Philippine Economic Outlook

2017 and Beyond

Mr. Aekapol Chongvilaivan

Country Economist

Philippines Country Office

June 2017

2

Improved Macroeconomic Fundamentals

0

2

4

6

8

20

00

20

04

20

08

20

12

20

16

% GDP Growth

5-year moving average

-2

1

3

5

7

9

20

00

20

04

20

08

20

12

20

16

% Inflation Rate

5-year moving average

(6)

(4)

(2)

0

22

00

0

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

% of GDP Fiscal Balance

20

30

40

50

60

70

80

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

% of GDPGovernment Debt

3

Investment: A New Driver of Growth

-6

-4

-2

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 2015 2016

Percentage

Points

Contribution to GDP Growth, Demand

Household spending Government spending

Investment Statistical discrepancy

Net Exports GDP

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 2015 2016

%

GDP, Household Spending, InvestmentGrowth, 5 year moving average

Household Investment GDP

Investment has outpaced household consumption

4

Manufacturing Growth Picking Up

-1

0

1

2

3

4

5

6

7

8

2010 2011 2012 2013 2014 2015 2016

Percentage

Point

Contribution to GDP Growth, Supply

Agriculture Manufacturing

other industry Services

GDP

-

1

2

3

4

5

6

7

8

9

2010 2011 2012 2013 2014 2015 2016

%

GDP, Manufacturing, ServicesGrowth (5-year movng average)

Manufacturing Services GDP

5

Fiscal Management

0

20

40

60

80

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

% of GDP

National Government Debt

Domestic Foreign

Fiscal space supports the acceleration in expenditure

10

11

12

13

14

15

16

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

% of GDP

Expenditure

(excluding interest payments)

6

2017 to 2018 Outlook

• Sustained growth in domestic demand

• Expansionary fiscal policy

• Inflation to pick up, though within BSP’s target

0

2

4

6

8

2012 2013 2014 2015 2016 2017 2018

% GDP

Forecast

0

1

2

3

4

5

2012 2013 2014 2015 2016 2017 2018

%

Inflation

Forecast

7

2017 to 2018 Growth Outlook

• Strong domestic demand supported by expansionary

fiscal policy as well as higher local employment

• External headwinds and risks

– Modest growth in major trading partners

– Uncertain trade and other external policies

– Monetary tightening

• Rise in global commodity prices particularly oil

8

Contribution to GDP Growth

2010-2015 Average

Metro Manila

Central Luzon

Calabarzon

Other Luzon

Visayas

Mindanao

Key Development Challenges: Making Growth More Inclusive

0

5

10

15

20

25

30

35

40

45

PHILIPPINES Luzon Visayas Mindanao

% of

PopulationPoverty Incidence

2006 2015

Key Development Challenges: High Youth Unemployment

9

0

5

10

15

20

25

30

Indonesia Philippines Malaysia Vietnam Thailand

%Youth Unemployment Rate

2000 2010 2016

Need to accelerate Infrastructure Development

• Public Private Partnerships

(PPP)

‒ Improvements in the

enabling environment

‒ Enhancements in

project development

and monitoring

• Regional connectivity,

value chain development

79

95

60

49

24

60

57

41

34

25

Viet Nam

Philippines

Indonesia

Thailand

Malaysia

2016-2017 Global Competiivenessrank out of 138 economies

Overall rank

Infrastructure

Key Development Challenges: More Revenues to support public investments

11

12

13

14

15

16

17

18

19

20

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

% of GDP Revenue

Philippines Average Indonesia, Malaysia, Thailand

Moving Ahead: Medium- to Long-Term DevelopmentPhilippines 2040 Vision: Long-term strategic framework

10 Point Socio-Economic agenda: Medium term anchor

12

Government’s Medium-term Goals

13

• GDP growth of 7-8 percent in the medium

term

• Poverty incidence down to 14% and

unemployment rate to 3%-5% by 2022

• Significant investments in social services and

infrastructure (at least 5% of GDP)

• Agricultural, rural and value chain

development

• Progressive tax reforms

Boosting Infrastructure Investments

14

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2015

Actual

2016

Actual

2017 2018 2019 2020 2021 2022

% of GDP

Public Infrastructure Spending Targets

Considerations for Moving Ahead

• Sound macroeconomic fundamentals are the foundation for

development

• Further poverty reduction, especially in southern Philippines

• Expanding infrastructure connectivity and access to

services, finance, markets to increase employment and

incomes

• Productivity improvements in agriculture, industry and

services

• Coordinated and effective national and local government

service delivery

15