Philippines: 2017 Economic Performance and Socioeconomic Priorities 2018 Onwards Carlos Bernardo O. Abad Santos Assistant Secretary 09 March 2018
The Setting: Where We Are Now
PH economic growth in sharp upward trajectory Philippine economic growth rate, 1980-2017 8 6 1980-1989 2.0% 1990-1999 2.8% 2000-2009 4.5% 2010-2016 6.3% 6.7% FULL YEAR 2017 GDP GROWTH 4 2 0-2 -4-6 -8 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Philippine Statistics Authority
Rising contribution from investments and industry Demand Side Supply Side Ave. growth 4.5% 6.3% 6.7% 3.0 2.5 4.5% 6.3% 6.7% 2.8% 0.4 0.7 2.8% 0.7 1.2 2.4 2.5 Net Exports Investment Government Household Consumption Agriculture Industry Services Source: Philippine Statistics Authority (PSA)
Our external position remains favorable 70 60 50 40 30 20 10 0 Current Account & External Debt 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 External Debt to GDP ratio - LHS Current Account to GDP Ratio - RHS 23.4 0.01 Q1-Q3 2017 30,000 25,000 20,000 15,000 10,000 5,000 0 2005 OF Remittances and OFW Deployment Cash Remittances (US$mn), LHS 2,500 OF Deployment ('000), RHS 2,000 1,500 1,000 500 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Merchandise Foreign Trade (US$ billion) Net FDI (US$ billion) 100 80 60 40 20 Exports Imports 84.1 92.7 57.4 62.9 10 8 6 4 2 1.7 2.7 2.9 1.3 2.1 1.1 2.0 3.2 3.7 5.7 5.6 8.0 7.3 8.7 0 0 Source: Bangko Sentral ng Pilipinas, Philippine Statistics Authority
Fiscal position remains strong, investment-grade sovereign credit rating sustained. Modest fiscal deficit; Declining Public debt & interest payments; Increasing reliance on domestic financing Result: resilient fiscal position Fiscal Position Share of expenditures allocated to interest payments 18.00 13.00 8.00 13.7 14.5 25.0 20.0 15.0 10.0 20.0 15.6 15.0 11.6 10.0 3.00 5.0 5.0 (2.00) (7.00) 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 as of Q3 2017 Fiscal Position Revenue Effort Tax Effort National gov t outstanding debt (% of GDP) 42.1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0 100.0 80.0 60.0 40.0 20.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* * Primary Exp. to GDP is as of Q3 2017; Int. Payments to Disbursement is as of Nov 2017 National Government Borrowing Program (%) 23.0 16.4 77.0 83.6 6.1 93.9 26.8 31.1 29.5 24.7 73.2 68.9 70.5 75.3 2011 2012 2013 2014 2015 2016 as of Nov Domestic Foreign 2017 This follows the GFSM 2014 concept Int. Payments to Disbursement Primary Exp to GDP (rhs) 0.0 6
Underemployment Rate Our vibrant economy is producing more and better jobs... Unemployment and Underemployment rates (%) 24.0 22.0 20.0 18.0 16.0 14.0 12.0 10.0 Notes: Share of Wage and Salary Employment (% of Total Employment) a/ Due to the adoption of the new unemployment definition in April 2005, annualized data for 2005 refer to the average estimates for April, July and October survey rounds. b/ Starting 2006, population projection benchmark is based on the 2000 Population Census, hence 2006 employment generation can not be computed due to break in the series c/ Starting January 2012 Labor Force Survey (LFS), the codes for industry adopted the 2009 PSIC. Prior to this, codes for industry used the 1994 PSIC. d/ Annualized data for 2014 refer to the average estimates for April, July and October survey rounds that exclude Leyte. e/ Annualized data for 2015 refer to the average estimates of all 4 quarter rounds of LFS 2015 results, excluding Leyte. Employment generation refers to the average of estimates for April, July and October survey rounds. f/ The Jan 2016 used the 2010 CPH but was based on the 2003 MS design, while starting April 2016, the 2010 CPH was adopted and estimates were based on the 2013 MS design. The Methodology for the computation of annual estimates of labor is based on the Resolution found on the PSA website: Approving and Adopting the Official Methodology for Generating Annual Labor and Employment Estimates, using the average estimates of the four LFS rounds. g/ The 2017 estimates are preliminary and based on the average of the January, April, July and October 2017 rounds of the LFS. h/ Starting with the January 2004 round, LFS results used the latest population projections based on the 2000 Census of Population and Housing (CPH) as the base population. Source: PSA 7.8 21.0 18.3 5.5 5.7 16.1 Year Unemployment (%) Underemployment (%) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 - Unemployment Rate Employment Generation ('000) 5,000 4,000 3,000 2,000 1,000 - (1,000) (2,000) 4,426 3,680 51.9 57.1-663 2004-2009/a,b,h 2010-2015 /c,d,e 2017 /g Agriculture Services Industry 62.5 212 (803) (72) Wage and Salary Workers 64.0 62.0 60.0 58.0 56.0 54.0 52.0 50.0 48.0 46.0 Wage and Salary Workers (% of Total Employment)
The Outlook: Bright Prospects
8.0 7.0 6.0 5.0 4.0 3.0 2.0 The Philippines is expected to remain one of the fastest-growing economies in Asia 7.1 6.0 6.7 7.4 6.9 6.7 6.6 6.7 6.9 6.8 6.7 6.8 6.6 6.2 6.3 6.3 4.2 5.9 5.5 5.0 5.1 5.3 5.0 5.1 3.9 3.7 3.5 3.2 2.0 3.5 2.52.6 1.0 0.0 India*^ Philippines China^ Vietnam Malaysia ** Indonesia ** Thailand Singapore 2016 Actual 2017 2017F 2018F * Jan Sep 2017 data only **Forecast figures based on IMF Article IV Consultation in November 2017 ^2018 forecast based on IMF-WEO January 2018 update Source: IMF-WEO October 2017, Oxford Economics for Jan-Sep 2017 figures
Public Infrastructure Spending to Raise the Country s Competitiveness For FY 2017-2022, the projected public spending on infrastructure is around PhP6.79 trillion. For 2018, the proposed infrastructure outlay is equivalent to 5.1% of GDP. Note: Figures represent cash-based projected public spending
PIP 2017-2022 Investment Requirements For the Plan period (2017-2022), the estimated total investment target for the 5,636 priority programs and projects amount to PhP10.6 trillion. Top Six (6) Sectors with Highest Estimated Investment Requirements Chapter 19: Accelerating Infrastructure Development Chapter 10: Accelerating Human Capital Development Chapter 8: Expanding Economic Opportunities in Agriculture, Forestry, and Fisheries Chapter 11: Reducing Vulnerability of Individuals and Families No. of Projects 2017-2022 Total Investment Targets* (in PhP Trillion) Percentage 4,490 7.70 72.71% 139 0.72 6.75% 301 0.68 6.44% 7 0.46 4.32% Chapter 12: Building Safe and Secure Communities 20 0.35 3.32% Chapter 5: Ensuring People-Centered, Clean, and Efficient Governance 98 0.26 2.44% *as of October 3, 2017
Chapter 19: Accelerating Infrastructure Development of the PIP ICT, PhP108.78 B, 1% Power, PhP78.48 B, 1% Social Infrastructure, PhP1,010.14 B, 13% Water Resources, PhP937.51 B, 12% Government Building, PhP122.92 B, 2% Others, PhP512.19 B, 7% Transportation, PhP4,968.26 B, 64% 4,490 Programs and Projects PhP7.74 Trillion Total Investment Requirement *495 additional projects amounting to PhP1.31 trillion are reflected in the other Chapters of the PIP
Chapter 19: Accelerating Infrastructure Development of the PIP Mode of Financing PPP 16.5% Others* 8.1% TBD 0.1% ODA 13.0% NG-GAA 62.3% * Purely private investments, corporate funds of GOCCs and internally generated funds of GFIs; TBD to be determined.
Expected Drivers of Growth Demand side Household consumption: strong consumer confidence, manageable inflation; lifting of QR on rice; tax reform Government spending: expansion of social protection programs (i.e, CCT, K- 12, etc) Investment: public construction; private construction; reduction in cost of doing business; proposed reduction in foreign investment restrictions Exports: recovery of global trade; closer ASEAN economic integration; good prospects for BPM and tourism Supply side Industry: Construction and infrastructure development Manufacturing resurgence; Services: wholesale and retail trade, transport and communication will benefit from stronger consumption and international and domestic tourism
We remain vigilant and well-positioned against the downside risks to growth. External Slower than expected growth in some Advanced Economies (e.g. UK) Inward looking policies and extended period of policy uncertainty (e.g. post-brexit negotiations; normalization of Fed policy rates) China s financial sector risks and excessive credit growth Geopolitical tensions (e.g. Qatar, N.Korea) Domestic Increased intensity and frequency of natural hazards, including seasonal typhoons, droughts and dry-spells: La Nina in 2018 and El Nino in 2019 Restrictive employment protection legislation Possible delay in the implementation of infrastructure and reconstruction projects; Logistics bottlenecks Peace and security risks
Infrastructure Flagship Projects: Expected Completion Timeline and Costs Status/Implementation Period Number Cost (PhP Million) NEDA Board Approved/Ongoing 24 1,126,227.81 For Completion By 2022 17 648,982.39 For Completion Beyond 2022 7 477,245.42 For ICC/NB Approval* 51 784,309.18 For Completion By 2022 20 243,905.61 For Completion Beyond 2022 31 540,190.20 TOTAL 75 1,910,323.61 For Completion By 2022 37 892,888.00 For Completion Beyond 2022 38 1,017,435.62 *1 project approved by the ICC-CC, 9 projects without costs, 14 projects with completion timelines to be determined As of 22 February 2018
Key Reform Agenda
Sustaining/Accelerating Economic Growth 1. Improve government processes dealing with business. 2. Ease restrictions on foreign investments, especially in public utilities, retail trade, telecoms, and public procurement. 3. Tax reform will also boost consumption spending and investments. 4. Ensure the timely execution of the budget. 5. Seek out new export markets to further diversify export destinations. 18
Sustaining/Accelerating Economic Growth 6. Lift the quantitative restrictions (QR) on rice to increase the purchasing power of households, especially the poor. 7. Support crop diversification, especially to high value commercial crops (HVCC). 8. Invest in disaster resiliency. 9. Ensure timely restoration of normalcy in affected areas in Mindanao. 10.Focus on the policy reform agenda/ reduce political distractions 19
Philippines: 2017 Economic Performance and Socioeconomic Priotities 2018 Onwards Carlos Bernardo O. Abad Santos Assistant Secretary 09 March 2018