February 2015

The Philippines Millennials

Roberto B. Tan

Treasurer of the Philippines

Understanding the “Global” ASEAN Consumer

2

ASEAN Offers a Future of Prosperity and Stability

Combined GDP of nearly USD3tr

Over 600mn consumers

Robust growth outlook

2015 2016

ASEAN 5 5.2 5.3

World 3.5 3.7

Advanced Economies 2.4 2.4

United States 3.6 3.3

Euro Area 1.2 1.4

Emerging Markets 6.4 6.2

China 6.8 6.3

Emerging Europe 2.9 3.1

Latin America 1.3 2.3

Source: International Monetary Fund

Collectively, ASEAN’s combined GDP places 7th worldwide – with slightly

higher national income than Brazil

% Share to Global GDP (2013)

United States 21.8

China 11.6

Japan 8.3

Germany 4.7

France 3.6

United Kingdom 3.4

ASEAN 3.1

Brazil 3.1

Source: ASEAN

3

ASEAN: Consumer Profile

ASEAN 5 2008 2010 2012 2014

GDP per capita (PPP, current)

US$7,526 US$8,163 US$9,187 US$10,166 Global brands are here:

Sources: McKinsey, International Monetary Fund, Nielsen

Rapidly declining extreme poverty (% of total population): 2000: 14% vs. 2013:

3%

By 2025, consuming class will expand to 125mn households

Broad consumer trends: leisure activities, modern retail, increasing brand

awareness

22% of ASEAN’s population live in cities of more than 200,000 inhabitants Urban areas account for more than 54% of the region’s GDP

Home to 3 of the World’s Most Confident Consumers in the World

Increasingly moving online

Mobile penetration of 110% & Internet penetration of 25%

Make up the world’s second-largest community of Facebook users

4

PH: Strongly Positioned for the ASEAN Economic Community

Sources: International Monetary Fund, Philippine Statistics Authority

Real GDP Growth (%)

5.4 5.0 4.9

5.5

7.2

5.3

4.1 3.6

5.0

7.4 6.9

5.8 5.9

7.2

4.7

5.8 5.7

4.5 5.0

6.0

7.8 7.3

5.3

6.1

2.0 2.8

4.5

6.3

1980-89 1990-99 2000-09 2010-14

ASEAN 5 Thailand Vietnam Malaysia Indonesia Singapore Philippines

2.8

4.5

6.3

1990-99 2000-09 2010-14

Consumption Investment Government Net Exports

2.8

4.5

6.3

1990-99 2000-09 2010-14Agriculture Industry Services

Average Contribution to Broad-Based PH Growth (%)

5

Sustained Growth Translates to More Jobs and Higher Incomes

Indicator Ave 2010 Ave 2011 Ave

2012 Ave 2013 Ave 2014* Oct 2013** Oct 2014**

Labor force (‘000) 38,893 40,006 40,426 41,022 40,051 40,397 41,322

Employed (‘000) 36,035 37,192 37,600 38,118 37,309 37,793 38,839

Wage and salary workers (% share to total employment)

54.5 55.2 57.2 58.4 57.9 57.7 58.1

Unemployment rate (%) 7.3 7.0 7.0 7.1 6.8 6.4 6.0

Source: Labor Force Survey, Philippine Statistics Authority

*The average estimates for 2014 exclude Region 8. Moreover, average estimates for wage and salary workers are computed using the January 2014 data (which exclude Region 8) and

April-October 2014 (which exclude Leyte).

**Due to T phoo Yola da’s devastatio , esti ates for O t. e lude Le te; for o para ilit purposes, O t. esti ates also exclude Leyte.

4.3

2.7

6.6 7.3

5.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2006-10 average 2011 2012 2013 2014

GNI per capita (PPP basis) (LHS) GDP per capita (PPP basis) (LHS) GNI per capita growth (labeled, %, RHS)

GDP Per Capita (US$)

6

PH in 2015: Entry Into the ‘Demographic Window’ – Opens Opportunities for Sustainable Growth

Source: UN World Population to 2300, UN World Population Prospects, IMF World Economic Outlook

2015

2010

2010

2005

2005

1995

1990

1985

1980

1980

1965

2050

2050

2045

2040

2040

2030

2025

2020

2015

2015

1995

1950 1970 1990 2010 2030 2050 2070

Philippines

India

Malaysia

Vietnam

Indonesia

Thailand

China

Korea

Singapore

Hong Kong

Japan

Demographic Windows in Asia

Average GDP Growth Rate for First 10 Years in Demographic Window (%)

For nations that have not yet been in their demographic windows for 10 years, the figure is an average of their growth rate for the time in the window

Has been in the demographic window for at least 10 years

Has been in the demographic window for less than 10 years

10.3 9.0

8.1 7.8 7.4 6.5 6.2 5.8 5.8

3.3

China Korea Japan Singapore Hong Kong India Vietnam Indonesia Malaysia Thailand

7

Population

100mn Internet Penetration

37% Mobile Penetration

105%

81% are active Facebook users

32% are on Twitter

51% are active YouTube users

PH Consumers: Tech Savvy and Social Media Oriented

Average Daily Time Spent Accessing the

Internet

6 hours

through

Desktop/Laptop 4 hours

through

Mobile

Devices

Philippines Digital Landscape

Social network sites viewed 15 billion

times

45% go online every week

65% interact with brands via social

media

Source: Global Web Index, Nielsen Survey, Ihub Media, International Telecommunications Union

3rd Most Confident Consumers in the

World

8

PH Fiscal Flexibility: Sufficient Fiscal Space for Investing in Human Capital

Source: Department of Finance

Fiscal Deficit/GDP (%)

General Government Debt/GDP (%)

0.2

0.9

3.7 3.5

2.0 2.3

1.4

0.3

2007 2008 2009 2010 2011 2012 2013 Jan-Sep2014

44.2 44.2 44.3 43.5

41.4 40.6

39.2

37.3

2007 2008 2009 2010 2011 2012 2013 Jan-Jun 2014

9 Source: Department of Budget and Management

Stronger Fiscal Finances and Well-Targeted Spending Allow Higher Investments in Social Services

23.4 31.0

40.5 52.4 56.9

90.5 94.6

2009 2010 2011 2012 2013 2014 2015

205% g.r.

from 2010-2015

Health Budget (PHP bn)

208.7 225.1 254.4

279.4 327.0

383.1

450.2

2009 2010 2011 2012 2013 2014 2015

Education Budget (PHP bn)

100% g.r.

from 2010-2015

Investing in People

Improving health access and quality

Sin Tax Reform Law (RA 10351)

Responsible Parenthood and Reproductive

Health Act of 2012 (RA 10354)

Strengthening access to education and

training for life skills

Kindergarten Act of 2012 (RA 10157)

Enhanced Basic Education Act of 2013

(RA 10533)

Act Strengthening the Ladderized Interface

Between Technical-Vocation Education and

Training and Higher Education (RA 10647)

PHP2bn budget for Technical Education and

Skills Development Authority (TESDA)

Expansion of social protection

Conditional Cash Transfers (CCTs)

National Health Insurance Program

10

Stronger Fiscal Finances Allow PH to Accelerate Infrastructure Development

Key Budgetary Sectors as percent of GDP

Source: Department of Budget and Management

Infrastructure Outlay (as percent of GDP)

2.2%

2.5%

3.5%

4.0%

5.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2012 2013 2014 2015(Projected)

2016(Projected)

11

Investment Opportunities in PH

Manufacturing Tourism

Agri-business

Infrastructure

Investment Opportunities

IT and BPO

PH MY ID TH SG VN

2012 60.2r/ -35.6 3.1 177.1 1.2 12.6

2013 2014 Q1 -Q3

13.9r/ 61.3

18.9 -2.3

10.1 6.2

19.7 58.2

5.3 35.6

6.4 NA

Growth in Net FDI among fastest in Region

12

Growth Outlook for 2015 and 2016

Source: Department of Budget and Management, National Economic and Development Authority, IMF’s World Economic Outlook Update (Jan 2015); WB’s Global Economic Prospects (Jan 2015)

2015 (projected)

2016 (projected)

NEDA Board-Development Budget Coordination Committee (as of Jan. 7, 2015)

GDP growth (%) 7.0-8.0 7.0-8.0

IMF Forecast 6.6 6.4

WB Forecast 6.5 6.5

Inflation, CPI (%, 2006=100), average

2.0-4.0 2.0-4.0

Exchange rate (PHP/US%)

42-45 42-45

Budget deficit (% GDP)

-2.0 -2.0

Philippine Development Plan Update (as of Jan. 2014)

Unemployment rate (%)

6.7 6.6

Underemployment rate (%)

18.0 17.0

Poverty incidence (%)

22.5 19.0

Drivers of growth in the near to

medium term

Supply side

Manufacturing

Construction and logistics

International and domestic tourism

Wholesale and retail trade

Business Process Management (BPM)

fueling growth in real estate

Agribusiness

Demand side

Investment: public construction, including

infrastructure and reconstruction; private

construction

Household consumption: remittance

inflows, strong consumer confidence

Exports of services: good prospects on BPM

External trade conditions: low world price

of oil

February 2015

The Philippines Millennials

Roberto B. Tan

Treasurer of the Philippines

Understanding the “Global” ASEAN Consumer