & Investor more than four years experience in the Philippine financial industry. He also owns (www.marvingermo.com), a financial planning help site. He graduated from Mapua Institute of Technology with a Bachelor of Science in Electronics & Communications. He has just recently completed the Philippine Stock Exchange Certified Specialist Course in the Ateneo Center for Continuing Education.

As a young and aspiring financial services practitioner, I was often excited to get nuggets of financial wisdom from one of the pillars of the insurance and mutual funds industry. I often found myself wanting to hear more from the next featured expert and I feel blessed to be able to attend a number of learning opportunities from him. Let me now feature the prospective views of someone who is well admired and respected by many, Mr. Henry Herrera.

2012 Outlook of Henry Joseph Herrera

• 2012: a volatile year for global equities on account of fiscal deficit and debt issues largely in EU and US, slowdown of global economy and its impact on emerging markets, and worsening impact on countries of natural disasters (such as those caused by global warming).

• Spikes in interest rates may be in the menu for countries who are unable to get a handle of their ballooning fiscal deficits and national debts. More country sovereign credit downgrades may be expected.

• Investment opportunities abound where financial threats exists. Focus should be on safety and liquidity of invested assets while the “dark clouds” persist. Reduced weighting on risky assets is the prudent approach at this time. The possibility of much cheaper asset prices sometime in the near future is not unlikely. Returns on fixed income instruments will remain subdued, at best, given the low prevailing rates in the country.

  Mr. Henry Joseph Herrera was the former President and CEO of Sun Life Philippines and a well sought after expert in his field.

  Henry joined Sun Life in 1998 and has held a number of senior positions including EVP & Actuary, VP & Actuary, and SLAMC COO.  He was AVP, Actuarial for the Region in 1998.  Prior to his career at Sun Life, Henry was the President and Director of Philippine Asia Life Assurance Corporation.

  Henry has over 28 years experience in the life insurance industry. He holds an MBA degree major in finance and a B.S. in Statistics, cum laude, from the University of the Philippines. He is also a Fellow and past president of Actuarial Society of the Philippines and a member of the International Actuarial Association.  He is a past president of the Philippine Life Insurance Association.