World Bank warning on overheating economy spooks investors

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HEAVY selling persisted in early trading on Tuesday on the stock market after the World Bank said that the Philippine economy was at risk of overheating.

The benchmark Philippine Stock Exchange index (PSEi) was down 123.99 points or 1.58 percent at 7,746.26 at the midday break while the wider All Shares was down 58.63 points or 1.23 percent at 4,712.65.

“There was a report by the World Bank saying that the Philippine economy is already overheating,” Diversified Securities, Inc. equity trader Aniceto Pangan said.

“Though this was contested by a UA&P [economist]…but it seems that the effect on inflation after the implementation of the tax reform program has been perceived to weaken the bottom line of different companies that are affecting the growth in the short term,” he added.


The World Bank said on Monday that apart from the risk of overheating, the Philippine economy is also facing other domestic risks such as higher inflation and fiscal deficit.

In its Philippine economic update, the World Bank said inflationary pressure was expected to grow further on the back of higher costs of food and energy.

The multilateral lender said the risk of an overheating economy could be seen in an environment of growing fiscal spending and continued high credit growth.

All sectors ended in the red in morning trade, led by services, which retreated 2.73 percent. ANGELICA BALLESTEROS

 

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