A.

GDP
PH GDP grows 6.9% Q1 2016
(3rd UPDATE) This makes the Philippines the fastest growing economy in the region, ahead of
regional giant China.

MANILA, Philippines (3rd UPDATE) Exceeding market expectations, the Philippine economy grew
by 6.9% in the first quarter of 2016, the Philippine Statistics Authority (PSA) announced on Thursday,
May 19.
The latest GDP numbers the highest since the second quarter of 2013 makes the Philippines the
fastest growing economy in the region, ahead of regional giant China, National Economic and
Development Authority (NEDA) chief Emmanuel Esguerra said in a news briefing.
The first quarter gross domestic product (GDP) growth an improvement on the 5.0%registered in
the same period last year, and the now revised 6.5% growth in the fourth quarter of 2015 beat
market expectations of 6.6% growth.
"Overall, the growth prospect of our economy for the next quarters is encouraging. Growth in the
second quarter of an election year is usually stronger than in the first quarter. Barring a significant
drop in business confidence in the second half, the economy seems to be on track in meeting the fullyear target of 6.8 to 7.8%," Esguerra said.
Esguerra noted that among 11 selected Asian economies that have released their growth data for the
quarter, the Philippines was the "fastest-growing economy," followed by China at 6.7%, Vietnam at
5.5%, Indonesia at 4.9%, and Malaysia at 4.2%.
"The economic performance of our country from 2010 to the first quarter of 2016 remains the highest
growth average recorded by the country that is backed by sound macroeconomic fundamentals,"
Esguerra said.
In a statement, Finance Secretary Cesar Purisima said: "The running 6-year growth average of 6.2%
is our fastest streak since 1978, which when compared to the 3.8% average from 1995-2010 reflects
how much we have improved our structural growth capacity."

Investment-driven growth, agri slump

Esguerra said that on the demand side, growth was investment-driven, with significant contribution
from investments in durable equipment. He provided the following details:

Fixed capital grew by 25.5%, contributing 5.8 percentage points to real

GDP growth

Construction grew faster at 12%, compared with 7.6% in the last quarter
of 2015 and 4.5% in the first quarter of 2015

Public construction saw a reversal of its 23%-contraction last year to

39.9% in the first quarter of 2016

Private construction picked up by 7.1%, from 1.1% last year

"All these investments give us confidence that the economy will continue to perform well in the
succeeding quarters of the year and beyond," he said.
Esguerra said while external demand weakened "with growth of exports of goods and services
slowing down to 6.6%," imports of goods is up 15.9% "largely due to increased purchases of capital
goods, which again is an indication that firms are investing."
Services imports was up by 17.5%, significantly higher than last year's 8.9%.

Esguerra also said that the high first quarter growth was driven by gains in the industry and services
sectors. The industry sector grew by 8.7%, the highest in 5 consecutive quarters, supported by
manufacturing, construction, and utilities, while the services sector grew by 7.9%.
"The strength of both the industry and services sectors once again shows the ongoing structural
transformation taking place in our economy, which is crucial for sustaining economic growth and
generating quality jobs," he said.
Esguerra said the agriculture sector suffered a 4.4%-contraction in the first quarter, due to the impact
of El Nio, though this did not affect the rest of the economy.
He noted the need for vigilance in dealing with the lingering impact of El Nio, andpreparations for La
Nia "which now has a 75% probability of occurrence."

GOOD PROSPECTS. NEDA and PSA officials highlight the fact that the strong start bodes well for
the rest of 2016, as growth in the second quarter is usually stronger during an election year at the 1st
Quarter 2016 report on the economy held on May 19. (from left) Wilma Guillen PSA - Assistant
National Statistician, National Statistician Lisa Grace Bersales, Emmanuel Esguerra, Reynaldo
Cancio NEDA - Director. Photo by Chris Schnabel/Rappler
Policy consistency needed
Esguerra said the Aquino administration will turn over a "strong and stable economy onto the next
administration," as he stressed the importance of "policy consistency, which is important for sustained
business confidence."
"We have achieved significant socioeconomic progress over the last 5 years with the return of political
and economic stability, which we hope the incoming administration will build on. We should not miss
the current second wave of foreign investments into the region, especially now that we have finally
become an investment destination of choice," he said.
The first 3 months of 2016 saw the continued acceleration of government spending from last quarter
as well as improvements in overseas Filipino workers' remittances, which grew by 4.3%, as well
as foreign direct investment (FDI) which grew by 50% in the first two months of the year.
Strong domestic consumption, a mainstay of the Philippine economy, was further boosted at the start
of the year by the recently concluded elections which saw Rodrigo Duterteemerge as president-elect.
Duterte, in his 8-point economic agenda, promised to keep the Aquino administration's
macroeconomic policies and accelerate infrastructure spending, while strengthening focus on the
lagging agricultural sector.

Duterte has also expressed openness to lifting the constitutional restriction on foreign ownership of
companies, which has long been the bug bear of foreign investors.
Some of this optimism was tempered, however, by a weak global environment beset by volatility.
Tepid global growth was blamed for a drop in exports which dropped a total of 8.4% from January to
March 2016.
Multilateral institutions have backed the country to broadly maintain its growth momentum with
the World Bank forecasting growth this year at 6.4%. The IMF placed the Philippines ahead of the
ASEAN-5 pack with a projection of 6% growth.
In a statement, Presidential Spokesperson Edwin Lacierda welcomed the result and reiterated the
Presidents guiding principle "to leave the country in a far better state than when he first found it."
"With our peers in the international community having acknowledged our progress, it is now up to the
next administration to build on the gains we have recently achieved so that they may further
redound to our nation's improvement, for the benefit of generations to come," he said. Rappler.com

B. GNP
Philippines Gross National Product 1998-2016 | Data | Chart | Calendar
Gross National Product in Philippines increased to 2378578 PHP Million in the first quarter of 2016
from 2336585 PHP Million in the fourth quarter of 2015. Gross National Product in Philippines
averaged 1500387.30 PHP Million from 1998 until 2016, reaching an all-time high of 2378578 PHP
Million in the first quarter of 2016 and a record low of 944320 PHP Million in the second quarter of
1998. Gross National Product in Philippines is reported by the Philippine National Statistical
Coordination Board.

Actual

Previous

Highest

Lowest

Dates

Unit

2378578.0
0

2336585.0
0

2378578.0
0

944320.0
0

1998
2016

- PHP
Million

Frequenc
y
Quarterly

Constant
Prices, SA

Philippines GDP
GDP Growth Rate

Last
1.10

Previous
2.10

Highest
3.40

Lowest
-2.30

Unit
percent

GDP Annual Growth Rate

6.90

6.50

8.90

0.50

percent

GDP

284.78

271.93

284.78

4.40

1973891.0
0
Gross National Product
2378578.0
0
Gross
Fixed
Capital 509481.02
Formation
GDP per capita
1649.35

1952223.0
0
2336585.0
0
518857.06

1973891.0
0
2378578.0
0
518857.06

1581.49

1649.35

825496.0
0
944320.0
0
163357.6
9
696.05

USD
Billion
PHP
Million
PHP
Million
PHP
Million
USD

GDP per capita PPP

6597.66

6326.21

6597.66

3804.48

USD

GDP From Agriculture

144889.30

175788.62

175788.62

114778.4

PHP

GDP Constant Prices

[+
]
[+
]
[+
]
[+
]
[+
]
[+
]
[+
]
[+
]
[+

4
85502.67

GDP From Construction

158024.46

194529.59

194529.59

GDP From Manufacturing

459225.67

501178.30

501178.30

GDP From Mining

23531.08

15209.45

30306.94

252377.2
6
10394.10

GDP From Transport

61901.34

55928.54

65700.05

34827.71

GDP From Utilities

59256.72

60133.05

69086.22

42117.43

C.

Million
PHP
Million
PHP
Million
PHP
Million
PHP
Million
PHP
Million

]
[+
]
[+
]
[+
]
[+
]
[+
]

Inflation Rate

Inflation increases in May

June 7, 2016
In May, consumer prices increased 0.3% over the previous month, inching up from the 0.2% increase
recorded in April. Mays reading mainly reflected higher prices for food items.
Inflation was 1.6% in May, which was above the 1.1% recorded in April and marked a one-year high.
However, annual average inflationwhich the Central Bank uses as a guide for monetary policy
remained
stable
at
1.0%.
Core consumer prices, which exclude volatile items such as food and oil, rose 0.1% in May over the
previous month, coming in just below Aprils 0.2% increase. Finally, core inflation inched up to 1.6%
from 1.5% in April.
FocusEconomics Consensus Forecast panelists expect annual inflation to average 2.0% in 2016,
which is unchanged from last months projection. For 2017, panelists see average inflation of 2.9%.
Author: Christopher Mc Innes, Economist
Philippines Inflation Chart

Note: Annual
and
monthly
variation
of
consumer
price
Source: National Statistics Office (NSO) and FocusEconomics calculations.

index

in

%.

D.

Investment Rate

Philippines Interest Rate 1985-2016 | Data | Chart | Calendar | Forecast

Actual
3.00

Previous
4.00

Highest
56.60

Lowest
3.50

Dates
1985 - 2016

Unit
percent

Frequency
Daily

The central bank of Philippines will shift to an interest rate corridor system of 100bps starting June
3rd 2016. Policymakers said the move aims to improve the transmission of monetary policy and help
ensure that money market rates move within reasonably close range around central bank key rates.
The overnight lending rate will be reduced to 3.5 percent from 6 percent and will serve as the upper
bound of the corridor while the special deposit account rate, left steady at 2.5 percent will be the floor
rate of the corridor. The key overnight borrowing rate, lowered to 3 percent from 4 percent will be in
the middle. Interest Rate in Philippines averaged 9.44 percent from 1985 until 2016, reaching an alltime high of 56.60 percent in December of 1990 and a record low of 3.50 percent in September of
2012. Interest Rate in Philippines is reported by the Bangko Sentral ng Pilipinas.

In Philippines, interest rate decisions are taken by The Monetary Board of The
BangkoSentralngPilipinas (BSP). The official interest rate is the reverse repo rate (RR/P) which is the
overnight borrowing rate. The central bank of the Republic of the Philippines is committed to promote
and maintain price stability and provide proactive leadership in bringing about a strong financial
system conducive to a balanced and sustainable growth of the economy. This page provides the
latest reported value for - Philippines Interest Rate - plus previous releases, historical high and low,
short-term forecast and long-term prediction, economic calendar, survey consensus and news.
Philippines Interest Rate - actual data, historical chart and calendar of releases - was last updated on
June of 2016.
Calendar
2016-02-11
2016-03-23

GMT
08:13 AM
06:15 AM

Reference
Interest Rate Decision
Interest Rate Decision

Actual
4%
4%

Previous
4%
4%

Consensus
4%
4%

Forecast
4%
4%

2016-05-12
2016-06-23
2016-08-11
2016-09-22

08:16 AM
08:00 AM
08:00 AM
08:00 AM

Interest Rate Decision

Interest Rate Decision
Interest Rate Decision
Interest Rate Decision

4%

4%
3%

4%

4%
3%
3%
3%

Philippines Holds Key Rate at 4%

The central bank of Philippines left its benchmark overnight borrowing rate unchanged at 4 percent
for the 13th straight meeting on May 12th, 2016 as widely expected. The interest rates on short-term
special deposit accounts (SDA) and overnight repo rate were also kept steady at 2.5 percent and 6
percent, respectively. Policymakers said that economic growth remains strong while inflation
expectations declined slightly.
The interest rates on term RRPs, RPs and special deposit accounts (SDA) were also kept steady and
the reserve requirement ratios were left unchanged.
Statement by the BangkoSentralngPilipinas:
The Monetary Boards decision is based on its assessment of a continuing manageable inflation
environment. Latest forecasts continue to indicate that average inflation is likely to settle within the
target range of 3.0 percent 1.0 percentage point for 2016-2017. The Monetary Board observed that
inflation continues to be driven mainly by supply-side factors. Meanwhile, inflation expectations for
2016 have declined slightly due to low inflation readings in recent months but remain firmly within the
inflation target band over the policy horizon. The Monetary Board also recognized that while global
economic conditions have become weaker since the previous meeting, prospects for domestic
economic activity nevertheless remain robust, supported by solid private household consumption and
investment, buoyant business sentiment, and adequate credit and domestic liquidity. Higher fiscal
spending is expected to further boost domestic demand.
At the same time, the overall balance of risks surrounding the inflation outlook remains tilted to the
downside, with potential downward price pressures associated with slower-than-expected global
economic activity and possible second-round effects from lower international oil prices. Nevertheless,
upside risks to the inflation outlook could come from the impact of El Nio dry weather conditions on
food prices and utility rates as well as pending petitions for power rate adjustments.
Given these considerations, the BSP will continue to monitor emerging price and output conditions to
ensure the consistency of the monetary policy stance with stable prices and sustainable economic
growth.
BangkoSentral NG Pilipinas | YekaterinaGuchshina | yekaterina@tradingeconomics.com
5/12/2016 11:04:19 AM

E.

Investment Grade

EDITORIAL | What 'investment grade' means for Filipinos - and what it doesn't
March 28, 2013 5:22 PM
(UPDATED May 2, 2013)
Fitch Ratings (and, update: now Standard & Poors - ed) have given the Philippines two historic
thumbs up, rating the economy "investment grade" for the first time ever.
There is no spoiling this development. It is good news. Our leaders deserve credit as well as some
basking in the limelight. By leaders though, it's important to stress that this refers to both Gloria
Macapagal Arroyo and Benigno Aquino III. The former's government for initiating the reforms that
Fitch says made the Philippines resilient at a time of great global chaos, and the latter's
administration for following through on those reforms, while also layering on top of everything a great
push for transparency and good governance.
Beyond the government, the millions of overseas Filipino workers (OFWs) also deserve credit for
helping bolster the country's current account surplus, which Fitch Ratings acknowledged as one key
to the whole Philippine story. OFWs contribute to the surplus through their remittances, which already
accounts for 10 percent of GDP. Remittances help the economy in more ways than one. Money
OFWs send home to their loved ones also finance consumer spending, which make up two-thirds of
GDP and has propped up the economy especially during times when weak global demand take the
kick out of our exports.
While there has been universal cheering, the news was greeted by two distinct messages. The stock
market, in a frenzied, eve-of-a-long-break rally, surged to a fresh record. On the other hand,
businessmen cautioned that an investment grade rating will not automatically lead to an influx of
foreign direct investments, or FDIs the clearest indicator that jobs will be created.
The public must understand what it all means. What, indeed, is supposed to happen, now that Fitch
Ratings has promoted the Philippines to investment grade?
The textbook mantra is that investment grade status would bring down borrowing costs for the
government, and by extension, for the private sector.
Investment grade also would supposedly open the floodgates to more foreign investments,
specifically more conservative companies and funds that, by their own rules and mandates, are not
allowed to place any money on non-investment grade - also called junk - rated markets.
No surprise then that Philippine stock traders, in a fit of rapture on the eve of Maundy Thursday, piled
on to a "monster rally", on expectations that other foreign fund managers - who until Tuesday had
considered us "junk" - could now be expected to place some bets on one of the smallest, thinnest, yet
fastest-growing bourses in the region. This party just got way cooler, and we're expecting more
(paying) guests. Net foreign buying at the PSE hit P1.35 billion on Wednesday.
The hope, which abounds among the country's economic managers, is that portfolio money (the
short-term funds that mostly swirl in and out of markets generating profits for traders but not much for
anybody else) would be followed by the job-generating FDI. With this, the Philippines' economic

growth can finally shift from its current consumption-led tack to one driven by investments something that has higher value-added and so is more sustainable. People can start betting on the
Philippines, and not just on the stocks traded therein.
PNoy's economic managers yearn for this because FDIs comprise the most conspicuos missing
ingredient in three years of economic growth. Even the record-breaking expansion last year was not
accompanied by any meaningful job gains. Picture this: Philippine GDP grew 6.6 percent - which is
above the 5 percent 10-year average and yet it hardly made a dent in the country's unemployment,
which, after being excused of more than 10 million jobs generated and found everywhere else but the
Philippines, held at more than 7 percent.
In the meantime, the ranks of the country's billionaires have increased, pointing to a growing divide
between the haves and the have-nots. Not something one can gloat about, especially during an
election year.
But does FDI really follow the herd of portfolio flows?
Unfortunately, not necessarily. Investments in financial assets such as stocks and bonds are
considered short-term bets because theyre easier to pull out when the party is over - they're
electronic transfers, which is why portfolio funds are also called "hot money." Most people won't see
much less benefit from - any of that, except maybe to see it on cheap ink, or cheaper pixels, as
magnified by the news. Beyond that, ni anino, as Filipinos like to say. Not even a shadow of it.
FDI, on the other hand, involves sinking - literally thousands, millions, and tens of millions of dollars
in equipment, factories, technology, job hires, etc.
And there's the rub.
What draws the bricks-and-mortar FDI into a country is more than just an investment grade rating.
More crucial for such investments are infrastructure (transport, telecoms, energy etc.), reasonable
and ideally stable, predictable, understandable government regulations and fees; in short, an
environment that is conducive to doing business.
Unfortunately again, the Philippines has failed to make headway in these chronic concerns. According
to the Doing Business Report of the World Bank, no meaningful change has happened in the last two
years. Not in infrastructure, not in energy, not in the bureaucracy and red tape that remain as mindnumbing and paralyzing to potential investors as it is for any Filipino who simply wants to earn a
drivers license, pay taxes, or make it to their planes on time. The cost of doing business in the
Philippines remains prohibitive. Meanwhile, the government has all of two (2) projects successfully
bidded out for its cornerstone public-private projects. As another indicator of where infrastructure is
headed, we've actually missed targets for spending.
Does this mean we're still stuck with more of the footloose-and-fancy-free-type of investments for
now? Well, yes and no.
Yes, because the the short-termers have been here for the last year or so, helping fuel the stock
market's rally to stratospheric highs - 24 record highs in the first quarter alone! and in the immediate
term, Fitch's message (or that of the traders, actually) is that they ain't seen nothing yet (down at the
trading pits, to be precise). Understandably, some foreign fund managers, especially those that failed
to ride on the PSE's surge since last year, may rethink bailing out of the Philippines following the

rating upgrade. They may stay awhile, if only to appease shareholders who are aghast at why their
fund manager failed to make money on Southeast Asia's new emerging tiger.
In fact, portfolio flows have become a problem of late, especially to the Bangko Sentral ng Pilipinas
(BSP), which has been incurring losses by tempering the peso's appreciation. After all, the law of
supply and demand requires that a flood of dollars flowing into the country should cause the peso to
rise in value.
Which brings us to the "no" part of the equation. Additional hot money flows depend not only on the
credit rating of a country, but more so on the relative risk-reward conditions (as defined by interest
rates, earnings outlook, inflation, etc) of the Philippine and other markets.
As of Wednesday evening, the US stock market had risen to new highs, triggered by a slew of
positive data in the world's biggest economy. Meanwhile, the PSE, following its surge, had become
one of the world's most expensive markets, with price-to-earnings (P/E) ratios at upwards of 20 times.
And what goes up must come down. This explains the corrections in previous sessions, with investors
using a banking crisis in Cyprus as an excuse to take profit or in other words, to sell. This also
explains the BSP's conundrum and why the investment grade rating at this time is welcome yet
redundant.
The Philippine economy is drowning in money (courtesy of portfolio funds, remittances, etc) such that
thousand-peso bills are coming out of bankers' ears. To encourage banks to lend out more, the BSP
already cut its overnight rates and SDA rates to record lows. Treasury rates likewise have slumped,
as the excess liquidity has been a boon to government. To prevent this excess money from fueling
inflation, the central bank has been egging on the national government to tap this liquidity for its
financing requirements instead of borrowing abroad. The Aquino administration has obliged,
announcing a week ago that it was turning to the domestic market to finance bulk of its budget deficit.
The previous paragraph simply means this: No, dude, interest rates on that car or housing loan you
wanted to take out, or on your credit card debt, won't go down as a result of the Fitch rating upgrade
for the Philippines.
No less than the head of PNoy's economic team, Finance Secretary Cesar Purisima, acknowledges
that except for Fitch and the two other major credit rating agencies, the financial markets had been
pricing the Philippines as if it were investment grade long before Wednesday's actual upgrade. Any
potential benefit on interest rates has already been factored in.
Which should make every Filipino, acting alone or with a partner here or abroad, think: if the interest
rates have been low for the longest time and you still haven't taken the bait to invest in anything more
meaningful and longer term than stocks if you're still betting on shares rather than the country
well, why indeed is that?
It's because it's not really the investment grade you or everybody else have been waiting for.
To be sure, there is substantial reputational gain from Fitch's affirmation of the Philippines' investment
grade status. No wet blankets here.
But peoples expectations must be managed, if only so they can better focus on what they still need
to demand.

The challenge for the Aquino administration is to take advantage of this new level of goodwill by
unlocking the infrastructure bottlenecks, addressing the cost and ease of doing business, and
deepening social reform. Only by doing so can it hope to distribute the dividends of the newfound
economic growth to all Filipinos, and will the newfangled rating of being "investment grade" mean
anything to the larger society.

A first: Investment grade rating for PH

This is the first time in history that the Philippines achieves an investment grade, which is a vote of
confidence on A-lister countries considered safe to invest in.
MANILA, Philippines (4th UPDATE) - The Philippines won its first ever investment grade debt rating
from global credit rating firm Fitch.
By upgrading the Philippines' sovereign credit rating to BBB- from BB+, Fitch gives the country a vote
of confidence, and marks the first time the Philippines, once a basket case in Asia, joins the A-lister
countries considered safe to invest in.
The Philippines follows in the footsteps of Indonesia, which secured investment-grade status in
January 2012 with upgrades by Fitch Ratings and Moodys Investor Service.
In a statement on Wednesday, March 27, Fitch added a stable outlook and cited a robust economy
and improved fiscal management.
"The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic
backdrop. Strong domestic demand drove this outturn," Fitch said.
Fitch was the first among the other international credit rating firms -- Standard & Poor's (S&P) and
Moody's Investors Service -- that granted the Philippines a long-awaited investment grade. S&P and
Moody's still rate the country one notch below investment grade. S&P currently rates the Philippines a
BB+ market, while Moody's gave it a Ba1.
"This is an institutional affirmation of our sound good governance agenda," President Benigno Aquino
III said in a statement. He also called this "a national pride." (READ: Aquino admin downplays Arroyo
role in investment grade)
"The task now is to ensure that the investments will be used to empower the economy." he added.
Finance Secretary Cesar Purisima, who has been leading the efforts toward a credit rating upgrade,
called Fitch's decision "a landmark achievement."
"This is the clearest and most definite affirmation that good governance is indeed good economics,"
he said in a statment.

What a credit rating means

An investment grade is a seal of good housekeeping. It tells investors it is safe to do business in the
country, and encourages them to put huge capital here.
An investment grade means the Philippines, as a borrowing country, has a strong ability to pay its
debt. This lowers its borrowing costs, generating savings, which may be spent for social services. For
Filipinos, it means better education and health care, and affordable loans for major purchases.
View: INFOGRAPHIC: What a credit rating upgrade means for Filipinos

What led to the upgrade?

In summary, these are the reasons Fitch granted the Philippines an upgrade:

RESILIENT REMITTANCES. Remittances, which account for 8% of the

Philippine economy in 2012, stayed resilient despite the global financial
crisis. The inflows from overseas Filipino workers (OFWs), which grew
6.4% to US$23.8 billion in 2012, supported a strong net external creditor
position, which accounted for 12% of GDP in 2012. This means there are
more dollars flowing into the country than those being paid out (like
payment for imports).

RESILIENT ECONOMY. The 6.6% growth rate in 2012 made the

Philippines stand outamid the struggling economies of rich countries in

the west. "The Philippines has experienced stronger and less volatile
growth than its 'BBB' peers over the past five years," Fitch said.

FISCAL PRUDENCE. Fitch cited the improvements in the fiscal

management during the administration of former President Gloria
Macapagal Arroyo. These reforms, which included the passing of the VAT
reform law in 2005, "have made general government debt dynamics more
resilient to shocks." Fitch noted that under President Benigno Aquino III,
the government ably managed the country's foreign debts, which has
fallen to 47% of total government borrowings, from 53% at end-2008.

PRUDENT MONETARY STRATEGY. Fitch has cited the Bangko Sentral

ng Pilipinas' (BSP) inflation management track record and proactive use
of monetary tolls to support the economic growth.

GOOD GOVERNANCE. Fitch noted that governance reforms, which have

been a centrepiece of the Aquino administration's policy efforts, must
remain a priority of the Aquino government and institutionalize these
beyond 2016. Fitch also said that the Philippines' good governance
scores based on standards of international groups like the World Bank
"remain weaker than 'BBB' range norms but are not inconsistent with a
'BBB-' rating as a number of sovereigns in this rating category fare worse
than the Philippines."

More upgrades coming?

BDO Capital chief market strategist Jonathan Ravelas told Rappler that upgrades from Moody's and
S&P's are key to sealing this vote of confidence.
"We need another credit rating agency to give us an investment grade to really be considered of the
upgrade."
Economist Victor Abola echoed this. "I will not be surprised that the other two (Moody's & S&P) will
give their own upgrades this semester," he told Rappler.
"The credit rating upgrade of Fitch is an indication of the reflection of what the market is already
doing," he added.
On Wednesday, the Philippine Stock Exchange main index rallied to a new high, closing at 6,847.47
points, up 182.35 points or 2.74%. This marks the 24th time this 2013 that the PSEi hit a record high.

"Its primarily considered a gold standard in the financial community and...would unleash and allow
some funds that only invest in stock and countries to invest in Philippines stocks," John Forbes,
president of the American Chamber of Commerce of the Philippines, told Rappler.
Industry boost, peso impact
Aside from the capital markets, other industries expected to get a boost from the investment rating
upgrade include the property market.
This is a great news particularly for the property market and especially since there have been a lot of
foreign investors looking into the market. This tells foreign investors it's about time to invest in the
Philippines," Karlo Pobre, research analyst at Colliers International, told Rappler. (READ: 'Hot' PH
attracts multinationals)
"There is more opportunity in the commercial or industrial sector since the residential sector is already
slightly competitive. There should be increased expansion from BPOs (business process
outsourcing) and there may be more financial insitutions coming in to set up office, he added.
Lylah Fronda, associate director market of property consultant Jones Lang Lasalle, echoed this: "The
upgrade will encourage more businesses to expand and relocate to the Philippines. If last year's total
office space take up was around 400,000sqm, we are expecting a better performance this year -probably 20% more."
"With a lot of job opportunities that will come available and possibly significant growth in expat
community we see more demand in luxury destinations and leisure properties. Manila will continue to
be a favorite among real estate investors and developers as a good alternative market in Asia," she
added.
The upgrade, however, may further result in a stronger peso, which does not bode well for dollar
earners, including overseas Filipino workers to send money home, as well as exporters and BPO
firms.
It's good in a sense that it gives confidence of the investors to come. However the effect of that is the
peso appreciation, which affect the cost efficiency of the third party and ones who are outsource. The
BPO industries are already suffering from that. Fronda noted.
Trickle effect?
Making the rest of the Filipinos, especially those who consider themselves poor, benefit from these
investments remain a challenge.
"[The investment grade] has relatively little to do with the specifics of actual investment in direct job
investing activities such as agro business, mining, or manufacturing. Those investors are concerned
with the actual cost of investment, quality of infrastructure and labor issues, Forbes noted.

"Prudent measures to attract investment, improve the business climate and diversify the economy
have paved the way for growth. Now it's up to the authorities to make that growth more inclusive by
creating more and better jobs," Norio Usui, Country Economist at the Asian Development Bank
(ADB), said in a statement.
"This rating is unprecedented in the Philippines and can trigger the kind of investment that will help
carry the country into its next phase of development," he added. (READ: PH needs 'judo economics'
to further grow)
BSP governor Amando Tetangco echoed this: "The upgrade to investment grade status should inspire
the entire government bureaucracy and the Filipino people to capitalize on the opportunities that will
arise from this positive credit rating action."
"We should continue to work together not only to achieve higher credit ratings but also to ensure that
the gains from these benefit most of our people," he stressed. - with reports from Lala Rimando,
Cai Ordinario, Lean Santos and Aya Lowe/Rappler.com

F. Economic Development

In the past three years, a drastic transformation has swept the country, changing perceptions and
attitudes about the Philippines, and ultimately allowing the country to emerge as a bright spot in the
global economy. The Philippines has been steadily climbing up the competitiveness rankings and has
been granted investment grade status by international credit ratings agencies; funds continue to be
allocated to infrastructure, with an eye toward attracting more investors; and there is a rekindled
optimism in the business environment. Most importantly, the dividends from the countrys impressive
economic performance in recent years continue to be channeled to social protection services and to
development programs, all aiming for inclusive growth.
Under the Aquino administration, good governance is good economics: Increased confidence in the
countrys leadership and the reforms that it instituted in critical areas of governance has strengthened
and fuelled the fastest growing economy in East and Southeast Asia in the first quarter of 2013.
Fast Facts about the Philippine Economy

The performance of the Philippine economy in 2012 and in the first quarter of 2013 indicates that it is
moving along a higher growth trajectory. From the 3.6 percent growth recorded in 2011, the
Philippines GDP grew by 6.8 percent in 2012 and by 7.8 percent in the first quarter of 2013. The first
quarter growth of 2013 is the highest growth rate recorded under the Aquino administration, and is
faster than that of Chinas, Indonesias, Thailands, and Vietnams for the same period.
Remarkable growth was achieved alongside a slowdown in the increase in prices of basic
commodities. The full-year average inflation rate for 2012 was at 3.2%the lowest recorded inflation
rate in five years and lower than the average inflation rates in Indonesia, Singapore, India, and
Vietnam. Average inflation for the first half of 2013 was at 2.9%, which is at the lower than the 3% to
5%_target_for_2012_to_2013.

Fitch Ratings and Standard & Poors conferred investment grade status (BBB-) to the country on
March 27, 2013 and May 2, 2013, respectively, while the Japan Credit Rating Agency upgraded the
country one notch above investment grade (BBB) on May 7, 2013. These upgrades will increase the
capacity of the economy to create quality employment opportunities for the people through the
expected influx of foreign investments and cheaper borrowing costs for domestic firms. Moodys
Investor Service recently cited the countrys strong growth in the first quarter of 2013, improved
revenue receipts on stronger tax compliance, and mid-term election results validating the Aquino
administrations strong mandate as welcome developments that will boost the countrys credit profile.
There have been 92 record highs in the Philippine Stock Exchange Index since July 2010, the most
recent record closing registering on May 15, 2013 at 7392.20 points.
The World Economic Forum increased the ranking of the Philippines in the Global Competitiveness
Index, from 85th place in 2010 to 65th (out of 144 countries) in 2012two consecutive 10-place
jumps.
Foreign direct investments (FDI) grew by 54% from USD1.8 billion in 2011 to USD2.8 billion in 2012,
outpacing Malaysia, Indonesia, Thailand, and Singapore.
The Philippines has committed to provide up to USD1 billion in loan resources under the bilateral
borrowing facility of the International Monetary Fund.

Merchandise exports grew by 7.6% from USD48.30 billion in 2011 to USD51.99 billion in 2012, the
highest recorded export earnings in the countrys history amid adverse global developments.
________
Tourism is among the national governments priority sectorsand continuous promotional efforts of
the Department of Tourism, particularly the Its More Fun in the Philippines campaign, ensure that
local and global confidence in the tourism industry remains high. The industry passed the four-million
international tourist arrival mark for the first time, with 4.3 million visitors in 2012, 21.4% higher than
the 3.5 million tourist arrivals in 2010. The DOT targets to reach 5.5 million international tourist
arrivals in 2013 and 10 million in 2016. Domestic travelers, on the other hand, reached 37.5 million in
2011, surpassing the original target of 29.1 million for the year and 35.5 million for 2016 prompting
the DOT to raise the 2016 domestic tourism target to 56.1 million travelers.
The accolades for the local tourism industry are intensifying, from favorable reviews from publications
like the New York Times to the Philippines ranking as the most improved country in the Asia-Pacific
region in the World Economic Forum Travel and Tourism Competitiveness Index. But the success of
the efforts to project the country as a viable tourist destination is best appreciated in its contribution to
the generation of employment and income for local communities and individual workers in the
industry. The DOT and DSWD are currently developing a plan to maximize the contribution of supplier
communities in meeting the demands of tourists and the overall growth of the tourism sector.
The government remains committed to ensuring the best possible experience for all visitorsfrom
developing necessary infrastructure, to protecting the countrys natural resources and attractionsto
keep the Philippines truly fun. The DPWH and DOTC has allocated P16.96 billion in their budgets for
improvements of transportation infrastructure in priority destinations throughout the country, while the
DOT allocated P1.25 billion for tourism branding campaigns and promotions.
________
Agriculture is another of the governments priority sectors for growth; it makes the most of the
countrys resources and promotes opportunities for growth in the countryside. In the first quarter of
2013, agriculture registered a 3.3% growth and grossed P352.5 billion at current pricesa 3.33
percent increase from last years record. All subsectors recorded increases in production.

Crops accounted for 54.1% of total agricultural production, generating 3.62% more output in
2013, with palay and corn crops the main contributors.
Livestock production grew by 0.32 percent. The gross value of livestock output amounted to
P54.3 billion at current prices, 9.07 percent higher than 2012.
The fisheries subsector recovered from last years decline and posted the highest growth rate
among the subsectors, with a 5.6% in production. The subsector grossed P59.9 billion, 9.86
percent higher than last years level.