philippine economic performance & outlook · philippine economic performance & outlook...
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ATENEO CENTER FOR
ECONOMIC
RESEARCH AND
DEVELOPMENT
Philippine Economic Performance &
Outlook
Eagle Watch Economic BriefingAteneo Rockwell, Makati City
25 January 2018
Cielito F. HabitoProfessor of EconomicsAteneo de Manila University
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Storyline1. The economic momentum continues.
2. Investment, trade and manufacturing sustain a 7-year surge.
3. There’s less trabaho, but more negosyo.
4. Government spending (esp infra) is crucial.
5. MSMEs are key to our inclusive growth.
6. There are risks & challenges we must address.
7. PH is poised to grow faster and stronger.
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1. The economic momentum continues.Dynamism and stability remain, unlike in past post-election years.
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PiTiK Test in 7
Presyo: Inflation well within target (2017: 3.2%)
Trabaho: Less trabaho, more negosyo (Oct 7 Unemp Rate: 5.0%)
Kita: 2017 GDP growth of 6.7% (Among Asia s fastest)
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Presyo, 2017
Inflation Trends
9.3%
3.2%3.8%
4.4%
3.2%2.9%
4.2%
Malaysia – 3.8% Indonesia – 3.8%
Vietnam – 3.5%
1.4% 1.8%
3.2%
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Jobs Decline TapersBut Quality Improving
Trabaho, 2017
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Kita, 2017
PH: Among the fastest GDP Growth Rates in Asia
Graphic: NEDA
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Kita, 2017
Industry: Strong DriverAgriculture Reverses Last Year s Decline
Graphic: NEDA
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Graphic: NEDA
Kita, 2017
Demand Side: Internal & External Boost
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The Growth Momentum is Sustained
Graphic: NEDA
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2. Investment, trade & manufacturing sustain a 7-year surge.Growth shift began in 2010.
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1.8
-1.8
6.2
12.0
15.8
10.5
-5.0 0.0 5.0 10.0 15.0 20.0
2010-2017
2004-2009
Source: PSA
Investment Spending: A 7-Year Roll
Private Construction
Durable Equipment
Fixed Investment
Growth Rate (%)
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PH exports to ASEAN zoomed with AFTA.
0 100 200 300
Mineralfuels,oils,distillation
Essentialoils,perfumes,
Cereal,flour,starch,milk
Miscellaneouschemicalproducts
Ediblefruit,nuts,peelofcitrus
Vegetable,fruit,nutetc.food
Miscellaneousedible
Tanning,dyeingextracts,
US$Millions
PHExportstoMalaysia,2003vs.2013
2013level
2003level
0 50 100 150
Machinery,nuclearreactors,boilers,etc.
Optical,photo,technical,medical,
etc.apparatus
Mineralfuels,oils,distillationproducts,etc.
Animal,vegetablefatsandoils,cleavageproducts,etc.
Furniture,lighting,signs,
prefabricatedbuildings
Soaps,lubricants,waxes,candles,modellingpastes
US$Millions
PHExportstoIndonesia,2003vs.2013
2013level
2003level
0 2 4 6 8 10
Organicchemicals
Ediblefruit,nuts,peelofcitrusfruit,melons
Cereal,flour,starch,milkpreparationsandproducts
Articlesofironandsteel
Soaps,lubricants,waxes,candles,modellingpastes
Vegetable,fruit,nut,etc.foodpreparations
Ores,slagandash
US$Millions
PHExportstoVietNam,2003vs.2013
2013level
2003level
THAILAND MALAYSIA
VIETNAMINDONESIA
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Trade has resumed growthExport growth nearly doubled (and
goods exports are back on top)Goods exports now growing faster again
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Manufacturing ResurgenceGrowing faster than overall economy
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Manufacturing, 2017:
Winners• Fab. Metal Prods. (50.3%)
• Basic Metal Prods (23.5%)
• Non-met Minerals (21.6%)
• Furniture & Fixtures (20.4%)
• Office Equipment (16.5%)
• Petroleum/Fuel (12.5%)
• Transport Equipt (12.4%)
• Radio/TV/Comm Eqpt (12.1%)
• Footwear/Leather• Chemical Products
• Misc Manufactures
Losers• Textiles (-19.7%)• Tobacco Mfg• Wearing Apparel
• Electrical Machinery • Wood Etc Prods• Food Manufactures• Paper/Paper Prods• Publishing/Printing
• Non-elec Machinery• Rubber & Plastic Prods• Beverages
.
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. There s less trabaho, but more negosyo.
Job quality is improving.
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Job Quantity Lower, But Job Quality Better
• Total no. of jobs dropped by 134,000 (but reduction is tapering off)
• 1M Filipinos enter working age (15 years) every year
• Even so, unemployment rate fell from July to Oct due to lower LFPR (most still in school due to K+12)
• Wage & salary workers continue to rise (due to manufacturing surge); underemployment now < 16%
• Entrepreneurs (self-employed who employ others in a business) have risen
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Unemployment rate falls, even as jobs decline (but tapering)
Underemployment on downtrend?Hundreds of
thousands of new jobs generated in
industryUnderemployment continues decline
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Wage Employment, Entrepreneurship are expanding
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4. Government spending (especially in infra) is crucial.Growth driver in 2017, especially Q4
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Government spending was a key growth driver in Q4…
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…and will be the prominent growth driver in the years ahead
• Direct employment and multiplier effect
• Attraction for long-term private investment
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5. MSMEs are key to our inclusive growth.Major economic agenda in our ASEAN Chairmanship.
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MSMEs Contribution to GDP (%)
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MSMEs Employment Contribution (%)
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MSME Development:Starved of Financing
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PH SME bank financing is pathetically low, compared to
our neighbors
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7 M s of MSME Development1. Mindset – government, banks, and
entrepreneurs themselves
2. Mastery – business & financial management
3. Mentoring – DTI Roving Academy, DBFTA; NGOs
4. Money – financial inclusion (LBP, DBP refocus)
5. Machines – SETUP, SSFs, financing programs
6. Markets – infra, clustering, e-commerce, TF
7. Models – inclusive value chains vs. vertical integration
ASEAN More MSME-friendly regional environment
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PH AEC 2025 GameplanInternationalizing MSMEs
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6. There are risks and challenges we must address.Both external and internal issues
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Medium Term Downside Risks
• Implementation shortcomings (BBB)
• Political distractions and weakened institutions
• Slowing remittances and BPO sector growth
• Inflationary pressures from self-fulfilling (exaggerated) expectations
• Loss of momentum in completing the tax reform program
• Trade slowdown due to TPP exclusion
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1996 2006 2016
Metro Manila
Metro Manila + Central Luzon + CALABARZON
Luzon
Persistent Challenge:We re even more Manila- & Luzon-centric now
SHARE OF GDP
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Persistent Challenges• Falling farther behind in exports, and still
lagging in FDI
• Weakness in agriculture & agribusiness
• Fiscal pressures from hiked public investments, downscaled PPP, and populist policies (free tuition, irrigation)
• Non-passage of Basic Bangsamoro Law and lack of lasting peace in Mindanao
• Inferior telecommunications quality and Internet speed
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External Risks (IMF)
Graphic: IMF
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7. PH is poised to grow faster and stronger.But we must do the homework right
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IMF World Economic Outlook Global economy is expected to pick up in
2018-2019 (3.9% GDP growth)
Graphic: IMF
PH will do better!
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Short Term Outlook (2018)
Inflation Rate: 3.0-4.0%
Jobs: Employment Rate of 94-95% (Unemployment Rate 5-6%)
GDP Growth: 6.5-7.5%, with downside risks
Exchange Rate: P50-52/$1
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The Way Forward
For sustained growth:
Build, build, build implementation
Ease trade and investment restrictions; negotiate more trade deals
Regulatory reform
For inclusive development:
Concerted MSME promotion and support
Inclusive value chains (vs. vertical integration)
Strong competition policy enforcement
Investments in human development & social protection
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