Agsb economic form

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The state of the Philippine economy 1st quarter 2013

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Agsb economic form

  1. 1. Cielito F. Habito, Ph.D.Economic Briefing for theAteneo Graduate School of Business4 June 2013Philippine Economic Performanceand Outlook:In Quest of Inclusive Growth
  2. 2. Overview• Where We Have Been➜ Disturbing Comparisons• Where We Are Now The “PiTiK Test”• Where We Are Headed Signs of a Breakout Sustaining Growth, Threats to Growth The Challenge of Inclusive Growth Doing Our Share
  3. 3. Philippines & Thailand:Estranged TwinsThai Phil Thai PhilPopulation (million) 36 36 66.9 92.2Population G.R. (%) 3.1 3.1 0.6 2.0GDP Per Capita (US$) 250 250 4062 1796GDP Share (%)Agriculture 32.0 26.0 11.6 14.8Industry 23.0 27.5 43.3 30.2Services 45.2 46.7 45.1 55.0Gross Dom Inv (%GDP) 20.0 20.0 21.8 14.6Gross Dom Saving (%GDP) 18.5 20.3 31.7 15.6FDI Stock (Billion US$) 7.8 2.3 93.8 22.91998 2009Indicator1970 20091965 2009
  4. 4. Philippines & Indonesia:Trading Places
  5. 5. Gross Domestic InvestmentAverage Annual Growth Rate (%)2004-2009Source: ADB
  6. 6. Poverty rose from 24.9% (2003)to 26.5% (2009); (H1-2012: 27.9%)Net elementary school participationrate fell from 97% in 2001 to 85% in2008; high school from 66% to 62%Malnutrition incidence went up in mostprovincesWide disparities persist in lifeexpectancy across provinces: Low -53.4 (Tawi-Tawi); High - 74.6 (La Union)The Economy In Human Terms
  7. 7. 2010: Turning Point For PrivateDomestic Investment
  8. 8. Gross Domestic InvestmentAverage Annual Growth Rate (%)2004-2009 (Philippines: Ave. 2010-12)9.3
  9. 9. How Is The Economy Doing?The “PiTiK Test”The Essential Yardsticks (P-T-K): Price Stability (Presyo) Jobs (Trabaho) Incomes (Kita)
  10. 10. Latest Economic PerformanceGood News: 2½ out of 3 Prices: Slowed down to 3.2% in 2012 vs. 4.4%in 2011 (Food – 2.3%); Now 2.6% (Food -1.9%) Jobs: Jan 2013 unemployment fell to 7.1%from previous year‟s 7.3%, 606,000 jobsgained; but 571,000 agri jobs were lost,underemployment up to 21% Incomes/Output: GDP grew 7.8% in Q1-2013 (fastest in Asia), from previous year‟s6.5% growth
  11. 11. PresyoInflation Trends9.3%3.2%3.8%4.4%FY 2013 – 3.0%April ’13 – 2.6%Non-NCR – 2.8%Food – 1.9%3.2%
  12. 12. TrabahoUnderemployment Rising
  13. 13. Kita2012: All Sectors Speeding Up
  14. 14. KitaQ1-2013: Industrial Vigor
  15. 15. Manufacturing & Construction DriveIndustry Growth
  16. 16. Investment Surges in Q1
  17. 17. Business Confidence:Historical Peaks
  18. 18. FDI Approvals Reach 16-year High;Net Inflows Up 32.6% ($1.1b)
  19. 19. Sustained Remittances Growth
  20. 20. Regional GDP Growth, 2010-2011Fastest growing:Caraga Region,Central Visayas,Central LuzonWorst Performers:ARMM, ZamboangaPeninsula
  21. 21. A Break From the PastSource: NSCB
  22. 22. PiTiK Test: Then and NowSource: NSCB
  23. 23. Taking Off Where It MattersSource: NSCB
  24. 24. But much work remainsSource: ADB
  25. 25. We still lag far behindSource: ADB
  26. 26. Where is the Peso Headed?Source: http://fx.sauder.ubc.ca
  27. 27. Peso Appreciation Pressures Credit rating upgrade More financial inflows Sustained income remittances growth May accelerate further? BSP‟s „arsenal‟ getting tighter Intervention ability more limited More fun in PH Tourism influx picking up US Dollar‟s decline as reserve currency Long term weakening
  28. 28. Growth Drivers In 2013Onwards Government spending: Full throttle;PPPs coming on stream; strongerrevenues Governance: Improvements takinghold Private domestic investment: Up from adecade of stagnation; FDI picking up Fitch, S&P & Moody‟s: Ratings upgrades Election Spending: Strong stimulus
  29. 29. Growth Drivers In 2013Onwards Remittances: Steady growth Gaming Investments: PH as the newMacau? Mindanao: Peace agreement tounleash new growth potentials New manufacturing investments China: Factory of the world no more;resume PH industrialization?
  30. 30. Manufacturing: Renewed VigorChina trends – returning factoriesFood Manufactures – driven by growingpopulation, rising incomes; Halalproducts (with growing Islamic marketsworldwide)Design-based Manufactures – high endapparel; furniture & fixturesFinished consumer electronic products –deliberate efforts now underway tomove up the value chain (JICA)
  31. 31. Manufacturing 2012:Winners Well Outnumber LosersWinners• Wearing apparel (44.1%)• Furniture/Fixtures (38.7%)• Wood products• Office equipment• Nonmetallic Min Prods• Footwear & leather prods• Transport Equipment• Electrical Machinery• Rubber & plasticproducts• Food Manufactures• Chemical ProductsLosers• Basic Metal Prods• Misc Manufactures• Petroleum/Coal Prods• Paper/Paper products• Tobacco Manufactures• Radio, TV & CommEqpt Beverages Publishing/Printing Non-elec Machinery Fabricated MetalProds
  32. 32. Threats To Sustained GrowthFiscal Time Bomb in Europe & US:Systemic collapse would have globalimpactsAppreciating Peso: Adjusting to theinevitablePolitical Backsliding: Post-2016 scenarioASEAN Economic Community 2015: Tapopportunities, address vulnerabilitiesWide Inequalities: Attaining inclusivegrowth critical to avert “social volcano”
  33. 33. Who’s Afraid Of ASEAN 2015?ASEAN as a single market andproduction base, via:• Elimination of import tariffs• Free movement of professionals• Freer movement of capital• Free flow of investment• Faster customs clearance procedures
  34. 34. Top Philippine Billionaires:Skewed Wealth, Skewed Growth Income of top150,000 families =income ofbottom 6 million Rise in wealth ofthe 40 richestFilipinos in 2011equaled 76percent of thetotal growth inincome (GDP) ofall FilipinosForbesAsia
  35. 35. Wealth Increase of 40 Richest /Absolute Increase in GDP (2011) Philippines:$13 billion / $17 billion (76%) Thailand:$9 billion / $26.7 billion (33.7%) Malaysia:$2.3 billion / $41 billion (5.6%) Japan:$11 billion / $381 billion (2.8%)
  36. 36. • Economy grew 7.2% in Q3-2012, but actuallylost 882,000 jobs (NSO-LFS)• PH rice farmers receive only 45% ofwholesale price; other Asian rice farmers get65-95% (FAOStat)• A top billionaire can easily borrow hundredsof millions from a gov‟t bank and makefabulous profits from it – but a small farmer orentrepreneur is hard-pressed to borrow a fewthousand pesosNarrow, Hollow & Shallow Growth:Disturbing Facts
  37. 37. • It costs more to ship from Mindanao to Manilathan from Bangkok to Manila, for well over 25years now• Some of the 40 richest Filipinos in the Forbes listdo not even appear in the top 500 taxpayerslist of BIR• Gov‟t borrowed billions for Subic & BatangasPorts “to decongest Metro Manila” – thenpermitted substantial capacity expansion ofManila Port, leaving the two < 5% utilized (JICA)Narrow, Hollow & Shallow Growth:More Disturbing Facts
  38. 38. Inclusive Growth:How Shall We Get There?• Widen the economic base: Concerted SMEpromotion and development; foster socialenterprise• Disperse economic activity & economicgains: Democratize the value chains; invest inMindanao; strengthen competition policy;make the financial system inclusive• Get agriculture moving: Empower ProvincialAgricultural Offices; reform DA bureaucracy;attract/push large investors into agribusiness
  39. 39. The Philippine Conundrum• We have long understood our problems, andknown the needed measures – still, theproblems persist with no real action taken• Can our politics and political economyever change to finally enable the longneeded reforms?
  40. 40. Our Task:How cangovernment, privatesector and civil societywork together toensure sustainedpursuit of the trulymeaningful, longneeded and largelywell known policy andpublic investmentinterventions crucialfor inclusive growth?• Freedom of Information Act• National Land Use Act• Competition Policy Law• Rationalization of FiscalIncentives• Wider Liberalization ofInvestment Policy• Political Dynasties Ban• Easing of Cabotage Law• Open Skies Policy• Integrated Forward-LookingStrategic Infrastructure Plan• Expanded Farm and SMEFinance• Political Party Reform• Inclusive Commodity ValueChains• Effective SmallholderClustering Programs• Wider Ro-Ro Coverage• National AgriculturalCooperative System
  41. 41. Ruchir Sharma: Breakout Nations• PH: new economyto watch!• TIP (Turkey, Indo-nesia & Philippines)are pushing BRICSaside• Sharma: Quality ofpolitical leadershipcrucial to becominga breakout nation
  42. 42. Positive change will not comeautomatically…• Demand good governance from our leadersat all levels, at all times… and we must alsodeserve it• Do our share to stabilize and strengthen theeconomy:- Pay proper taxes- Consciously buy Filipino, buy locally- Discover our own country first (it‟s morefun – and less costly!)We Filipinos must all do our share…
  43. 43. •Doing Our Share (Cont’d)- Invest in Mindanao – especiallyMuslim Mindanao (and help break itsvicious cycle of backwardness)- Invest in good political leaders- Invest in a poor family➜ One out of five Filipino families is poor➜ It takes only one of every four non-poorto „adopt‟ a poor family➜ Not to „give a fish,‟ but „teach them tofish‟!
  44. 44. Thank you very much!Shamelesscommercial:If you liked the„movie‟, please readthe book!P650 atNationalBookstore, Powerbooks &Fully Booked(P550 from Publisher)

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