High Tech, High Touch, High Gear
ECONOMICECONOMIC
BRIEFINGBRIEFING
November 8, 2006November 8, 2006
UNIONBANKUNIONBANK
High Tech, High Touch, High Gear
Economic Profile / Economic Profile / Basic Trends Basic Trends
High Tech, High Touch, High Gear
5.1%
5.5%6.1%
4.7%4.4%
3.0%
4.4%3.4%
5.2%5.8%
4.7%
-0.6%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
9%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F
Agriculture Industry
Services GDP Growth
4.6%5.2%
4.1%
6.1%5.7%
5.5%5.0%
4.8%4.2%
4.8%
6.5% 6.6% 6.3%
5.4%
0%
2%
4%
6%
8%
10%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06
Agriculture Industry
Services GDP Growth
YEARLY GROWTHYEARLY GROWTH
QUARTERLY GROWTHQUARTERLY GROWTH
ECONOMIC PROFILEECONOMIC PROFILEAs of end 2005
GNP: PhP5.8 trillion or USD105 billionGDP: PhP5.4 trillion or USD98 billionPopulation: 85.3 millionGDP Per Capita: PhP63,463 or USD1,196Annual Per Capita Poverty Threshold: PhP12,267 Poverty Line: 24.7%
Industry, 32.6%
Services53.0%
Agriculture14.4%
STRUCTURE OF OUTPUTSTRUCTURE OF OUTPUT2005
Source of base data: National Economic & Development Authority
I. ECONOMY
A small, moderately growing A small, moderately growing economyeconomy
High Tech, High Touch, High Gear
More than half of the country’s GDP comes from 3 regionsMore than half of the country’s GDP comes from 3 regions
AT CURRENT PRICES CUM.RANK % SHARE % SHARE
PHILIPPINES 100.0%
1 NCR METRO MANILA 31.9% 31.9%2 IVA CALABARZON 12.5% 44.3%3 III C. LUZON 8.5% 52.8%
4 VII C. VISAYAS 7.3% 60.1%5 VI W. VISAYAS 7.1% 67.2%6 X N. MINDANAO 4.8% 72.0%
7 XI DAVAO 4.6% 76.6%
8 XII SOCCSKSARGEN 3.5% 80.1%9 I ILOCOS 3.0% 83.1%10 V BICOL 2.8% 85.9%11 VIII MIMAROPA 2.8% 88.7%12 CAR ZAMBOANGA 2.7% 91.4%13 IX CORDILLERA 2.3% 93.6%14 IVB E. VISAYAS 2.2% 95.8%15 II CAGAYAN VALLEY 2.0% 97.8%16 XIII CARAGA 1.3% 99.1%17 ARMM MUSLIM MINDANAO 0.9% 100.0%
REGION
GROSS REGIONAL DOMESTIC PRODUCT
I. ECONOMY
Source of base data: NEDA
High Tech, High Touch, High Gear
GROWTH RATES 02-03 03-04 04-05 AAGRREGION/YEAR (1995-2004)
4.7 6.2 5.0 4.1
NCR METRO MANILA 5.3 8.4 7.1 4.4CAR CORDILLERA 3.0 3.7 1.1 6.2I ILOCOS 3.5 5.4 6.0 3.9
II CAGAYAN VALLEY 1.3 10.4 -5.4 5.3III CENTRAL LUZON 3.6 1.8 2.9 2.8IVA CALABARZON 3.8 4.0 3.0 3.5
IVB MIMAROPA 11.0 4.1 6.5 7.8
V BICOL 5.4 5.7 5.0 3.8VI WESTERN VISAYAS 5.9 7.6 5.9 4.2VII CENTRAL VISAYAS 4.6 6.9 6.0 5.0VIII EASTERN VISAYAS 5.2 5.2 4.0 3.7IX ZAMBOANGA PENINSULA 4.5 4.1 7.2 4.6X NORTHERN MINDANAO 5.6 7.2 3.8 5.8XI DAVAO REGION 4.2 6.5 5.0 5.6XII SOCCSKSARGEN 3.8 5.8 2.3 5.1ARMM MUSLIM MINDANAO 2.6 5.2 3.9 3.9XIII CARAGA 0.9 3.1 3.5 2.8
GROSS REGIONAL DOMESTIC PRODUCT
PHILIPPINES
MIMAROPA, fastest growing MIMAROPA, fastest growing
Source of base data: NEDA
I. ECONOMY
High Tech, High Touch, High Gear
1 CALABARZON 13.8 1 M. MANILA 36.2 1 M. MANILA 45.42 C. LUZON 10.6 2 CALABARZON 14.4 2 CALABARZON 9.73 W. VISAYAS 9.6 3 C. LUZON 9.2 3 C. VISAYAS 7.7
4 N. MINDANAO 8.5 4 C. VISAYAS 6.7 4 C. LUZON 6.85 SOCCSKSARGEN 8.4 5 W. VISAYAS 5.8 5 W. VISAYAS 6.36 DAVAO REGION 6.9 6 N. MINDANAO 4.9 6 DAVAO 3.97 ILOCOS 6.5 7 CORDILLERA 4.3 7 N. MINDANAO 3.38 ZAMBOANGA P. 5.9 8 DAVAO 4.1 8 BICOL 2.89 C. VALLEY 5.1 9 SOCCSKSARGEN 3.2 9 ILOCOS 2.8
10 MIMAROPA 4.9 10 MIMAROPA 2.6 10 SOCCSKSARGEN 2.011 C. VISAYAS 4.5 11 E. VISAYAS 2.1 11 E. VISAYAS 1.912 E. VISAYAS 4.4 12 BICOL 1.7 12 ZAMBOANGA P. 1.813 BICOL 3.7 13 ILOCOS 1.4 13 C. VALLEY 1.614 CARAGA 3.0 14 ZAMBOANGA P. 1.3 14 CORDILLERA 1.315 ARMM 2.7 15 CARAGA 1.0 15 MIMAROPA 1.116 CORDILLERA 1.6 16 C. VALLEY 1.0 16 CARAGA 1.017 M. MANILA 0.0 17 ARMM 0.3 17 ARMM 0.7
REGIONAL CONTRIBUTION TO AGRICULTURE, INDUSTRY AND SERVICESAGRICULTURE INDUSTRY SERVICES
I. ECONOMY
Source of base data: NEDA
High Tech, High Touch, High Gear
348410 438 475
549624
718
828920
1,031
1,179
1,302
1,413
1,537
1,720 1,727
156 189 205 218 251 274 308 338 375 409469 513 550 592
654 676
184 2011621501361271151029488786960595448
0
250
500
750
1,000
1,250
1,500
1,750
2,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
NCRRegion IVPhilippines (Remainder) Average
GROSS REGIONAL DOMESTIC PRODUCT GROSS REGIONAL DOMESTIC PRODUCT NCR, REGION IV and PHILIPPINES (REMAINDER) AVERAGENCR, REGION IV and PHILIPPINES (REMAINDER) AVERAGE
1990 – 2005 at Current Prices1990 – 2005 at Current Prices
Source of base data: 2005 Philippine Statistical Yearbook
I. ECONOMY
In billion pesos
High Tech, High Touch, High Gear
Miscellaneous15%
Transportation & Communication
9%
Household furnishing
3%Beverages
2%
Food53%
Household operations
9%
Tobacco2%
Clothing and Footwear
3% Fuel, light, water4%
PERSONAL CONSUMPTION EXPENDITURE PERSONAL CONSUMPTION EXPENDITURE BY PURPOSEBY PURPOSE
2005
Miscellaneous14%
Transportation & Communication
5%
Household furnishing
3%
Beverages2%
Food55%
Household operations
10%
Tobacco3%
Clothing and Footwear
4%
Fuel, light, water4%
19961996
Transportation & Communication
6%
Miscellaneous15%
Household furnishing
3%
Beverages2%
Food53%
Household operations
10%
Tobacco2%
Clothing and Footwear
4%Fuel, light, water
5%
20002000
Source of base data: NSCB
Consumption pattern remains almost the sameConsumption pattern remains almost the sameI. ECONOMY
High Tech, High Touch, High Gear
Source of base data: 2005 Philippine Statistical Yearbook
Population growth projected to slow furtherPopulation growth projected to slow further
77
94
141
112
128135
120
103
85
2.1% 2.0%1.8%
1.6%1.4% 1.3%
0.9%1.1%
0
20
40
60
80
100
120
140
160
2000 2005 2010 2015 2020 2025 2030 2035 2040
0%
1%
2%
3%
4%
5%Population in millions CAGR
I. ECONOMY
High Tech, High Touch, High Gear
Fiscal and External Fiscal and External Sectors Sectors
High Tech, High Touch, High Gear
700796
850
282 320
590649
779
942 975
243 260336 361
410472 463 479 515
564 566627
259
350404
470513
712827
887
(16) (22)
(67)
0
(125)(160)
(186)
16
(200)(213)
(147)(136)
(112)
11 6 2
(50)
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F 2008F
-300
-200
-100
0
100
200
300
Revenues (LHS) Expenses (LHS) Budget Balance (RHS)
Sources of base data: NEDA & Bureau of the Treasury
In billion pesos
Fiscal deficit narrows Fiscal deficit narrows
-7%
-5%
-3%
-1%
1%
3%
5%
7%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Deficit / GDP Deficit / GNP
I. ECONOMY
High Tech, High Touch, High Gear
15.6%
14.5%13.9%
13.3%
17.4%
16.1%15.5%
14.8%
11.9%
17.0%16.9%
12.5% 12.5% 12.4%
16.7%
13.3%
19.4%
14.5%14.6%14.3%
15.4%
18.9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06
Tax Revenues / GDP Total Revenues / GDP
84.1%74.2%
76.2%
89.4%
74.3%68.3%
64.3%64.2%
70.8%
88.0%
80.7%
58.9%
67.7%
64.6%66.2%
73.8%74.6%
59.2%51.1% 53.4%
56.6%60.8% 61.5%
66.7%73.1%
0%
30%
60%
90%
120%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06
Total NG + Contingent Debt/GNP
Total NG Debt/GNP
Sources of data: Department of Finance, BIR, BSP
Fiscal dynamics improveFiscal dynamics improveI. ECONOMY
Total External Debt US$55.3 BOf which: Short-Term US$ 6.1 B % of Total 11.10% Medium-to long-term US$49.2 B % of Total 88.90%Ave Maturity of MLT Debt (years), orig maturity 17.6 Public 20 Private 10.2Ave Maturity (years), remaining maturity 10.7 Public 12.4 Private 5.5
Average Maturity for MLT Debt as of end-Mar 2006
High Tech, High Touch, High Gear
631
4,107
(3,364)
1,359
3,586
(280)
2,400 2,128
111663
(206)(513)
(6,000)
(5,000)
(4,000)
(3,000)
(2,000)
(1,000)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1Q06
Capital and Financial Account
Current Account
Balance of Payments
Source of data: Bangko Sentral ng Pilipinas
In million USD
I. ECONOMY Comfortable BoPComfortable BoP
High Tech, High Touch, High Gear
8.2 8.8 9.8 11.413.5
17.420.5
25.2
29.5
35.038.1
32.135.2 35.8
41.2
23.026.7
39.6
5%8% 11%
16% 19%
29%
18%
9%
-16%
9%4%2%
17%19%
23%
10%
-10
0
10
20
30
40
50
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06
-20%
0%
20%
40%
60%
80%
100%
Exports, in USD billion
Year-on-Year Growth
Source of base data: National Statistical & Coordination Board
+16.2%
Mineral Products
2%
Petroleum1%
Agro-Based Products
5%Garments
6%
Others20%
Electronics66%
III. WEAK LINKS
BREAKDOWN OF EXPORTS BREAKDOWN OF EXPORTS
Exports seen to slow in 2007Exports seen to slow in 2007
High Tech, High Touch, High GearSource of base data: National Statistical & Coordination Board
12 1215
18 17
27
3236
30 3134 33 35
29
45
26
39
44
(20)
(10)
0
10
20
30
40
50
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06
-20%
-10%
0%
10%
20%
30%
40%
50%
Imports (USD bn)Year-on-Year Growth
+ 9.6%
Mineral Fuel, 14.0%
Raw Materials,
40.7%
Capital Goods, 35.2%
Others, 2.5%Consumer
Goods , 7.6%
III. WEAK LINKS
Imports expected to slow as well Imports expected to slow as well
BREAKDOWN OF IMPORTS BREAKDOWN OF IMPORTS
High Tech, High Touch, High Gear
140137 136
129 129126
119
100
105
110
115
120
125
130
135
140
145
1999 2000 2001 2002 2003 2004 2005
OIL IMPORT VOLUME, OIL IMPORT VOLUME, in million barrelsin million barrels
2,420
3,8763,372 3,273
3,761
4,714
6,276
2,369
3,262
100
1,100
2,100
3,100
4,100
5,100
6,100
7,100
1999 2000 2001 2002 2003 2004 2005 1H05 1H06
OIL IMPORT BILL, OIL IMPORT BILL, in million barrelsin million barrels
+38%+38%
+33%+33%
Declining on average by 3.5 million barrels per year
Source of base data: Department of Energy
Rising import billRising import billIII. WEAK LINKS
High Tech, High Touch, High Gear
ENERGY SUPPLY MIXENERGY SUPPLY MIX
Increasing supply of alternative fuels Increasing supply of alternative fuels
Source : Department of Energy
Others7.7%
Geothermal 8.0%
Biomass 29.8%
Imported Oil45.4%
Imported Coal9.2%
Others15.2%
Geothermal 21.1%
Biomass 16.8%
Imported Oil37.3%
Imported Coal9.6%
20002000 20052005
High Tech, High Touch, High Gear
Low foreign direct investmentsLow foreign direct investments
NET FOREIGN DIRECT INVESTMENTSNET FOREIGN DIRECT INVESTMENTSIn Million USD
1,453
1,733
150
487
743688
1,754
1,149 1,132
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1999 2000 2001 2002 2003 2004 2005 5M05 5M06
Source of base data: Bangko Sentral ng Pilipinas
High Tech, High Touch, High Gear
0
100
200
300
400
500
600
700
800
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06
0
100
200
300
400
500
600Inflows Outflows Net Flows
0
100
200
300
400
500
600
700
800
900
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
0
100
200
300
400
500
600Inflows Outflows Net Flows
Lower portfolio inflowsLower portfolio inflows
Source of base data: Bangko Sentral ng Pilipinas
1,191
1,993
0
500
1,000
1,500
2,000
2,500
9M05 9M06
NET FOREIGN PORTFOLIO INVESTMENTSNET FOREIGN PORTFOLIO INVESTMENTSIn Million USD
High Tech, High Touch, High Gear
15.0 15.7 16.2
18.5
21.2
17.0
14.9
8.8
11.810.8
16.4
0
5
10
15
20
25
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06
GROSS INTERNATIONAL RESERVESGROSS INTERNATIONAL RESERVES
Source of base data: Bangko Sentral ng Pilipinas
6.7
11.3 11.4
13.9 14.4
17.8
20.7
11.810.0
8.0
12.8
0
5
10
15
20
25
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06
Forex reserves hit all-time high Forex reserves hit all-time high
In billion USD
NET INTERNATIONAL RESERVESNET INTERNATIONAL RESERVESIn billion USD
4.5
3.93.64.14.04.0
3.53.7
3.1
2.0
3.2
0
1
2
3
4
5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06
IMPORT COVER (x)IMPORT COVER (x)
I. ECONOMY
High Tech, High Touch, High Gear
Rating companies on wait-and-see Rating companies on wait-and-see
Source of base data: Bloomberg
FITCH RATINGSOutlook Action
13-Feb-06 BB Stable Upgrade11-Jul-05 BB Negative Downgrade26-May-05 BB Stable Upgrade7-Dec-04 BB Negative Downgrade12-Jun-03 BB Stable Downgrade25-Nov-02 BB+ Negative Downgrade15-Mar-01 BB+ Stable Maintain21-Sep-00 BB+ Stable
MOODYS INVESTORS SERVICEOutlook Action
10-Feb-06 B1 Negative Maintain13-Jul-05 B1 Negative Downgrade16-Feb-05 B1 Stable Downgrade27-Jan-04 Ba2 Negative Downgrade29-Sep-03 Ba1 Negative Downgrade8-Jan-03 Ba1 Stable Maintain3-Feb-02 Ba1 Stable Upgrade
27-Oct-00 Ba1 Negative
STANDARD & POORSOutlook Action
9-Feb-06 BB- Stable Upgrade11-Jul-05 BB- Negative Downgrade17-Jan-05 BB- Stable Downgrade29-Jul-04 BB Stable Maintain24-Apr-03 BB Stable Upgrade28-Oct-02 BB+ Negative Downgrade4-Apr-02 BB+ Stable Upgrade19-Oct-00 BB+ Negative
SOVEREIGN RATINGS
High Tech, High Touch, High Gear
MOODYS -MOODYS - Achievement of the 2006 budget Achievement of the 2006 budget targets for P75 billion in additional VAT revenue targets for P75 billion in additional VAT revenue and of fiscal deficit to around 2.1% of GDPand of fiscal deficit to around 2.1% of GDP
What could change the outlook up?What could change the outlook up?
SOVEREIGN RATINGS
High Tech, High Touch, High Gear
Aaa Aa1 Aa2 Aa3
MOODY’S RATINGSMOODY’S RATINGS
A1 A2
China
A3
HK
Baa1 Baa2 Baa3 Ba1
S&P RATINGSS&P RATINGS
Ba2
Philippines
Ba3
Korea
B1 B2 B3
India
MalaysiaIndonesia
MexicoBrazil
Singapore
Caa1 Caa2Caa3
Thailand
BB-AAA AA- A+AA+ A A- BBB+ BBB BBB- BB+ BB B+
Poland
B B- CCC+CCC CCC-
HK Philippines
Indonesia
CzechSingapore
ThailandTurkeyBrazil
China EcuadorKorea
Russia
ArgentinaPoland
EcuadorRussia
Argentina
Vietnam
Vietnam
Turkey
AA
IndiaMalaysia
Czech
SOVEREIGN RATINGS
High Tech, High Touch, High Gear
Bright SpotsBright Spots
High Tech, High Touch, High Gear
WORKERS’ REMITTANCES AND MIGRANT TRANSFERS
2005 Estimated
Remittance
Remittances as share of GDP,
2004
Growth
Rate (1990-2005)
1 India 21,727 3.1% 14%2 China 21,283 1.3% 36%3 Mexico 18,955 2.7% 13%4 Philippines 13,379 13.5% 16%5 France 12,650 0.6% 8%6 Spain 6,859 0.7% 8%7 Belgium 6,840 2.0% 4%8 Germany 6,497 0.2% 2%9 United Kingdom 6,350 0.3% 8%10 Morocco 4,724 8.4% 6%
Source: Global Economic Prospects 2006: Economic Implications of Remittances and Migration, World Bank.
In million USD, (Estimates include both coursed and not coursed through the banking system)
Filipino remittances, fourth largest in the worldFilipino remittances, fourth largest in the world
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
7,368
6,050 6,031
8,544
10,689
7,019 7,006
6,0495,742
6,7957,640
0
2,000
4,000
6,000
8,000
10,000
12,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06
+15.8%
Rising importance of remittances Rising importance of remittances
OFW REMITTANCESOFW REMITTANCESIn Billion USD
10.3%10.1%9.3%9.2%
8.8%7.9%
8.5%8.7%
10.3%9.1%
0%
2%
4%
6%
8%
10%
12%
1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06
OFW REMITTANCES / GNPOFW REMITTANCES / GNP
Source of base data: Bangko Sentral ng Pilipinas
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
METRO MANILA 19.6%SOUTHERN LUZON 18.9%ILOCOS 12.6%
CENTRAL LUZON 12.0%WESTERN VISAYAS 9.4%CAGAYAN VALLEY 4.9%CENTRAL VISAYAS 4.1%ZAMBOANGA 2.9%BICOL 2.7%DAVAO 2.6%SOCCSKSARGEN 2.4%CARAGA 2.0%CAR 2.0%ARMM 1.9%EASTERN VISAYAS 1.8%NORTHERN MINDANAO 1.3%
DISTRIBUTION OF OFW BENEFICIARIESTO PHILIPPINE REGIONS
II. BRIGHT SPOTS
Source: University of Asia & the Pacific
High Tech, High Touch, High Gear
Increasing rate of labor migrationIncreasing rate of labor migration
62
69 70 70 72 74 72
7882
5554
31
37 39
5157
38
6058
2932
37
0
10
20
30
40
50
60
70
80
90
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Source of base data: Philippine Overseas Employment Authority
AVERAGE MONTHLY OFW DEPLOYMENTAVERAGE MONTHLY OFW DEPLOYMENTIn Thousands
I. ECONOMY
High Tech, High Touch, High Gear
820
1,430
2,290
3,330
4,050
5,070
5,670
120 180 320580
990
1,680
2,700
5901,000
1,610
740
60 80 190 3504501680
1,000
2,000
3,000
4,000
5,000
6,000
2004 2005 2006 2007 2008 2009 2010
Customer Contact Back OfficeSoftware Development Medical TranscriptionAnimation Engineering DesignOther Data Transcription Legal TranscriptionDigital Content
BREAKDOWN OF CYBER-SERVICES REVENUESBREAKDOWN OF CYBER-SERVICES REVENUESIn million USD
Source of base data: www.pes.com.ph, CICT
Cyber-services projected to become another major dollar earnerCyber-services projected to become another major dollar earner
2,100
4,900
6,600
9,100
1,300
3,300
11,700
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2004E 2005E 2006F 2007F 2008F 2009F 2010F
CYBER-SERVICES REVENUESCYBER-SERVICES REVENUESIn million USD
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
28,000
26,000
12,600
6,500
3,0001,300
2,100
6,6004,900
3,300
0
5,000
10,000
15,000
20,000
25,000
30,000
2004 2005 2006F 2007F 2008F
India Philippines
CYBER-SERVICES REVENUESCYBER-SERVICES REVENUESIn million USD
Source of base data: www.bpoindia.org, www.pes.org.ph
Philippines’ cyber-services, 1/3 the size of IndiaPhilippines’ cyber-services, 1/3 the size of India
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
VISITOR ARRIVALS VISITOR ARRIVALS In millionsIn millions
1.0 1.0
1.2
1.4
1.6
1.8
2.02.2 2.1 2.2
2.0
1.81.9 1.9
2.3
2.6
1.51.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06
Growing number of visitor arrivalsGrowing number of visitor arrivals
II. BRIGHT SPOTS
Source of base data: Department of Tourism
High Tech, High Touch, High Gear
AVERAGE LAND VALUE – MAKATI CBD & ORTIGAS CENTERAVERAGE LAND VALUE – MAKATI CBD & ORTIGAS CENTER
Land value, office rents on the rise since 2002Land value, office rents on the rise since 2002
II. BRIGHT SPOTS
OFFICE RENTS – MAKATI CBDOFFICE RENTS – MAKATI CBD
High Tech, High Touch, High Gear
OFFICE VACANCY RATE – MAKATI CBDOFFICE VACANCY RATE – MAKATI CBD
Vacancy rates on downtrendVacancy rates on downtrend
II. BRIGHT SPOTS
RESIDENTIAL VACANCY RATES – MAKATI CBD
High Tech, High Touch, High Gear
585,482
495,400
343,138
290,468
240,152214,793
190,278202,298229,349
180,240
0
100,000
200,000
300,000
400,000
500,000
600,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Cars Utility VehiclesTrucks Buses
Motorcycles/Tricycles
NEW MOTOR VEHICLES REGISTERED BY TYPENEW MOTOR VEHICLES REGISTERED BY TYPE
Motorcycle / tricycle sales rapidly growing Motorcycle / tricycle sales rapidly growing
Source of base data : Land Transportation Office
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
159,393
845
186,248
29,759 26,898
94,382
59,416
22,816
34,749
120,010
19,25426,990 23,197
39,13828,477
11,1216,546
24,68422,89118,02618,46913,836
77,292
25,48816,037
53,20559,176
20,45923,498945
0
40,000
80,000
120,000
160,000
200,000
NCR CAR REG 1 REG 2 REG 3 REG 4 REG 5 REG 6 REG 7 REG 8 REG 9 REG 10
REG 11
REG 12
REG 13
2003 2004
NEW VEHICLE REGISTRATION BY REGION (ALL TYPES)NEW VEHICLE REGISTRATION BY REGION (ALL TYPES)
58,946
253
99,511
28,15425,062
48,883 49,725
21,882
29,802
59,551
18,900
25,43119,321
32,881
25,164
10,771
6,175
20,68017,14014,51016,84413,365
41,037
20,64315,235
43,432
34,203
18,55122,124
364
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
NCR CAR REG 1 REG 2 REG 3 REG 4 REG 5 REG 6 REG 7 REG 8 REG 9 REG 10
REG 11
REG 12
REG 13
2003 2004
NEW MOTORCYCLE/TRICYCLE REGISTRATION BY REGIONNEW MOTORCYCLE/TRICYCLE REGISTRATION BY REGION
Source of base data : Land Transportation Office
NCR, C. Luzon & C. Visayas, biggest buyers of vehicles NCR, C. Luzon & C. Visayas, biggest buyers of vehicles
II. BRIGHT SPOTS
High Tech, High Touch, High Gear
Huge potential in mining Huge potential in mining
II. BRIGHT SPOTS
11 11 12 11 10 10 10 11 10 11 10
1518 18 20
-20
-15
-10
-5
0
5
10
15
20
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-60%
-40%
-20%
0%
20%
40%
60%
Mining GVA, in bn pesosYear-on-Year Growth
Source of base data : NEDA
As at the end 2005, a total of 24 mining projects were identified, which have attracted USD339.7
million in FDI and created over 5,000 jobs.
High Tech, High Touch, High Gear
Growing SectorsGrowing Sectors
RemittanceRemittance Cyber ServicesCyber Services Tourism / Medical TourismTourism / Medical Tourism TelecommunicationsTelecommunications Construction / Real EstateConstruction / Real Estate Low-end VehiclesLow-end Vehicles EducationEducation WellnessWellness InfrastructureInfrastructure PowerPower MiningMining
High Tech, High Touch, High Gear
Weak LinksWeak Links
High Tech, High Touch, High Gear
CUSTOMER LOAN GROWTHCUSTOMER LOAN GROWTH
Economic upcycle, “Property & middle-market boom”
Period of excess capacity & deleveraging
Rapid expansion of FCDU loans; Continued trade liberalization; Several cuts in reserve requirement
Weak loan growthWeak loan growth
4.3%0.7%
3.8%3.0%0.4%-1.9%
7.2%
0.4%
-4.9%
26.5%
52.0%
40.7%
28.4%
38.2%
19.5%
9.3%
33.7%
-10%
0%
10%
20%
30%
40%
50%
60%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 J ul-06
Source of base data: Bangko Sentral ng Pilipinas
Nine years of weak loan growth
III. WEAK LINKS
High Tech, High Touch, High Gear
Sources of base data: PDIC & BSP
1,348 1,3541,452 1,424 1,430 1,473 1,529 1,539 1,568
1841601451249610097
233228
0
500
1,000
1,500
2,000
1998 1999 2000 2001 2002 2003 2004 2005 Jul-06
Total Loans (Net of IBCL)Consumer Loans (Credit Cards, Mortgage, Auto)
Flat overall loan level, growing consumer Flat overall loan level, growing consumer financefinance
In Billion Pesos
14.9%14.8%
12.0%10.9%
10.1%8.7%
6.6%7.4%7.2%
0%
5%
10%
15%
20%
1998 1999 2000 2001 2002 2003 2004 2005 Jun-06
CONSUMER LOANS / TOTAL LOANSCONSUMER LOANS / TOTAL LOANS
High Tech, High Touch, High GearSource of base data: Bangko Sentral ng Pilipinas
Declining, but still huge, non-performing Declining, but still huge, non-performing assetsassets
19 23 24 25 28 34
74
160
195
246
282
245 246227
160
137
20
0
50
100
150
200
250
300
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 J un-06
NON-PERFORMING LOANSNON-PERFORMING LOANSIn Billion Pesos
6 11 1118
48
98
128
159
183
202211
195 192
911
0
50
100
150
200
250
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jun-06
7
GROSS ROPOAGROSS ROPOAIn Billion Pesos
III. WEAK LINKS
High Tech, High Touch, High Gear
III. WEAK LINKS
183 180 181 190203 215 224 221 225
237 244 253 263277
292
-0.4%-1.7%
0.7%
5.0%6.8%
5.6%4.2%
5.6%3.5%2.9%
5.1%
1.6%
5.6%
-1.1%
4.2%
-100
-50
0
50
100
150
200
250
300
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Manufacturing GVA, in bn pesosYear-on-Year Growth
Modest growth in manufacturingModest growth in manufacturing
Source of base data: NEDA
Others22%
Chemicals6%
Footwear4%
Products of Petroleum &
Coal12%
Electrical Machinery
13%
Basic Metals3%
Food Manufactures
40%
BREAKDOWN OF GROSS VALUE ADDED BREAKDOWN OF GROSS VALUE ADDED
High Tech, High Touch, High Gear
110111115109109
115117116109106105
118110114114114113111111
106107104104106109111116114
109119117116
105107105114114113115115113
118
95 95 97 99108
127126118
(100)
(50)
0
50
100
150
Ap
r-0
2
Ma
y-0
2
Ju
n-0
2
Ju
l-0
2
Au
g-0
2
Se
p-0
2
Oct-
02
No
v-0
2
De
c-0
2
Ja
n-0
3
Fe
b-0
3
Ma
r-0
3
Ap
r-0
3
Ma
y-0
3
Ju
n-0
3
Ju
l-0
3
Au
g-0
3
Se
p-0
3
Oct-
03
No
v-0
3
De
c-0
3
Ja
n-0
4
Fe
b-0
4
Ma
r-0
4
Ap
r-0
4
Ma
y-0
4
Ju
n-0
4
Ju
l-0
4
Au
g-0
4
Se
p-0
4
Oct-
04
No
v-0
4
De
c-0
4
Ja
n-0
5
Fe
b-0
5
Ma
r-0
5
Ap
r-0
5
Ma
y-0
5
Ju
n-0
5
Ju
l-0
5
Au
g-0
5
Se
p-0
5
Oct-
05
No
v-0
5
De
c-0
5
Ja
n-0
6
Fe
b-0
6
Ma
r-0
6
Ap
r-0
6
Ma
y-0
6
-30%
-20%
-10%
0%
10%
20%
30%
40%
Index Year-on-Year Growth
VOLUME OF PRODUCTION INDEX 1994=100VOLUME OF PRODUCTION INDEX 1994=100
Source of base data: National Statistical Coordination Board
III. WEAK LINKS
Production remains in negative territoryProduction remains in negative territory
High Tech, High Touch, High Gear
8080808080808080808080808080808080 8080
808079
808080
7979
78797878
797979797979
80
777777
75
80
85
Jan
-03
Feb
-03
Mar-
03
Ap
r-03
May-0
3
Ju
n-0
3
Ju
l-03
Au
g-0
3
Sep
-03
Oct-
03
No
v-0
3
Dec-0
3
Jan
-04
Feb
-04
Mar-
04
Ap
r-04
May-0
4
Ju
n-0
4
Ju
l-04
Au
g-0
4
Sep
-04
Oct-
04
No
v-0
4
Dec-0
4
Jan
-05
Feb
-05
Mar-
05
Ap
r-05
May-0
5
Ju
n-0
5
Ju
l-05
Au
g-0
5
Sep
-05
Oct-
05
No
v-0
5
Dec-0
5
Jan
-06
Feb
-06
Mar-
06
Ap
r-06
May-0
6
Food Manufacturing Textile Manufacturing
Total Manufacturing
Source of base data: National Statistical Coordination Board
AVERAGE CAPACITY UTILIZATIONAVERAGE CAPACITY UTILIZATION
III. WEAK LINKS
Excess capacity remainsExcess capacity remains
High Tech, High Touch, High Gear
Declining share to GDPDeclining share to GDP
3.7 3.7 3.7 3.8 3.94.0
4.2 4.3 4.44.7 4.7
5.35.0
4.24.54.5
1
2
3
4
5
6
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
WATER TRANSPORT GROSS VALUE ADDEDWATER TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos
% SHARE TO GDP % SHARE TO GDP
0.6%
0.5%0.5%
0.4%0.4%
0.4%0.4%
0.5%0.5%0.5%0.5%0.5%0.5%0.5%0.5%0.5%
0%
1%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source : NEDA
III. WEAK LINKS
High Tech, High Touch, High Gear
A small and barely growing sector A small and barely growing sector
1.5
1.0 1.0
1.21.3
1.41.3
1.51.6
1.5
0.0
0.5
1.0
1.5
2.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
AIR TRANSPORT GROSS VALUE ADDEDAIR TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos
% SHARE TO GDP % SHARE TO GDP
0.17%0.17%
0.11%0.11%
0.13% 0.12% 0.13% 0.11% 0.13%0.13%
0%
0%
0%
0%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source of base data : NEDA
26.0 26.827.8
29.1 29.5 30.331.9
34.032.5
24.8
1
6
11
16
21
26
31
36
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2.9%2.9% 3.0% 3.0%
3.0% 2.9% 2.9% 3.0%3.0%
2.7%
0%
1%
2%
3%
4%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
LAND TRANSPORT GROSS VALUE ADDEDLAND TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos
% SHARE TO GDP % SHARE TO GDP
III. WEAK LINKS
High Tech, High Touch, High Gear
Ships and trains lose share to air Ships and trains lose share to air transporttransport
37.940.0
41.444.1 43.2 44.4 43.7
49.151.7
40.4
49.6
53.0
10
20
30
40
50
60
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
3.93.9
4.4
5.1
3.9
5.65.3
3.73.3
4.6
3.3
0
1
2
3
4
5
6
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
SHIPS : PASSENGER TRAFFICSHIPS : PASSENGER TRAFFICIn millions
18.0
19.0
22.3
20.6
21.9 22.1 21.9 22.1
18.4
16.6
22.9
10
12
14
16
18
20
22
24
26
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
AIR TRANSPORT : PASSENGER TRAFFICAIR TRANSPORT : PASSENGER TRAFFIC TRAINS : PASSENGER TRAFFICTRAINS : PASSENGER TRAFFICIn millions In millions
III. WEAK LINKS
High Tech, High Touch, High Gear
0
20
40
60
80
100
120
140
160
180
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
5
10
15
20
25
30
35
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
100
200
300
400
500
600
700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
In metric tons
in thousands in thousands
FREIGHT SERVICE WAS FREIGHT SERVICE WAS NOT OPERATIONAL NOT OPERATIONAL SINCE 1998SINCE 1998
AIR TRANSPORT: CARGO TONS MOVEMENTAIR TRANSPORT: CARGO TONS MOVEMENTTRAINS: FREIGHT TONS LOADEDTRAINS: FREIGHT TONS LOADED
SHIPPING: CARGO THROUGHPUTSHIPPING: CARGO THROUGHPUT
III. WEAK LINKS
High Tech, High Touch, High Gear
PricesPrices
High Tech, High Touch, High Gear
Source of base data: Bloomberg
0
10
20
30
40
50
60
70
80
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sep-06
Brent NYMEX Dubai
CRUDE OIL PRICE, USD per barrelCRUDE OIL PRICE, USD per barrel
Crude oil price increase eases Crude oil price increase eases
… because of rising US inventories, slowing economic growth, & diminishing political tensions
IV. PRICES
High Tech, High Touch, High Gear
6.9%
3.0%
7.6%
6.0%3.5%
6.8%
4.0%
6.5%
8.7%
5.6%
7.5%
5.2%6.1%
7.3%6.0%5.8%
9.9%9.9%
15.3%
13.1%12.4%
10.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 8M06
Inflation Rate 91-day T-Bill
Sources of base data: Bangko Sentral ng Pilipinas, Bloomberg
IV. PRICES
Negative real interest rate Negative real interest rate
High Tech, High Touch, High Gear
TREASURY BILL RATESTREASURY BILL RATES2003 to 2006, Monthly Figures – Auction Results2003 to 2006, Monthly Figures – Auction Results
IV. PRICES
TREASURY NOTE / BOND RATESTREASURY NOTE / BOND RATES2003 to 2006, Weekly Figures – Mart Rates2003 to 2006, Weekly Figures – Mart Rates
Low interest rate environmentLow interest rate environment
High Tech, High Touch, High Gear
51.19
51.25
50
51
52
53
54
55
56
57
58
Jan-03
Mar-03
May-03
Jul-03
Sep-03
Nov-03
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
aop USD/Php Rate eop USD/Php Rate
25.5127.12 26.42 25.71 26.22
29.47
40.8939.09
44.19
50.99 51.6054.20
56.04 55.09
0
5
10
15
20
25
30
35
40
45
50
55
60
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
aop USD/Php Rate eop USD/Php Rate
Source of data: Bangko Sentral ng Pilipinas
YEARLYYEARLY
MONTHLYMONTHLY
IV. PRICESAppreciating pesoAppreciating peso