Cielito F. Habito, Ph.D.
Economic Briefing for the Ateneo Graduate School of
Business4 June 2013
Philippine Economic Performance and Outlook:In Quest of Inclusive Growth
Overview
•Where We Have Been➜ Disturbing Comparisons
•Where We Are Now The “PiTiK Test”
•Where We Are Headed Signs of a Breakout Sustaining Growth, Threats to Growth The Challenge of Inclusive Growth Doing Our Share
Philippines & Thailand:Estranged Twins
Thai Phil Thai PhilPopulation (million) 36 36 66.9 92.2Population G.R. (%) 3.1 3.1 0.6 2.0GDP Per Capita (US$) 250 250 4062 1796GDP Share (%) Agriculture 32.0 26.0 11.6 14.8 Industry 23.0 27.5 43.3 30.2 Services 45.2 46.7 45.1 55.0
Gross Dom Inv (%GDP) 20.0 20.0 21.8 14.6Gross Dom Saving (%GDP) 18.5 20.3 31.7 15.6
FDI Stock (Billion US$) 7.8 2.3 93.8 22.91998 2009
Indicator1970 2009
1965 2009
Philippines & Indonesia:Trading Places
Gross Domestic InvestmentAverage Annual Growth Rate (%)
2004-2009Source: ADB
Poverty rose from 24.9% (2003) to 26.5% (2009); (H1-2012: 27.9%)
Net elementary school participation rate fell from 97% in 2001 to 85% in 2008; high school from 66% to 62%
Malnutrition incidence went up in most provinces
Wide disparities persist in life expectancy across provinces: Low - 53.4 (Tawi-Tawi); High - 74.6 (La Union)
The Economy In Human Terms
2010: Turning Point For Private Domestic Investment
Gross Domestic InvestmentAverage Annual Growth Rate (%) 2004-2009 (Philippines: Ave. 2010-12)
9.3
How Is The Economy Doing?The “PiTiK Test”
The Essential Yardsticks (P-T-K):
Price Stability (Presyo)
Jobs (Trabaho)
Incomes (Kita)
Latest Economic PerformanceGood News: 2½ out of 3
Prices: Slowed down to 3.2% in 2012 vs. 4.4% in 2011 (Food – 2.3%); Now 2.6% (Food -1.9%)
Jobs: Jan 2013 unemployment fell to 7.1% from previous year’s 7.3%, 606,000 jobs gained; but 571,000 agri jobs were lost, underemployment up to 21%
Incomes/Output: GDP grew 7.8% in Q1-2013 (fastest in Asia), from previous year’s 6.5% growth
Presyo
Inflation Trends
9.3%
3.2%
3.8%
4.4%
FY 2013 – 3.0% April ’13 – 2.6% Non-NCR – 2.8% Food – 1.9%
3.2%
Trabaho
Underemployment Rising
Kita
2012: All Sectors Speeding Up
Kita
Q1-2013: Industrial Vigor
Manufacturing & Construction Drive Industry Growth
Investment Surges in Q1
Business Confidence:Historical Peaks
FDI Approvals Reach 16-year High; Net Inflows Up 32.6%
($1.1b)
Sustained Remittances Growth
Regional GDP Growth, 2010-2011Fastest
growing: Caraga Region, Central Visayas, Central Luzon Worst
Performers:ARMM,
Zamboanga Peninsula
A Break From the Past
Source: NSCB
PiTiK Test: Then and Now
Source: NSCB
Taking Off Where It Matters
Source: NSCB
But much work remains
Source: ADB
We still lag far behind
Source: ADB
Where is the Peso Headed?
Source: http://fx.sauder.ubc.ca
Peso Appreciation Pressures
Credit rating upgrade More financial inflows
Sustained income remittances growth May accelerate further?
BSP’s ‘arsenal’ getting tighter Intervention ability more limited
More fun in PH Tourism influx picking up
US Dollar’s decline as reserve currency Long term weakening
Growth Drivers In 2013 Onwards
Government spending: Full throttle; PPPs coming on stream; stronger revenues
Governance: Improvements taking hold
Private domestic investment: Up from a decade of stagnation; FDI picking up
Fitch, S&P & Moody’s: Ratings upgrades
Election Spending: Strong stimulus
Growth Drivers In 2013 Onwards
Remittances: Steady growth
Gaming Investments: PH as the new Macau?
Mindanao: Peace agreement to unleash new growth potentials
New manufacturing investments
China: Factory of the world no more; resume PH industrialization?
Manufacturing: Renewed Vigor
China trends – returning factoriesFood Manufactures – driven by growing population, rising incomes; Halal products (with growing Islamic markets worldwide)
Design-based Manufactures – high end apparel; furniture & fixtures
Finished consumer electronic products – deliberate efforts now underway to move up the value chain (JICA)
Manufacturing 2012: Winners Well Outnumber Losers
Winners• Wearing apparel (44.1%)• Furniture/Fixtures
(38.7%) • Wood products• Office equipment• Nonmetallic Min Prods• Footwear & leather
prods• Transport Equipment• Electrical Machinery• Rubber & plastic products• Food Manufactures• Chemical Products
Losers• Basic Metal Prods • Misc Manufactures• Petroleum/Coal Prods • Paper/Paper products • Tobacco Manufactures• Radio, TV & Comm
Eqpt
BeveragesPublishing/PrintingNon-elec MachineryFabricated Metal
Prods
Threats To Sustained Growth
Fiscal Time Bomb in Europe & US: Systemic collapse would have global impacts
Appreciating Peso: Adjusting to the inevitable
Political Backsliding: Post-2016 scenarioASEAN Economic Community 2015: Tap opportunities, address vulnerabilities
Wide Inequalities: Attaining inclusive growth critical to avert “social volcano”
Who’s Afraid Of ASEAN 2015?
ASEAN as a single market and production base, via:
• Elimination of import tariffs
• Free movement of professionals
• Freer movement of capital
• Free flow of investment
• Faster customs clearance procedures
Top Philippine Billionaires:Skewed Wealth, Skewed Growth
Income of top 150,000 families = income of bottom 6 million
Rise in wealth of the 40 richest Filipinos in 2011 equaled 76 percent of the total growth in income (GDP) of all Filipinos
Forbes Asia
Wealth Increase of 40 Richest / Absolute Increase in
GDP (2011)
Philippines: $13 billion / $17 billion (76%)
Thailand: $9 billion / $26.7 billion (33.7%)
Malaysia: $2.3 billion / $41 billion (5.6%)
Japan: $11 billion / $381 billion (2.8%)
• Economy grew 7.2% in Q3-2012, but actually lost 882,000 jobs (NSO-LFS)
• PH rice farmers receive only 45% of wholesale price; other Asian rice farmers get 65-95% (FAOStat)
• A top billionaire can easily borrow hundreds of millions from a gov’t bank and make fabulous profits from it – but a small farmer or entrepreneur is hard-pressed to borrow a few thousand pesos
Narrow, Hollow & Shallow Growth:
Disturbing Facts
• It costs more to ship from Mindanao to Manila than from Bangkok to Manila, for well over 25 years now
• Some of the 40 richest Filipinos in the Forbes list do not even appear in the top 500 taxpayers list of BIR
• Gov’t borrowed billions for Subic & Batangas Ports “to decongest Metro Manila” – then permitted substantial capacity expansion of Manila Port, leaving the two < 5% utilized (JICA)
Narrow, Hollow & Shallow Growth:
More Disturbing Facts
Inclusive Growth:How Shall We Get There?
• Widen the economic base: Concerted SME promotion and development; foster social enterprise
• Disperse economic activity & economic gains: Democratize the value chains; invest in Mindanao; strengthen competition policy; make the financial system inclusive
• Get agriculture moving: Empower Provincial Agricultural Offices; reform DA bureaucracy; attract/push large investors into agribusiness
The Philippine Conundrum
• We have long understood our problems, and known the needed measures – still, the problems persist with no real action taken
• Can our politics and political economy ever change to finally enable the long needed reforms?
Our Task:
How can government, private sector and civil society work together to ensure sustained pursuit of the truly meaningful, long needed and largely well known policy and public investment interventions crucial for inclusive growth?
• Freedom of Information Act• National Land Use Act• Competition Policy Law• Rationalization of Fiscal
Incentives• Wider Liberalization of
Investment Policy• Political Dynasties Ban• Easing of Cabotage Law• Open Skies Policy• Integrated Forward-Looking
Strategic Infrastructure Plan• Expanded Farm and SME
Finance• Political Party Reform• Inclusive Commodity Value
Chains• Effective Smallholder
Clustering Programs• Wider Ro-Ro Coverage• National Agricultural
Cooperative System• Strategic Investment
Program for Bangsamoro• Climate Change Resilient
Local Development Plans• Freedom of Information Act• National Land Use Act• Competition Policy Law• Rationalization of Fiscal
Incentives• Wider Liberalization of
Investment • Political Dynasties Ban• Easing of Cabotage Law• Open Skies Policy• Integrated Forward-Looking
Strategic Infrastructure Plan• Expanded Farm and SME
Finance• Political Party Reform• Inclusive Commodity Value
Chains• Effective Smallholder
Clustering Programs• Wider Ro-Ro Coverage• National Agricultural
Cooperative System• Strategic Investment
Program for Bangsamoro• Climate Change Resilient
Local Development Plans
Ruchir Sharma: Breakout Nations
• PH: new economy to watch!
• TIP (Turkey, Indo-nesia & Philippines) are pushing BRICS aside
• Sharma: Quality of political leadership crucial to becoming a breakout nation
Positive change will not come automatically…
• Demand good governance from our leaders at all levels, at all times… and we must also deserve it
• Do our share to stabilize and strengthen the economy:- Pay proper taxes- Consciously buy Filipino, buy locally- Discover our own country first (it’s more
fun – and less costly!)
We Filipinos must all do our share…
• Doing Our Share (Cont’d)
- Invest in Mindanao – especially Muslim Mindanao (and help break its vicious cycle of backwardness)
- Invest in good political leaders
- Invest in a poor family➜ One out of five Filipino families is poor
➜ It takes only one of every four non-poor to ‘adopt’ a poor family
➜ Not to ‘give a fish,’ but ‘teach them to fish’!
Thank you very much!
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