SDA phase-out could boost PH economy


The phase-out of the special deposit accounts (SDA) for small investors by the Bangko Sentral ng Pilipinas (BSP) next month could help fuel local economic activity and growth, according to Philippine American Life and General Insurance Co. Investment Officer Arleen Guevarra.

“With the implementation of this phase-out by the BSP, we can expect about P1 trillion of the total SDA deposits to flow back into the economy. This outflow is seen to push large amounts of liquidity into the financial system that could finance economic activity and boost growth in the capital markets,” she said.

Guevarra added that this will augment the country’s investment market, which is supported not just by the high performance of the local economy, but also by the recent upgrades of its credit rating to investment grade by credit firms Standard and Poor’s, Moody’s and Fitch Ratings.

“The Philippine economy yet again posted an aggressive expansion in the second quarter with a 7.5 percent growth in the gross domestic product, matching the pace of China as the two fastest growing economies in Asia,” Guevarra said.

“Couple that with the upgraded credit rating, and we can safely say the country is in a sweet spot right now,” she added.

Other options
Philam Life Financial Advisor Eric Nicdao said that the SDA phase-out will prompt small investors to look at other options when it comes to investing their money.

“While some depositors may think that this change would mean difficulty in managing their money, this is actually a good opportunity to contemplate where they can invest their money and possibly maximize its growth potential,” Nicdao said.

Currently, a deposit in the SDA only earns 2 percent, while a 1-year time deposit could only yield 1.3 percent or less annually with inflation at 2.7 percent. This means that money in bank deposits loses value in the long run.

“An individual looking for capital growth should always look for investments that offer returns higher than inflation to grow their money over time and reach their long-term financial goals,” Nicdao said.

He added that investors are more likely to prioritize low risk and liquid assets in choosing where to invest their money coming from SDAs.

“What we want to impart to our clients is that in managing their money they should also consider proper financial goals. Money for short-term goals needs should be placed in short-term assets like bank deposits, while money for the long-term should be placed in long-term assets that can maximize the growth potential of their money,” Nicdao said.


Please follow our commenting guidelines.

Comments are closed.