The Philippine’s Socio-economic
Performance, Outlook, Challenges, and Vision
National Economic and Development Authority
ILO Trade on Employment Workshop6-7 October 2016
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11
20
12
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13
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15
The Philippines’ growth trajectory has been improving, with
17 years of uninterrupted expansion
2.01980-1989
2.81990-1999
4.52000-2009
6.22010-2015
GDP growth rates (in %, at constant prices)
Source: Philippine Statistics Authority (PSA)3
Investment & industry are increasingly becoming major drivers ofGDP growth
Supply SideDemand Side
1990-1999 2000-2009 2010-2015 S12016
Ave
rage
gro
wth
(%
)
Agriculture Industry Services
2.8%
4.5%
6.2%
6.9%
1990-1999 2000-2009 2010-2015 S12016
Ave
rage
gro
wth
(%
)
Consumption
Government
Investment
Net Exports
Statistical discrepancy
2.8%4.5%
6.2%
6.9%
Ave. growth
Source: PSA
PARTICULARS
First
QuarterSecond 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
o.w. Manufacturing 8.0 4.7 6.3 7.2
Services 7.6 6.7 8.4 8.0
By Expenditure
Household Final Consumption
Expenditure7.0 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
o.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
0
2
4
6
8
10
12
14
16
18
20
NPL Ratio*
Real interest rates**
CAR
1.7
1.5
0
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
0.50
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
0
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 ourinvestment-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
0
5
10
15
20
0
5
10
15
20
25
30
35
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 S12016
Int. Payments to Disbursement Primary Exp to GDP (rhs)
74.4
41.2
*Using the program 2016 GDP
11.813.6
Fiscal Position Revenue Effort Tax Effort
64.6 65.6 65.283.6
93.972.1
57.671.1
84.0
35.4 34.4 34.816.4
6.127.9
42.428.9
16.0
2009 2010 2011 2012 2013 2014 2015 as of Jul2016
2016Proposed
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
215.7306.9
346.3
575.7
756.4
860.6
2.0
2.7 2.7
4.3
5.25.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
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 ProjectsAmount(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
685762
417 482
888
1,247
1,484
38 56 126 17377
2,644 2,679
3,842
5,777
6,761
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
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
7.88.0
7.3 7.4 7.5 7.47.0 7.0 7.1
6.66.3
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
Un
emp
loym
ent
Rat
e
Un
der
emp
loym
ent
Rat
e
Underemployment Rate (%) Unemployment Rate (%)
37823448
4493
50.351.9
57.2
61.9
45
50
55
60
65
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2000-2004/a 2005-2009 2010-2015/c,d Apr-July 2016/e Wag
e an
d s
alar
y w
ork
er (
% in
to
tal e
mp
loym
ent)
Emp
loym
ent
Gen
erat
ed ('
00
0)
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 seriesb/ 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 30.529.2
25.9
15.3 15.6 16.0 16.218.1
52.6 53.4 53.5 54.756.0
36
37
37
38
38
39
39
40
40
41
41
0
10
20
30
40
50
60
2012 2013 2014a/ 2015b/ Apr-Jul 2016c/
To
tal P
hilip
pin
e E
mp
loym
en
t (i
n m
illio
ns)
Sh
are
in
To
tal E
mp
loym
en
t (%
)
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 1.30.5 0.5
3.4
5.2
3.1
1.2 0.8
6.9
0.0
Sh
are
in
To
tal E
mp
loym
en
t (%
)
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 rateTarget underemployment rate
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0Unemployment rateUnderemployment 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 ofthe 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 28.627.9
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
Pove
rty
(% o
f p
op
ula
tio
n)
Sub
sist
ence
(%
of
po
pu
lati
on
)
Subsistence (% of population) Poverty (% of population)
Poverty Statistics, First Semester (%)
Poverty Statistics, Full Year (%)
12.0
10.9
10.4
26.526.3
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
Pove
rty
(% o
f p
op
ula
tio
n)
Sub
sist
ence
(%
of
po
pu
lati
on
)
Subsistence (% of population) Poverty (% of population)Source: PSA
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
6.96.7
4.85.0
2.8
2.0
7.5
6.96.7
5.55.1
4.1
3.4
2.1
7.4
6.46.6
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 2018ADB 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
Indicators2014
Actual2015
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
2,1092,257
2,482
2,990
3,327
2,231
2,6462,960
3,5173,907
122
389 478 527 581
15.8 15.515.6
17.0 17.216.8
18.2 18.6
20.020.2
0.9
2.7 3.0 3.0 3.0
0
5
10
15
20
25
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2015Actual
2016Outlook
2017Proposed
2018Proposed
2019Proposed
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
oil 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
• 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
0
50,000
100,000
150,000
200,000
250,000
in P
hP
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
0 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
12.012.6
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 & challengeFor instance….
Challenge Agenda
High food prices Raise farm productivity; macroeconomic esp. price stability; strategic trade policy
Faster population growth [bulge of reproductive-age (15-49) women] during the coming six years or so
Full, rapid and sustained implementation of 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