better business brunch: know your numbers- economic outlook of the philippines (part 2)
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The Philippine Economy: Midway in the Noynoy Administration
Alvin P. Ang, Ph.D.
University of Santo Tomas
Manila, Philippines
Professor, Faculty of Arts and Letters
Flow of Presentation
Past Philippine Economic Performance Where is the growth coming from? What are the new growth drivers? What is the short-term and long-term
direction of growth?
NUMBERS THAT MATTER
GDP GROWTH – (UP) GDP BY CONTRIBUTION – (FEW) GDP BY AREA – (CONCENTRATED) EMPLOYMENT – (WEAK) BUDGET BALANCE (GOOD) REMITTANCES – (BEST) INTEREST RATES – (BEST)
GDP Growth – Breaking Out!
Death ofAquino andPolitical Crisis
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
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
20
06
20
07
20
08
20
09
20
10
20
11
20
12
-10
-8
-6
-4
-2
0
2
4
6
8
10
Philippines Real GDP Growth, Percent
Balance ofPaymentsCrisis
AsianFinancial Crisis
GlobalFinancialCrisis
Economic Structure
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Services Mining Agriculture
Contribution per industry
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% Other Services
Public Administration & Defense: Compulsory Social Security
R. Estate, Renting & Bus. Actvt
Financial Intermediation
Trade and Repair of Motor Vehicles, Mo-torcycles, Personal and Household Goods
Transport., Stor., and Comm.
Electricity, Gas and Water Supply
Construction
Manufacturing
Mining & Quarrying
Forestry
Agriculture and fishing
Manufacturing2011 2012 2013
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1Food manufactures 122,956 83,642 157,285 141,995 130,009 92,920 166,780 159,340Beverage industries 13,423 16,600 18,358 10,626 13,638 17,191 18,849 10,435Tobacco manufactures 735 1,958 1,710 507 837 1,945 1,386 480Textile manufactures 9,333 6,819 7,470 6,643 10,333 6,170 6,956 5,749Wearing apparel 6,008 7,159 9,862 7,284 10,314 11,093 10,863 7,634Footwear and leather and leather products 677 1,216 2,385 1,004 1,009 1,288 2,968 1,278
Wood, bamboo, cane and rattan articles 3,123 2,282 4,988 2,637 4,252 2,170 5,258 2,104Paper and paper products 4,286 4,728 2,449 2,721 3,937 4,243 2,690 2,609Publishing and printing 2,735 878 2,608 2,251 2,630 977 2,651 1,761
Petroleum and other fuel products 13,527 10,038 13,234 14,581 11,606 8,955 13,648 11,449Chemical & chemical products 18,976 22,782 30,983 18,652 21,029 23,527 32,058 22,092Rubber and plastic products 5,013 6,066 5,952 5,303 5,457 6,961 4,796 5,409Non-metallic mineral products 7,880 7,916 11,198 7,247 9,555 9,895 11,313 7,473Basic metal industries 4,858 10,387 4,481 4,315 2,914 8,388 5,367 7,144Fabricated metal products 6,007 2,542 3,568 2,057 6,053 2,539 3,311 1,964Machinery and equipment except electrical 4,344 5,804 4,828 4,888 4,488 5,832 5,063 5,799Office, accounting and computing machinery 3,318 6,748 3,889 3,862 3,431 8,787 4,860 4,087
Electrical machinery and apparatus 8,609 7,954 9,229 8,174 10,359 9,234 7,982 5,595Radio, television and communication equipmentand apparatus 62,909 70,817 38,306 67,216 56,284 68,960 45,936 80,824Transport equipment 6,858 8,884 8,175 5,627 8,349 10,300 9,009 6,282Furniture and fixtures 5,667 7,452 19,680 13,717 10,401 10,304 18,925 14,196Miscellaneous manufactures 13,394 13,021 10,594 10,929 11,606 11,846 10,796 11,682
Why can’t I feel the growth?
TWO THINGS:
What is expanding? - Growth
What is contributing to it? - Share
Where?
PERCENT DISTRIBUTIONREGION / YEAR 2010 2011 2012
NCR METRO MANILA 35.8 35.7 36.3
CAR CORDILLERA 2.2 2.2 2.0
I ILOCOS 3.1 3.1 3.1
II CAGAYAN VALLEY 1.7 1.7 1.8
III CENTRAL LUZON 8.8 9.1 9.1
IVA CALABARZON 17.3 16.9 16.8
IVB MIMAROPA 1.8 1.8 1.7
V BICOL 2.1 2.1 2.1
VI WESTERN VISAYAS 3.9 4.0 4.0
VII CENTRAL VISAYAS 6.0 6.1 6.3
VIII EASTERN VISAYAS 2.5 2.5 2.2
IX ZAMBOANGA PENINSULA 2.0 2.0 2.1
X NORTHERN MINDANAO 3.8 3.9 3.9
XI DAVAO REGION 4.2 4.2 4.0
XII SOCCSKSARGEN 2.8 2.8 2.8
XIII CARAGA 1.1 1.1 1.2
ARMM MUSLIM MINDANAO 0.9 0.9 0.9 Source: National Statistical Coordination Board
Share
Stagnant Manufacturing
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
0
5000
10000
15000
20000
25000Employment by Sector
Agriculture
Manufacturing
Services
Productivity Issues
Agriculture Employment of 33% only produces 16% of GDP
Industry employs about 15% of GDP but contributes about 25% to GDP
Latest Employment Data
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
Labor Force Mn
39.2 39.7
39.9 41.1 40.3 40.6 40.4 40.4 40.8 40.9
Employed Mn
36.2 36.8
37.1 38.5 37.3 37.8 37.5 37.7 37.9 37.8
Unemployed Mn
2.9 2.9 2.8 2.6 2.9 2.8 2.8 2.7 2.9 3.0
LFPR% 63.7 64.2
64.3 66.3 64.2 64.7 64.0 63.9 64.1 63.9
ER% 92.6 92.8
92.9 93.6 92.8 93.1 93.0 93.2 92.9 92.5
UR% 7.4 7.2 7.1 6.4 7.2 6.9 7.0 6.8 7.1 7.5
UnER% 19.4 19.4
19.1 19.1 18.8 19.3 22.7 19.0 20.9 19.2
Minimum Wage in Asian Countries
Mya
nmar
Cambo
dia (C
ambo
dian
Riel)
Vietna
m (D
ong)
Indo
nesia
/Jak
arta
(Rup
iah)
China/
Shenz
hen
(Yua
n Ren
minb
i)
Philipp
ines/
VII (P
eso)
Philipp
ines/
IV-A
(Pes
o)
Philipp
ines/
III (P
eso)
Thaila
nd/B
angk
ok (B
aht)
Mala
ysia
(Ring
git)
Philipp
ines/
Met
ro M
anila
(Pes
o)
Taiwan
(Taiw
an D
ollar
)
Hong
Kong
(HK D
ollar
)
South
Kor
ea (W
on)
Japa
n (J
apan
Yen
)0
5
10
15
20
25
30
35
40
Manpower supply – long term concern
276,940 unfilled jobs with 1,969,976 applicants (BITS 09-10)
Average time to fill up jobs is 3.7 months (09-10) vs 5 months (07-08)
Difficulty more pronounced in middle management
Source: WB Philippine Skills Survey 2010
Stock of Overseas Filipinos: 10.4 Million (more than 10% of Population, as of end-2011) in 239 countries and territories– 45% Temporary Migrants (also called overseas Filipino
workers or OFWs in the Philippines); – 48% Permanent Immigrants; – 7% Irregular migrants– Developing country comparisons: 0.9M overseas Albanians;
2.27M overseas Moroccans; 2.7M El Salvadorans
Filipinos’ Overseas Migration
Growth can be internally financed
0%
5%
10%
15%
20%
25%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%1
990
19
91
19
92
19
93
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99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Portfolio Investments as % of GDP Foreign Direct Investments as % of GDP
OFW Remittance as % of GDP Gross Domestic Savings as % of GDP
Savings boom!
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Gross domestic saving
Gross national saving
Gross domestic capital formation
Government balance
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Total revenue Taxes
Total expenditure Overall budgetary surplus/deficit
Pushed Interest Rates to all time lows
Reserves at all time high!19
70
1971
1972
1973
1974
1975
1976
1977
1978
1979
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
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
0
10
20
30
40
50
60
Official Reserves and Exchange Rate
Official Reserve Assets, Million US$
Exchange Rates, PhP/US$
Foreign Debt
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
2010
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
External debt percent of GNI
Total long-term debt percent of total debt
Short-term debt percent of total debt
Investment Grade
Fitch, S&P, Japan Ratings Agency and soon Moody’s
Analysis of a country’s debt condition, tax collection, low and stable inflation collectively known as risk premium
Irony
With lower risk premium, money flows in > we no longer need too much external borrowing
Government can raise resources internally
Enough fx to finance our requirements
Employment in BPO
2004 2005 2006 2007 2008 2009 2010 2011 -
100,000
200,000
300,000
400,000
500,000
600,000
Software DevelopmentAnimationTranscriptionContact Center
Top Exports and Imports
Exports Share Imports Share
Electronics 58% Electronics 35%Clothing 4% Fuel 22%Furniture 3% Transport 5%Wiring 2% Food 5%Copper 2% Machinery 4%Bananas 1% Chemicals 2%Tuna 1% Iron 3%
Cities outside of Manila catching up!
Cagay
an D
e Oro
City
Iloilo
City
San F
erna
ndo
City, P
ampa
nga
Butua
n
Bacol
od
Koron
adal
San F
erna
ndo,
La
Union
Olong
apo
CityNag
a
Mar
ikina
Lega
zpi C
ity
Gener
al S
anto
s City
Surig
ao
Quezo
n
Vigan
Kidap
awan
Mab
alac
at
Antip
olo
Luce
na C
ity
Mas
bate
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
Can we sustain investment grade?
Macroeconomic policy can influence but not totally change institutions/cultures
We are faced with huge structural imbalance favoring the present economic and political groups
Private sector must follow and government infrastructure investments
Short term growth prospects
Richest follow their investments
HENRY SY 12.BN MALLS, BANKING, REAL ESTATE
LUCIO TAN 7.5BN TOBACCO, BANKING, AIRLINE
ANDREW TAN 4.6BN REAL ESTATE
ENRIQUE RAZON 4.5BN PORTS, CASINO
JOHN GOKONGWEI 3.4BN MALLS, REAL ESTATE, AIRLINE, FOOD MANUFACTURING
JAIME ZOBEL DE AYALA 3.1BN REAL ESTATE, BANKING, TELCO
ENRIQUE ABOITIZ 3.0BN POWER, BANKING, FOOD
DAVID CONSUNJI 2.7BN UTILITIES, REAL ESTATE
GEORGE TY 2.6BN BANKING, UTILITIES
LUCIO CO 1.9BN SUPERMARKET RETAIL
What holds in the next 3 years?
Philippines will need to prepare:– ASEAN 2015– Shift in OFW demand– Immediate transformation of investments to
productive and job-sustaining activities– Support infrastructure
We are severely affected by internal structure!
P-Noy Focus
Focus on quality basic education including financial literacy as a basic life skill
Improving the business climate by now extending fight of corruption at local levels
Encourage and take the lead in investments in sectors where productivity is low – agriculture
Overwhelming infrastructure development
Without these…
Investment upgrade mostly reputational impact – good for short- term
Increase FDI to at least US$5Bn! – Argentina and Egypt have lower credit ratings but higher FDIs of 11 and 5 Bn!
They need to be connected to smaller firms
Please attend…
51st Annual Meeting of the Philippine Economic Society on 15 November 2013
Featuring the country’s top economists and business leaders
For further inquiry please log on to www.pes.org.ph
Philippine Economic Society 50 years (1962 – 2012)
THANK YOU AND GOD BLESS!
Twitter: @angalvin
Email: angalvinp@gmail.com
Blog: winninginvestor@wordpress.com
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