The Philippines Socio -economic Performance, Outlook, Challenges, - - PowerPoint PPT Presentation

The Philippine’s Socio-economic Performance, Outlook, Challenges, and Vision

National Economic and Development Authority

ILO Trade on Employment Workshop 6-7 October 2016

Socio-economic Performance

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2 4 6 8 10 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

The Philippines’ growth trajectory has been improving, with 17 years of uninterrupted expansion

2.0

1980-1989

2.8

1990-1999

4.5

2000-2009

6.2

2010-2015

GDP growth rates (in %, at constant prices)

Source: Philippine Statistics Authority (PSA) 3

Investment & industry are increasingly becoming major drivers of GDP growth

Supply Side Demand Side

1990-1999 2000-2009 2010-2015 S12016

Average growth (%)

Agriculture Industry Services 2.8% 4.5% 6.2% 6.9%

1990-1999 2000-2009 2010-2015 S12016

Average growth (%)

Consumption Government Investment Net Exports Statistical discrepancy 2.8% 4.5% 6.2% 6.9%

• Ave. growth

Source: PSA

PARTICULARS First Quarter Second Quarter First Semester 2016 2015 2016 2016

GROSS NATIONAL INCOME 7.4 5.4 6.8 7.1 Net Primary Income 9.9 2.5 6.2 8.0 GROSS DOMESTIC PRODUCT 6.8 5.9 7.0 6.9 By Industrial Origin Agri, Fishery and Forestry (4.4) (0.1) (2.1) (3.3) Industry 9.0 6.1 6.9 7.9

• .w. Manufacturing

8.0 4.7 6.3 7.2 Services 7.6 6.7 8.4 8.0 By Expenditure Household Final Consumption Expenditure 7.0 6.4 7.3 7.2 Gov’t Final Consumption Expenditure 11.8 2.4 13.5 12.7 Capital Formation 26.6 21.4 27.6 27.1

• .w. Fixed Capital Formation

28.2 12.7 27.2 27.7 Exports 7.3 5.1 6.6 7.0 Imports 19.0 12.6 20.9 19.9

Growth accelerated in first half of 2016

Source: PSA

• as of Aug ’16 ** as of Jul’16

Headline and Core Inflation, 2005- 2016*

Inflation has been tame, while financial sector is stable…

Real Interest Rate and Non-performing Loans, 2005- 2016

* Average of Jan - Aug 2016 Source: PSA and Bangko Sentral ng Pilipinas (BSP)

1.7 3.7 15.8 2 4 6 8 10 12 14 16 18 20 NPL Ratio* Real interest rates** CAR 1.7 1.5 1 2 3 4 5 6 7 8 9 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Core Inflation Headline Inflation

Source: BSP

The country’s external position remains robust

26.2 0.5 20 40 60 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H 2016

Positive Current Acct. & Declining External Debt

External Debt to GDP ratio - LHS Current Account to GDP Ratio - RHS

85.8 10.0 9 10 11 12 20 40 60 80 100 2010 2011 2012 2013 2014 2015 end-Aug 2016

Healthy International Reserves

Gross International Reserves (US$ bn) - LHS Months of import cover - RHS

2.5 3.0 3.8 4.4 4.8 5.0 2.7 3.5 3.9 4.3 4.7 4.8 5.4 3.0 2010 2011 2012 2013 2014 2015 Jan-Jun 2016

Buoyant International Tourism Receipts

Receipts Arrivals Source: Department of Tourism, IT and Business Process Association of the Philippines

12.8 14.4 16.4 17.3 18.8 20.1 21.4 23.0 24.6 25.8 3.4 4.5 6.1 7.1 8.9 11.0 13.2 16.1 18.9 22.0 25.0 28.9 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 F 2017 F

IT-BPO Revenues is Set to Overtake Remittances

Cash Remittances (US$ bn) IT-BPO Revenues (US$ bn)

Supported by major drivers…

Our stronger fiscal position has been recognized as evidenced by our investment-grade sovereign credit rating

• Modest fiscal deficit; Declining Public debt & interest payments; Increasing reliance on domestic financing
• Result: resilient fiscal sector

Fiscal side:

Fiscal Position National Government Borrowing Program (%) Share of expenditures allocated to interest payments National gov’t outstanding debt (% of GDP)

29.7 13.9 12.6 15.5 5 10 15 20 5 10 15 20 25 30 35 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 S1 2016

• Int. Payments to Disbursement

Primary Exp to GDP (rhs) 74.4 41.2 *Using the program 2016 GDP 11.8 13.6 Fiscal Position Revenue Effort Tax Effort 64.6 65.6 65.2 83.6 93.9 72.1 57.6 71.1 84.0 35.4 34.4 34.8 16.4 6.1 27.9 42.4 28.9 16.0

2009 2010 2011 2012 2013 2014 2015 as of Jul 2016 2016 Proposed

Domestic Foreign

Growth-enhanced fiscal space has allowed major investments in infrastructure with spending on infrastructure more than tripling...

Source: Department of Budget and Management-BESF 2017

Public infrastructure spending, Bn PhP and % of GDP

215.7 306.9 346.3 575.7 756.4 860.6 2.0 2.7 2.7 4.3 5.2 5.4

0.0 1.0 2.0 3.0 4.0 5.0 6.0 100 200 300 400 500 600 700 800 900 1000 2012 2013 2014 2015 2016 2017 Actual Obligations GAA NEP

…complemented by private investments in public infrastructure

Source: PPP Center

Status of PPP Projects (as of 20 September 2016) Projects by Status

• No. of Projects

Amount (PHP bn)

Projects Under Implementation 13 292.32 Contract Awarded 11 185.59 Other projects under Implementation 2 106.73 PPP Pipeline 40 5,642.54 For Contract Signing 2 24.79 Projects under Procurement 12 338.28 For Approval of Relevant Government Bodies 5 241.26 For Evaluation of Concerned Agencies 2 5,034.00 Projects with Ongoing Studies 3 4.21 Projects Under Conceptualization/Development 16 NA Total 53 5,934.86

Source: DBM, PSA-NSCB

Increased fiscal resources have also allowed greater public investments in social services…

1,426 1,372 1,764 2,843 3,519 160 148 359 685 762 417 482 888 1,247 1,484 38 56 126 173 77 2,644 2,679 3,842 5,777 6,761 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

2000-2004 2005-2009 2010-2015 2016 GAA 2017 Proposed

Spending on Social Services Per Capita, Constant Prices

Education Health Social Security (incl. CCT) Housing Total Social Services (rhs)

Our vibrant economy is producing more and better jobs...

Unemployment and Underemployment rates (%) Employment Generated 2000- 2015 (‘000)

21.0 22.6 20.1 19.319.118.8 19.3 20.0 19.3 18.418.5 17.9 7.8 8.0 7.3 7.4 7.5 7.4 7.0 7.0 7.1 6.6 6.3 5.7

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 23.0 Unemployment Rate Underemployment Rate

Underemployment Rate (%) Unemployment Rate (%)

3782 3448 4493 50.3 51.9 57.2 61.9

45 50 55 60 65 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

2000-2004/a 2005-2009 2010-2015/c,d Apr-July 2016/e

Wage and salary worker (% in total employment) Employment Generated ('000)

Employment Generated ('000) Wage and salary worker (% in total employment) Wage and salary worker (% in total employment)

a/ 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 b/ 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. c/ Annualized data for 2014 refer to the average estimates for April, July and October survey rounds that exclude Leyte. d/ 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. e/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013 MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC). Notes:

Source: PSA

Services and industry sectors remain to be the main contributor in employment generation...

32.2 31.1 30.5 29.2 25.9 15.3 15.6 16.0 16.2 18.1 52.6 53.4 53.5 54.7 56.0 36 37 37 38 38 39 39 40 40 41 41 10 20 30 40 50 60 2012 2013 2014a/ 2015b/ Apr-Jul 2016c/ Total Philippine Employment (in millions) Share in Total Employment (%) AGRICULTURE INDUSTRY SERVICES TOTAL EMPLOYMENT

a/ Annualized data for 2014 refer to the average estimates for April, July and October survey rounds that exclude Leyte. b/ 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. c/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013 MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC). d/ 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. Notes:

Source: PSA

22.8 3.1 0.5 8.5 0.3 0.2 8.6 20.2 7.5 4.3 0.9 1.3 0.5 0.5 3.4 5.2 3.1 1.2 0.8 6.9 0.0 Share in Total Employment (%)

April-July 2016

Specifically, employment in the Philippines is dominated by agriculture, hunting & forestry; wholesale & retail trade; construction; & manufacturing.

Notes: a/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013 MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC). b/ 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. c/ Other Services Activities already includes Activities of Households as Employers; Undifferentiated Goods and Service-Producing Activities of Households for Own Use.

Source: PSA

Beginning April 2016, the PSA adopted the 2013 Master Sample for household surveys in the sampling design of the LFS. Thus, April 2016 LFS figures are not comparable with previous data. Source: PSA

Target unemployment rate Target underemployment rate

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Unemployment rate Underemployment rate

PH NCR CAR I II III IV-A IV-B V VI VII VIII IX X XI XII Caraga ARMM NIR Unemployment rate 5.4 6.5 5.0 5.4 3.5 6.2 7.6 4.3 4.0 5.3 5.1 4.5 4.8 6.1 4.3 3.5 4.5 2.9 4.0 Underemployment rate 17.3 9.3 24.6 17.2 8.9 13.9 10.7 26.6 25.4 17.6 14.3 31.0 20.3 32.2 15.4 29.0 26.2 7.7 18.6

Unemployment and Underemployment Rates, by Region: July 2016

Gains in unemployment were broad-based geographically as most of the regions had unemployment rates lower than the national unemployment rate

Poverty reduction has improved but needs to accelerate further

14.2 13.3 13.4 12.1 28.8 28.6 27.9 26.3 25.0 26.0 27.0 28.0 29.0 10.0 11.0 12.0 13.0 14.0 15.0 2006S1 2009S1 2012S1 2015S1 Poverty (% of population) Subsistence (% of population) Subsistence (% of population) Poverty (% of population)

Poverty Statistics, First Semester (%) Poverty Statistics, Full Year (%)

12.0 10.9 10.4 26.5 26.3 25.2 24.5 25.0 25.5 26.0 26.5 27.0 9.5 10.0 10.5 11.0 11.5 12.0 12.5 2006 2009 2012 Poverty (% of population) Subsistence (% of population) Subsistence (% of population) Poverty (% of population)

Source: PSA

Growth Outlook and Risks

The Philippines is expected to remain one of the fastest growing economies in Asia

GDP growth of selected Asian economies (%)

Source: IMF-WEO April 2016, July 2016 Update, Article IV consultations for forecast values, and various government websites for actual values

7.3 5.9 6.9 6.7 4.8 5.0 2.8 2.0 7.5 6.9 6.7 5.5 5.1 4.1 3.4 2.1 7.4 6.4 6.6 6.1 4.9 4.4 3.0 1.8 7.4 6.7 6.2 6.2 5.3 4.8 3.2 2.2

India Philippines China Vietnam Indonesia Malaysia Thailand Singapore

2015 1H 2016 2016F 2017F

The vibrant view on the Philippine economy is also shared by the private sector

Source: Various sources, as of 17 August 2016

Consensus Forecast (in %)

Institution 2016 2017 2018

ADB 6.0 6.1

• Barclays

6.2 5.8

• Citi

6.3 6.5

• Fitch rating

5.9 6.0

• Goldman Sachs

6.4 6.1

• HSBC

6.3 6.3

• IMF

6.0 6.2 6.3 Metrobank Research 6.3

• Moody’s

6.0 6.0

• Nomura

6.3 6.0

• Standard and Poor’s

6.1 6.3 6.2 Standard Chartered Bank 6.4 6.0 5.8 UNESCAP 6.4

• WB

6.4 6.2 6.2 Median 6.3 6.1 6.2 Mean 6.3 6.1 6.1

Indicators 2014 Actual 2015 Actual Projections1/ 2016 2017 2018 2019 2020 2021 2022

Real GDP Growth Rate 6.2 5.9 6.0-7.0 6.5-7.5 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0

Outlook and targets for 2016-2022

1/ Assumptions adopted by the Development Budget Coordination Committee (DBCC) on July 2016

2,109 2,257 2,482 2,990 3,327 2,231 2,646 2,960 3,517 3,907 122 389 478 527 581

15.8 15.5 15.6 17.0 17.2 16.8 18.2 18.6 20.0 20.2 0.9 2.7 3.0 3.0 3.0

5 10 15 20 25 500 1000 1500 2000 2500 3000 3500 4000 4500 2015 Actual 2016 Outlook 2017 Proposed 2018 Proposed 2019 Proposed

Revenue Disbursement Deficit Revenue-to-GDP Disbursement-to-GDP Deficit-to-GDP

Medium-term fiscal outlook 2015 - 2019

Source: BESF 2017

Expected Drivers of Growth

Demand side

• Household consumption: remittance inflows, better employment prospects, strong

consumer confidence, low inflation, low interest rates

• Government spending: expansion of human development and social protection

programs (i.e. CCT, K-12, health, etc)

• Investment: public construction, including infrastructure and reconstruction; private

construction

• Exports of services: good prospects for Business Process Management (BPM) and

tourism

Supply side

• Lower petroleum prices
• Construction and infrastructure development
• Manufacturing resurgence
• Real estate, renting, and business activities in response to demand from the BPM

sector

• Tourism-related services
• Wholesale and retail trade

• Fragile growth in Japan and European Union
• Slowdown in large emerging economies, particularly China
• Asynchronous monetary policies in major developed economies
• Uncertainties over “Brexit”
• Geopolitical tensions in the Middle East, extended period of low
• il prices
• Maritime dispute in the West Philippine Sea

Risks to Growth

External Domestic

• Logistics bottlenecks
• Delays in government infrastructure and reconstruction projects
• Weather shocks, potential La Nina
• Closure of mines

We remain vigilant and well- positioned against the downside risks to growth

Opportunities

• Closer economic integration in the ASEAN region which would open up new

sources of capital and markets

• Peaceful and smooth transfer of power
• Commitment of new Administration to continue current policies and

programs, sustain reform momentum

• Resumption of peace talks with NDF, MILF, MNLF

Challenges

• High growth relatively recent

phenomenon

• Growth has not been broadly shared

across socioeconomic classes and regions

• Agriculture, Fishery and Forestry grew

by only 1.4% annually in 2010-2015; - 3.3% in S1 2016.

• Food price, in particular rice, rose;

poverty line increased by almost 30% during the period 2009-2015.

• High pop’n growth, resulting in 10M+

more Filipinos in 6 years. The nagging PUZZLE: fast GDP growth but slow reduction in poverty

• incidence. Why?

Source: World Bank’s World Development Indicators

Income inequality remains high, albeit slowly declining, across income classes…

5.4 52.3 5.6 50.5 5.9 49.6

Bottom 20% Top 20%

Income Shares of Top and Bottom HH Quintiles

2000 2006 2012

50,000 100,000 150,000 200,000 250,000

in PhP

Regional per capita income (constant prices), 2009 & 2015

2009 2015

There are broad-based improvements in average incomes, but wide disparities across regions persist…

Source: PSA

10 20 30 40 50 60

NCR CAR Region I Region II Region III Region IV-A Region IV-B Region V Region VI Region VII Region VIII Region IX Region X Region XI Region XII Caraga ARMM

Poverty Incidence by Region: 2009 and 2012

2012 2009

Poverty rate is declining in most regions, but remains above 20% for majority of regions…

Source: PSA

We need to sustain the gains to catch up with our ASEAN neighbors in terms of poverty reduction

Source: World Development Indicators; government statistical agencies Notes: No poverty data available for the Philippines on 2013 and 2014 25.2 12.0 12.6 1.7

Philippines Indonesia Thailand Malaysia

Poverty headcount ratio at national poverty lines, 2012 (% of population)

Philippines Indonesia Thailand Malaysia

Challenge Agenda

Adverse investment climate Peace and order; massive infrastructure upgrade; cut red tape; ease constitutional restrictions on FDI ... Uneven growth Regional and rural development; pro-poor economic growth ... Contraction in Agriculture and Fishery sector Agricultural development; land administration and asset reform; technology and innovation; moving up the value chain and agri-business ...

The Plan: The 0-10 Socioeconomic Agenda designed to address the puzzle & challenge

For instance….

Challenge Agenda

High food prices Raise farm productivity; macroeconomic

• esp. price stability; strategic trade policy

Faster population growth [bulge

• f reproductive-age (15-49)

women] during the coming six years or so Full, rapid and sustained implementation

• f RPRH Law esp. in LGUs.

PH’s huge lag in Science and Technology (S&T) relative to ASEAN neighbours Promote S&T and creative arts for self- sustaining inclusive growth and PH’s participation in global knowledge economy

The Plan: The 0-10 Socioeconomic Agenda designed to address the puzzle & challenge

The Philippine’s Socio-economic Performance, Outlook, Challenges, and Vision

National Economic and Development Authority

ILO Trade on Employment Workshop 6-7 October 2016