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Philippines Economic Update

April 2017
May 4, 2017

STORY HIGHLIGHTS

The Philippine economy remained resilient to global headwinds in 2016.

The rapidly growing domestic economy has yielded substantial gains in employment and
poverty reduction.

The Philippines growth outlook remains positive but subject to downside risks.

Economic and policy developments

The Philippine economy remained resilient to global headwinds in 2016. While a


slower-than-expected global recovery weakened net exports, surging domestic demand
pushed the annual GDP growth rate to 6.8 percent, year-on-year. Investment drove
economy-wide growth for the first time since 2013, as the governments expansionary fiscal-
policy stance helped capital formation to expand by 20.8 percent year-on-year led by the
construction sector. Consumption growth remained strong as accommodative monetary
policies kept interest rates low, supporting a double-digit expansion in consumer lending.
Meanwhile, low inflation boosted households purchasing power, while a steady increase in
remittance inflows accelerated the growth of household consumption.

The rapidly growing domestic economy has yielded substantial gains in employment
and poverty reduction. This means growth became more inclusive. Unemployment fell to
a historic low of 4.7 percent in 2016, as 1.4 million net jobs were created. However, the
countrys 18 percent underemployment level has remained broadly unchanged over the last
ten years, reflecting the prevalence of informality and related job-quality concerns. The
poverty incidence among Filipinos dropped to 21.6 percent in 2015 from 25.2 percent in
2012. This presents 1.8 million Filipinos lifted out of poverty within three years. Higher
employment, low inflation and improved incomes contributed to the decline in the number of
poor.

Prospects and risks

The Philippines growth outlook remains positive. The World Bank projects that real
GDP will grow at a rate of 6.9 percent in 2017 and 2018. Supported by sound domestic
macroeconomic fundamentals and an accelerating recovery among other emerging markets
and developing economies, the Philippines is expected to remain one of East Asias top
growth performers. The governments commitment to further increasing public infrastructure
investment is expected to sustain the countrys growth momentum through 2018 and
reinforce business and consumer confidence. Strong and inclusive economic growth is
projected to further increase household consumption and speed the pace of poverty
reduction.

The countrys growth prospects are subject to several important downside risks. On
the external front, rising global interest rates could weaken the peso, adversely affecting
capital flows to the Philippines and driving up domestic inflation. Commodity prices,
specifically global crude oil prices, are projected to rise in 2017, which could also increase
inflationary pressures. On the domestic front, strong macroeconomic fundamentals have
opened some fiscal space for the government to implement its public investment and social
spending agenda, but the success and timeliness of the administrations planned tax
reforms will be vital to preserve fiscal sustainability. Moreover, planning and implementation
bottlenecks could diminish the governments ability to implement its planned infrastructure
investment program.

Over the medium term, the Philippines can leverage several emerging trends to
accelerate its growth and development, including the potential of its very young and
growing population and capitalizing on its growing services sector to accelerate its structural
economic transformation. Sustaining the inclusive pattern of recent growth and taking
advantage of the potential of its young population offers a brief window of opportunity which
will require an enduring commitment to structural reforms that facilitate, on one hand,
private investment, and, on the other hand, helps young workers to develop the appropriate
skills to succeed in a dynamic labor market.

Source: http://www.worldbank.org/en/news/feature/2017/05/04/philippines-economic-update-april-
2017

Duterte's Philippines Is The 10th Fastest


Growing Economy In The World
President Rodrigo Dutertes death squads may have killed democracy in the
Philippines, but they havent killed the countrys vibrant economy, which is the
worlds 10th fastest growing economy in the world in 2017.

Thats according to the World Banks latest edition of Global Economic


Prospects. For 2017, Philippines economy is expected to advance between 6.5 to
7.5 percent. Thats almost twice the countrys long-term growth.

GDP Annual Growth Rate in Philippines averaged 3.68 percent from 1982 until
2017, reaching an all time high of 12.40 percent in the fourth quarter of 1988 and
a record low of -11.10 percent in the first quarter of 1985, according
to Tradingeconomics.com.
The Philippines economy has benefited from a stable macroeconomic
environment of low inflation and low debt to GDP ratio, which has helped sustain
a healthy domestic demand growth; and from a revival of the Asian Pacific region
that have boosted exports, which account for close to a third of GDP. Exports
from the Philippines rose 12.1 percent from a year earlier to USD 4.81 billion in
April of 2017.

Apparently, President Dutertes harsh domestic policies and foreign policy flip-
flops havent undermined Philippines economic growth, at least not yet. But they
have touched the countrys equity markets, which have underperformed the
markets of the region.

Fund 12-Month Performance


iShares MSCI Philippines (EPHE) -6.19%
iShares MSCI Emerging Markets (EEM) 17.24
Market Vectors Vietnam ETF (VNM) 2.6

Source: E*Trade.com 12/20/2017

Meanwhile, Dutertes Philippines is getting corrupt and less competitive,


according to Transparency International and the Global Competitiveness reports,
raising serious doubts as to whether the current robust economic growth rates
will be sustained in the future.

Those who have followed the Philippines economy for a long time have seen a
familiar show: hard working Filipinos remain poor, watching the people of other
nations in the region get rich. Revolutions come and go in Philippines, but the old
villains -- corruption and political oppression -- remain intact, holding Filipinos
back from making the transition from poverty to riches.

Source: https://www.forbes.com/sites/panosmourdoukoutas/2017/06/20/dutertes-philippines-is-the-
10th-fastest-growing-economy-in-the-world/#1b4e28ab5887

Philippine economy grows 6.5%


in second quarter
By VJ Bacungan, CNN Philippines
Updated 15:56 PM PHT Thu, August 17, 2017
Metro Manila (CNN Philippines, August 17) Increased government
spending contributed to the 6.5-percent gross domestic product (GDP)
growth in the economy for the second quarter of 2017, economic officials
said Thursday.

The 6.5-percent growth in the second quarter ending June is up slightly


from 6.4-percent growth posted in the first quarter ending March. However,
this is down from the 7.1 percent registered in the same period a year ago.

"Taking the last quarter's GDP growth, where the government's spending
performance was lackluster but where the private sector stepped up, and
then this quarter's GDP growth, where government really stepped up but
where private sector slackened, just think what could happen if both
government and private sectors together exerted that extra effort," said
Socioeconomic Planning Secretary Ernesto Pernia in a press briefing.

The second quarter GDP of 6.5 percent is on the lower range of the 6.5 to
7.5 percent target for 2017.

GDP represents the total value of all the goods and services produced in
the Philippines within a certain period. It serves as a gauge of an
economy's health.

Analysts said the 6.5 percent GDP was slightly better than what they
expected.

April Lee Tan, research head for online stockbroker group COL Financial,
told CNN Philippines that the figures are slightly better than what people
were expecting.

"Most notable for me was the pick-up in government spending," said April
Lee Tan, research head of online stockbroker group COL Financial.
"People aren't disappointed," she said.

Although household consumption remained steady at 5.9 percent,


government consumption leaped from 0.1 percent in the first quarter to 7.1
percent in the second quarter, said Pernia.

Budget Secretary Benjamin Diokno said in an August 8 Senate hearing that


government underspending, where the government does not spend its
budget within the allotted time, has been a "major flaw" in the Philippines
since 2014.
Source: http://cnnphilippines.com/business/2017/08/17/philippine-economy-grow-6.5-percent-second-
quarter.html