MANILA, Philippines – Despite the last-minute debt deal to avoid a default in the United States, economic uncertainties surrounding the debt ceiling are worrying, Security Bank EVP for Financial Markets Rafael Algarra said on Thursday.
Algarra warned that by early 2014, US will face the same problem as the deal only funds the US government until January 15 and raises the debt ceiling until February 7.
“I think that’s where most of the worry of the market is. The problem is that every time they do this, it starts to affect the economy in general and another shutdown will further affect the economy,” he told ANC’s “News Now” on Thursday.
“I think the bigger worry is the long-term effect of what has happened. As we've seen, they estimated that the GDP would be affected by around 6%, that’s around $24 billion. This should probably effect US economy and they’ll have worries of ongoing problems like this in the future. We’ll probably see the Federal Reserve be conscious of the fact that they might withhold tapering and move it at a much later date,” he added.
The 11th-hour deal ended a 16-day US government shutdown and averted a historic debt default that could have brought financial calamity.
According to Algarra, the forecast for the Philippine financial market is still positive for the rest of the year.
He said the Philippine Stock Exchange index (PSEi) is seen to hit 6,800-6,850 level by yearend.
“We expect the PSEi to move up before the yearend,” he said.
Algarra also said the Philippine peso is expected to strengthen against the US dollar, with the peso-dollar exchange rate seen to range between P42.50-P43 to a $1.
“With the uncertainty of the US dollar it may even be more pronounced this time,” he said.
He added that prospects for the country’s financial market are promising with remittances and balance of payments surplus.
“On a risk aversion scenario, you buy US dollar. But the problem is the US dollar is causing all the uncertainty. So on taking out risk, you should be selling local currency and buying another currency, but if the US dollar is not the one, in a cross basis it cancels off. But the prospects for the Philippines are quite good,” he said. -- With Reuters
source: www.abs-cbnnews.com
