The Philippine economy, as measured by the gross national product, eked out a mere  3.7-growth  in 2011 despite government efforts to boost spending in the fourth  quarter. The government’s last-quarter effort to boost total economic output was restrained by the slowdown in exports and the lingering debt problem in Europe.

PH 2012 GNP forecasts

* World Bank, 4.2 percent;

* US-based investment bank Citigroup, 3.9 percent;

* Hong Kong and Shanghai Banking Corp., 3.6 percent; and

* United Bank of Switzerland, 3.6 percent;

This year the WB, Citigroup, HSBC, and UBS trimmed their respective growth forecasts for the Philippines because of the looming impact of a global recession triggered by the debt crisis in the Eurozone (Portugal, Italy, Greece, and Spain).  These leading forecasters conclude that the impact of the Eurozone debt crisis and the stationary growth of the US economy on Asia, including the Philippines, is real and serious in terms of foreign trade and investments.

According to Bank of International Settlement and International Monetary Fund data, the total Eurozone debt to be refinanced is a huge 4.7 trillion euros equivalent to $6.2 trillion. The debt crisis in the Eurozone could force major European banks to mainly focus their resources to refinance maturing sovereign and foreign debts of the so-called PIGS countries.

The European banks’ primary obligation to save the Eurozone from financial ruin would force them to curb their lending to Asia and the rest of the world for as long as the debt crisis in that region continues. On the other hand, the flat US growth can only provide scant financial relief to Asia and the rest of the world.

This year alone, it is estimated that the major European banks would refinance about one trillion euros or $1.3 trillion. With this situation, the problem now is how the major European banks with the help of France, Germany, and the United Kingdom -- the wealthiest countries in the Eurozone -- would refinance these maturing big debts without weakening their capital base. These major Eurozone banks would need recapitalization funds so they may continue to play their role as Europe’s economic movers.

Economic impact

The magnitude of the debt crisis in the Eurozone has already affected our country’s exports to China and the Eurozone last year and is likely to continue for the rest of this year. China’s exports are forecast to go down significantly this year.  In fact, the slowdown was already felt in HK  -- China’s  biggest trading partner -- last month, according to its Finance Secretary, John Tsang. Mr. Tsang’s  forecast is that HK’s GNP would go down to three percent from five percent last year.

The economic slowdown has already affected the poorest of the poor in the country as well. The respectable Social Weather Stations said in a new report that the poor may have become fewer, but more of them went hungry and that they needed increased government intervention.         The WB had confirmed this conclusion when it said that poor Filipinos – those who live on less than $2 a day -- do not feel the relief from the country’s economic gains.

With the shortage of foreign funds from Europe and the United States, capital needed to run industries and drive our economy forward would be hard to come by.

Without the dramatic increase in foreign trade and foreign investments from Europe and the US, the massive infrastructure projects planned this year by both our government and local private conglomerates would  woefully not be enough to sustain a robust economy.

LC still the stock to watch

The injunction issued by the National Commission on Indigenous Peoples to stop Far Southeast Gold Resources Inc., a subsidiary of Lepanto Consolidated Mining Co.,  to drill last month has been settled, and the drilling to confirm the extent of the deposit has commenced.

On the technical side, LC is expected to turn bullish next month.  It has a very strong support at P1.64-P1.67 price range. Trading had been very light for the past two weeks on thin   volume. Prices could still dip to P1.60-P1.65 range before the next rally. Trading on the stock needs to reach a volume of 150 million shares to ignite a rally. Expect this to happen before the end of the month or early March. A price window of opportunity to buy and accumulate is between P1.60 and P1.65.

If you have questions about my column in particular or the stock market in general, please feel free to contact me by email:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it. or log on to www.philippinegolddiggers.com.

Till next week. 

In the meantime, keep your mind on the money and your eyes on the market.