1
THE PHILIPPINES THE PHILIPPINES –– TEN YEARS AFTER THE CRISISTEN YEARS AFTER THE CRISIS
Tokyo, JapanTokyo, Japan22 January 200722 January 2007
AMANDO M. TETANGCO, JR.AMANDO M. TETANGCO, JR.GovernorGovernor
2
OutlineOutline
I. Impact of the Crisis II. Recovery from the CrisisIII. Future Challenges and Policy Directions
3
Impact of the CrisisImpact of the Crisis
-2-1012345678
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
GDP GNP
02468
101214161820
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Headline Inflation ( in %) 1990-1999
Real GDP and GNP Growth ( in %) 1990-1999
10
15
2 0
2 5
3 0
3 5
4 0
4 5
5 0
' 9 0 ' 9 1 ' 9 2 ' 9 3 ' 9 4 ' 9 5 ' 9 6 ' 9 7 ' 9 8 ' 9 9
-4,000-3,000-2,000-1,000
01,0002,0003,0004,0005,000
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Balance of Payments (in million US$)1990-1999
Exchange Rate1990-1999
4
Philippine economy was spared the harshest Philippine economy was spared the harshest effects of the crisiseffects of the crisis
Real GDP Growth (1990-2006)
-15
-10
-5
0
5
10
15
20
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Q1 Q2
Philippines Thailand Indonesia Korea Malaysia
5
Financial sector reforms
Creation of an independent central bank
Improvement of prudential policies
Liberalization of entry of new banks
Major Structural Reforms Prior to the Major Structural Reforms Prior to the CrisisCrisis
6
Trade liberalization
Foreign exchange liberalization
Major Structural Reforms Prior to the Major Structural Reforms Prior to the CrisisCrisis
7
Recovery from the CrisisRecovery from the Crisis
8
Philippine economy has recoveredPhilippine economy has recovered
Real GDP and GNP Growth (in%)
-2-1012345678
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Q1-Q3'06
GDP GNP
Source: NSCB
5.4
6.3
Ave. GNP (90-97)Ave. GNP (98-06)
9
Implemented measured tightening
Adopted inflation targeting framework
• Greater transparency and accountability
• Greater policy discipline
Monetary Policy ReformMonetary Policy Reform
10
Inflation has generally eased over the yearsInflation has generally eased over the years
02468
101214161820
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Headline Inflation (%)1990- 2006
6.2%
11
• Pursued the passage of the following laws: General Banking Law of 2000Special Purpose Vehicle Act of 2002
• Aligned prudential regulations with international standards
Financial Sector ReformsFinancial Sector Reforms
12
BanksBanks’’ NPL ratio has gone down after peaking NPL ratio has gone down after peaking in 2001in 2001
2 %4 %6 %8 %
10 %12 %14 %16 %18 %20 %
'90 '92 '94 '96 '98 '00 '02 '04 Nov 06
Commercial Banking System NPL Ratio (%)1990-November 06
13
Capital Adequacy Ratio has gone upCapital Adequacy Ratio has gone upU/KBs:Capital Adequacy Ratio(%)
March 00-March 06
10 %
15 %
20 %
Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar
2001 2003 2005
19.4019.40
14
Fiscal Consolidation ProgramFiscal Consolidation ProgramRevenue:
Increased tax rates
Broadened tax base
Implemented efficiency-enhancing administrative measures
Expenditure
Adopted a prudent approach to public spending
15
Fiscal position has improved appreciablyFiscal position has improved appreciably
-6 %-5 %-4 %
-3 %-2 %-1 %0 %
1 %2 %
'90 '92 '94 '96 '98 '00 '02 '04 'Sep 06
Fiscal Deficit as Percent of GDP (%)1990-Sep 2006
16
Exchange Rate (1990 – 2006)
Peso has appreciated over the past two years Peso has appreciated over the past two years
10
15
2 0
2 5
3 0
3 5
4 0
4 5
5 0
5 5
6 0
' 9 0 ' 9 1 ' 9 2 ' 9 3 ' 9 4 ' 9 5 ' 9 6 ' 9 7 ' 9 8 ' 9 9 ' 0 0 ' 0 1 ' 0 2 ' 0 3 ' 0 4 ' 0 5 ' 0 6
17
0
5
10
15
20
25
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Gross International Reserves ( in billion US$)
Buildup in international reserves due in Buildup in international reserves due in part to strong foreign exchange inflowspart to strong foreign exchange inflows
18
External Debt (1990-2006)
External DebtExternal Debt--GDP ratio has improved GDP ratio has improved
10
15
20
25
30
35
40
45
50
55
60
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jan-Sep05
Jan-Sep06
In billion US$
10
20
30
40
50
60
70
80In %
Total External
Debt to GDP
19
Future Challenges and Policy Future Challenges and Policy DirectionsDirections
20
Future Challenges: Need to sustain Future Challenges: Need to sustain reformsreforms
Investor confidence
Higher growth
Poverty reduction
21
Future challenges: Need to boost capital spendingFuture challenges: Need to boost capital spending
0
5
10
15
20
25
30
35
40
1997 1998 1999 2000 2001 2002 2003 2004 2005 1Q-3Q 06-1
0
1
2
3
4
5
6
7
8
9
Investments/GDP ratioGDP Growth Rate
Investment to GDP ratio (1990-2006)
22
Future challenges: Need to increase growth in Future challenges: Need to increase growth in bank lending to raise the economybank lending to raise the economy’’s productive s productive potentialpotential
0
10
20
30
40
50
60
70
80
1997 1998 1999 2000 2001 2002 2003 2004 2005
Loans to GDP ratio (1990-2005)
23
Future challenges: Need to deal with capital surgesFuture challenges: Need to deal with capital surges
Net Investment Flows (2000-Oct 2006, in million US$)
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
2000 2001 2002 2003 2004 2005 Jan-Sep06 p/
FDIs*Portfolio Investments
**/ Non-residents’ investments (BOP concept); p/ preliminary
24
Monetary policy will focus on protecting the inflation target
External policy will focus on further strengthening the external position
Fiscal consolidation will continue
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THE PHILIPPINES THE PHILIPPINES –– TEN YEARS AFTER THE CRISISTEN YEARS AFTER THE CRISIS
Tokyo, JapanTokyo, Japan22 January 200722 January 2007
AMANDO M. TETANGCO, JR.AMANDO M. TETANGCO, JR.GovernorGovernor
