Macroeconomy Philippines

4,073 views

Published on

Macroeconomy Philippines

  1. 1. Acedo * Fabia * Reyes * Sorbito * Vidamo
  2. 2. Gross Domestic Product (based on PPP valuation of country GDP)18.00% World Advanced economies Eurozone USA Developing Asia Philippines13.00% 8.00% 3.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-2.00%-7.00% Source: IMF, World Economic Outlook Database, October 2012 * 2012 to 2017 are estimates.
  3. 3. • World economy in 2013 should mark the beginning of sustainably faster growth with declining trade imbalances.• Expansionary monetary policies will continue to drive the cyclical upturn in the United States and in the euro area.• Economic activity in Latin America will strengthen.• East Asia will remain the fastest growing segment of the world.• Philippines is expected to outperform most other nations in Asia and enjoy another year of strong economic growth.
  4. 4. • The Philippine economy was one of the global star performers in 2012. In 2013, the Philippine economy is expected to grow by around 6% on the back of sound policy developments and strong underlying fundamentals. Actual/Forecast 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GraphEconomic ActivityReal GDP (YoY%) 5.20 6.60 4.20 1.10 7.60 3.90 6.60 5.90 5.60 5.55Inflation (YoY%) 5.48 2.95 8.15 4.24 3.79 4.73 3.12 3.80 4.00 3.90Unemployment (%) 7.93 7.33 7.40 7.48 7.35 7.03 6.98 6.80 6.50 6.50External BalanceCurr. Account % of GDP 4.34 4.72 2.48 5.08 4.21 3.14 3.00 3.40 3.05 3.15Fiscal BalanceBudget (% of GDP) -1.03 -0.18 0.88 -3.72 -3.49 -2.03 -2.30 -2.20 -2.10 -2.35Interest RatesCentral Bank Rate (%) 7.50 5.25 5.50 4.00 4.00 4.50 3.50 3.75 0.00 0.003-Month Rate (%) 6.94 6.31 5.25 5.00 1.06 2.25 0.56 1.76 0.00 0.002-Year Note (%) 5.42 11.09 9.79 11.69 4.72 0.00 2.58 0.00 0.00 0.0010-Year Note (%) 6.38 6.58 7.44 8.11 6.10 5.41 4.40 5.04 0.00 0.00Exchange RatesUSD/PHP 49.03 41.25 47.52 46.16 43.80 43.84 41.01 39.85 39.00 38.00Source: Bloomberg
  5. 5. Gross Domestic Product PHP Mlns GDP GDP Growth % • GDP grew by 6.8 percent in 8,000,000 9% 4Q2012, paving for the full-year 7,000,000 8% 6.6% 7% GDP estimate to post a broad-based 6,000,000 5.9% 5.6% 5.6% growth of 6.6 percent. 6% 5,000,000 5% 4,000,000 4% 3,000,000 3% • GDP is expected to grow above 5% 2,000,000 2% in the coming years, mainly coming 1,000,000 1% from buoyant public and private 0 0% spending. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bloomberg Other Economic Activities 9% • Year-on-year headline inflation is 8% within the Governments target 7% range of 3-5 percent for the year 6% 7.0% 6.8% 6.5% 6.5% and will continue for the next few 5% 4% years. 3% 3.8% 4.0% 3.9% 2% 3.1% • Unemployment rate improved in 1% Inflation (YoY%) Unemployment (%) 2011. it is expected to hover around 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 4% in the coming years.Source: Bloomberg
  6. 6. External Balance PHP Mlns Curr. Acount Curr. Account % of GDP 300,000 6% • Current account continued to register a surplus at US$1.8 billion, equivalent to 250,000 5% 2.9 percent of GDP but 15% lower than 200,000 4% the surplus of US$2.1 billion in 2010. 150,000 3% 3.4% 100,000 3.1% 3.0% 3.1% 3.2% 2% • Current account is expected to remain in surplus on the back of strong inflows 50,000 1% from OFWs and receipts from the 0 0% growing BPO industry 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: Bloomberg Fiscal BalancePHP Mlns 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 100,000 2% • Government has continued to 50,000 1% 0 demonstrate prudence in its 0% -50,000 fiscal management, as -1% -100,000 characterized by low budget -2% -150,000 deficits (less than 3% of GDP) -200,000 -2.3% -2.2% -2.1% -2.4% -3% -250,000 -4% Budget Budget (% of GDP)Source: Bloomberg
  7. 7. Interest Rates14% • Policy rates, repo and reverse repo12% Central Bank Rate were kept on hold at 5.5% and 3.5% 3-Month Rate10% 2-Year Note 8% 10-Year Note • Interest rates are low due to investor strong demand on the back of the 6% country’s solid fundamentals 4% 2% • Interest rates are expected to remain 0% at or slightly above current levels. 2006 2007 2008 2009 2010 2011 2012 2013Source: Bloomberg PHP Foreign Exchange Rate 60 • Peso emerged as Asia Pacific’s 2nd best 49.03 47.52 46.16 performing currency against the dollar 50 41.25 43.80 43.84 41.01 39.85 39.00 in 2012 38.00 40 30 • Capital inflows temper through ban on foreign funds in SDA and cap on NDF 20 10 • The peso is expected to appreciate - further on strong inflows. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: Bloomberg
  8. 8. Philippine Gross Domestic Product8,000,000 at Constant Prices 2001-2012 10.0%7,000,000 8.0%6,000,0005,000,000 6.0%4,000,0003,000,000 4.0%2,000,000 2.0%1,000,000 - 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(1,000,000) Consumer spending Capital expenditure Government spending Current Accounts GDP Growth %(2,000,000) -2.0%Source: Bloomberg, NSCB
  9. 9. • Conditions are ripe for spending (both from the public and private sectors)• Inflation in check, interest rates to remain low, liquidity abound• Sustained consumer spending and increased investment spending from the private sector• Government spending on infrastructure and socio- economic programs
  10. 10. 10 yr PDST-F Rate Banking Statistics: U/Kbs14.00 12.11 Yr NPL Ratio Provision/NPL12.00 2005 8.2% 77.5%10.00 2006 5.7% 82.6% 2007 4.4% 93.3% 8.00 2008 3.5% 100.0% 6.00 2009 3.0% 112.3% 2010 2.9% 118.3% 4.00 2011 2.2% 126.4% 3.52 3Q12 2.1% 136.0% 2.00 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: BSPSource: Bloomberg, NSO Interest rates are low Banking sector is sound Domestic Liquidity & Money Supply M2 M3 M2 Growth M3 Growth 60000000 20.0% 50000000 15.0% 40000000 30000000 10.0% 20000000 5.0% 10000000 0 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: BSP Ample Liquidity (M2 &M3 growth)
  11. 11. GDP and Consumer Spending Growth Rate 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP growth % Consumer Spending growth %Source: Bloomberg, NSO • In 2013, expenditure is likely to be propped up by election-related spending for the May mid-term poll
  12. 12. • Robust consumer spending on the back of strong USD Mlns BPO Revenues inflows from OFWs and receipts from the growing BPO industry 12000 11000 • OFW remittances up 7.2% to new record $ 20.12 B in 10000 9000 2011 amid political turmoil in some parts of MENA and slowdown in global economic growth 8000 7200 6061 • BPAP 5-yr. plan to grow at an average of 20% a year – 6000 4875 above the projected global annual growth rate of 10- 15% 4000 3257 2420 • IT-BPO services serve as catalysts for growth, the 1475 2000 industry played a major role in fueling recent economic development in the Philippines 0 2004 2005 2006 2007 2008 2009 2010 2011 Source: BPAP OFW RemittancesUSD Mlns 2000 30.0% BPO Multiplier Effect at Yr 2016 1800 25.0% OFW Remittances Growth 1600 25.0% Housing 4% 1400 13% 20.0% 1200 12.8% 20% Food 1000 15.0% 800 600 6.3% 10.0% Transport and 14% Communicatio 400 5.0% 41% ns 200 5.6% Savings 0 0.0% 8% 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Bloomberg, BSP
  13. 13. Upgrades in indicators of competitiveness and sovereign ratings reflect an improved investment environmentS&P raised its outlook on the Phils.’ credit rating to “positive” from“stable”.Current administration possesses a level of legitimacy, support andstability that reduces political uncertainty and allows for improvedlegislative efficiency. This environment allowed the government to focus itsefforts on improving its revenues, building infrastructure and reducingpoverty.Credit rating may be raised from “BB+” to investment-grade by end-2014.The case for investment grade is supported by a number offactors, including a resilient economy, a current account surplus, stablefiscal policy, and the narrowing of the budget deficit.
  14. 14. % Debt to GDP 100 90 77 80 70 74.2 72.3 63.8 • Prudent fiscal 56.9 57.3 60 55.8 52.4 50.9 50.6 management: 50 40 government has enough 30 20 leeway for spending 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 • Government revenue Source: Bloomberg growth is expected to Revenues and Tax Efforts improve further (As % of GDP)10.00 8.10 • Infrastructure spending 8.00 6.00 4.70 7.18 • Socio-economic spending: 4.00 RH bill, conditional cash 4.20 2.00 Revenues Tax revenues transfer program - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Bloomberg
  15. 15. • Foreign exchange appreciation poses challenges – Affects exporters, OFWs, and BPO industry – However, a stronger peso is helping deliver lower inflation, e.g., through cheaper oil imports and dollar loans – BSP says it will not seek to run against the fundamentals, although it has hinted at strengthened capital controls to curb inflows of hot money
  16. 16. • Longer term, the challenge is for further economic reform to make sure that growth is sustainable – Important that the heady growth does not sate appetite for economic reform – Economy over-reliant on remittances and real estate – BPO sector is world-class but delivers limited new jobs – Economic power is too concentrated , holding back development – More needs to be done to diversify the economy and increase competition
  17. 17. • Fiscal deficit is expected to narrow gradually over the next few years.• Fiscal consolidation would continue especially with the implementation of the "sin tax" in January.• Policy rates will remain unchanged at 3.50% given robust growth outlook and a manageable inflation. Possible policy rate hike by 25 bps in Q4.• Further SDA rate cuts can’t be ruled out, which would give central bank more freedom to manage FX volatility.• Inflation may accelerate, particularly in 4Q2013, due to higher food and energy inflation, consumer spending, and base effects but will remain manageable and unlikely to breach the inflation target.
  18. 18. 100 150 200 250 300 350 400 - 50 50 100 150 200 250 300 350 400 450 - Jan-09 Dec-99 Apr-09 Apr-00 Jul-09 Aug-00 Oct-09 Dec-00 PSEI Jan-10 Apr-01 Apr-10 Aug-01 Jul-10 Dec-01 Oct-10 Apr-02 S&P500 Jan-11 Aug-02 Dec-02 Apr-11 Apr-03 Jul-11 Medium Term Aug-03 Oct-11 Dec-03 Jan-12 Apr-04 EuroStoxx50 Apr-12 Aug-04 Jul-12 Dec-04 Oct-12 Apr-05 Jan-13 Aug-05 Dec-05 Apr-06 Aug-06 100 110 120 130 140 80 90 Long Term Dec-06 Apr-07 MSCI Emerging Markets Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Nikkei 225 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Short Term Dec-10 Apr-11 Philippine stocks still expected to outperform its peers Aug-11 Dec-11 Shanghai SE Composite Apr-12 Aug-12 Dec-12Source: Bloomberg
  19. 19. • Based on macroeconomic analysis, sectors we prefer are : Consumer Staples Utilities Financial Real estate Tourism
  20. 20. •••••••

×