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PROSPECTS FOR THE PHILIPPINE ECONOMY 2017
Bernardo M. Villegas, Ph.D. (Harvard)University Professor, UA&P
THE GLOBAL SCENARIO• U.S. Economy facing a Possible Recession• EU, except Spain, growing very slowly• BREXIT will aggravate EU problems• Japan in perpetual stagnation• China slowing down: possible hard landing• Emerging markets, especially Russia and Brazil, facing heavy debt burdens• The ASEAN Economic Community (AEC) assuming growth leadership
together with India and Sri Lanka• Continuing turmoil in the Middle East and North Africa• Oil prices recovering but ceiling of US$50-$60 dollar per barrel • Moderate depreciation of Philippine peso• Demographic winter of developed countries, including Northeast Asia
ENGINES OF GROWTH FOR THE PHILIPPINE ECONOMY
Young Population BPO Industry Infrastructure Domestic Tourism OFWs
Public-Private Partnerships
Agriculture Manufacturing
2017 – 2022
President Rodrigo Duterte’s10-Point Socioeconomic Agenda
1. Continue and maintain current macroeconomic policies, including fiscal, monetary, and trade policies.
2. Institute progressive tax reform and more effective tax collection, indexing taxes to inflation.
3. Increase competitiveness and the ease of doing business.4. Accelerate annual infrastructure spending to account for 5% of
GDP, with Public-Private Partnerships playing a key role.5. Promote rural and value chain development toward increasing
agricultural and rural enterprise productivity and rural tourism.
6. Ensure security of land tenure to encourage investments, and address bottlenecks in land management and titling agencies.
7. Invest in human capital development, including health and education systems, and match skills and training.
8. Promote science, technology, and the creative arts to enhance innovation and creative capacity.
9. Improve social protection programs, including the government's Conditional Cash Transfer program.
10. Strengthen implementation of the Responsible Parenthood and Reproductive Health Law.
President Rodrigo Duterte’s10-Point Socioeconomic Agenda
ASEAN Foreign Direct Investment net inflows
Country 2013 2014 2015 Share to total2015
Brunei Darussalam 725.5 568.2 171.3 0.1 Cambodia 1,274.9 1,726.5 1,701.0 1.4 Indonesia 18,443.8 21,810.4 16,916.8 14.0 Lao PDR 426.7 913.2 1,079.2 0.9 Malaysia 12,297.4 10,875.3 11,289.6 9.3 Myanmar 2,620.9 946.2 2,824.5 2.3 Philippines 3,859.8 5,814.6 5,724.2 4.7 Singapore 60,379.6 74,420.3 61,284.8 50.7 Thailand 15,936.0 3,720.2 8,027.5 6.6 Viet Nam 8,900.0 9,200.1 11,800.0 9.8
Total 124,864.5 129,995.1 120,818.8 100.0ASEAN 6 111,642.0 117,209.0 103,414.2 85.6CLMV 13,222.5 12,786.1 17,404.6 14.4ASEAN 6 consists of Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand, while CLMV comprises Cambodia, Lao PDR, Myanmar and Viet Nam.Source: ASEAN Secretariat as of October 2016
Value in US$ million; share to total in percent
FIRST METRO INVESTMENT CORPORATION | www.firstmetro.com.ph7
FDI ON UPTREND
2,007.2
3,215.43,737.4
5,739.6 5,835.3
4,689.0
5,875.0
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
2011 2012 2013 2014 2015 9M2016 9M2016
Mill
ions
Net FDI (US$)
Source: Bangko Sentral ng Pilipinas (BSP)As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017
FIRST METRO INVESTMENT CORPORATION | www.firstmetro.com.ph
WIDE FISCAL SPACE TO SUPPORT EXPANSION
0.9
-2.1
1.8
7.8
0.71.8
-0.2
2.3
-1.0-2.6
-3.4-2.3
-4.5-2.8
-4.2-3.3
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
10.0
Philippines Indonesia Malaysia Thailand Vietnam ASEAN BRICS PIGGS
Current Account balance (% of GDP) Budget deficit (% of GDP)
COUNTRYBLOCK
AVERAGES
In %
Sources: World Bank Open Data, The Economist Economic and Financial Indicators
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017
FIRST METRO INVESTMENT CORPORATION | www.firstmetro.com.ph
INFRA SPEND: WILL DU30 DELIVER?
Sources: Department of Budget and Management, PSAAs cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017
FIRST METRO INVESTMENT CORPORATION | www.firstmetro.com.ph10
SUFFICIENT RESERVES TO WEATHER FOREX VOLATILITY
9.9x
6.5x5.5x
7.4x
1.9x
6.2x
11.4x
1.6x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Philippines Indonesia Malaysia Thailand Vietnam ASEAN BRICS PIGGS
Total reserves/monthly total imports
Sources: World Bank, International Debt Statistics 2017As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017
FIRST METRO INVESTMENT CORPORATION | www.firstmetro.com.ph11
LOWEST EXTERNAL DEBT TO GNI IN THE REGION
22.0
37.0
66.3
35.2
42.5 40.6
29.9
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Philippines Indonesia Malaysia Thailand Vietnam ASEAN BRICS
In %
Sources: World Bank, International Debt Statistics 2017As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017
Macroeconomic Forecasts
2014 2015 2016 2017f
Inflation Rate (Ave % change) 4.1 1.4 1.6 3.5
Peso-Dollar Rate (Year-end) 44.62 46.75 49.81 50.00 - 52.00Gross Int'l Reserves ($B) 79.6 82.5 81.5 90.0GDP Growth Rate 6.1 5.9 7.1 (3rd Qtr.) 7.5
Industry Sector 7.9 5.6 8.6 9.2Services Sector 5.9 6.4 6.9 7.3
f-forecasts*Various Sources
Financial Forecasts
2014 2015 2016 2017f
Inflation Rate (Ave % change) 4.1 1.4 1.6 3.5Peso-Dollar Rate (Year-end) 44.62 46.75 49.81 50.00 – 52.00
91 day T-bill rate (% p.a.) 1.4 2.1 1.6 3.5
10-year T-bond rate (% p.a.) 3.7 3.8 3.5 5.0
PSEi Level 7,230 7,400 6,841 8,000f-forecasts*Various Sources
Agribusiness Business Process Outsourcing Creative Industries Infrastructures (Airports, Power, Roads and Rail, Seaports, Telecoms,
Water) Manufacturing and Logistics Mining Tourism, Medical Travel and Retirement
Source: Arangkada Philippines 2010: A Business Perspective, Joint Foreign Chambers
Seven Key Industries