The Philippines faces economic slowdown due to declining global demand and lackluster domestic investment and government intervention. Growth is projected to slow considerably, with forecasts ranging from 2-4% compared to past growth rates over 5%. While the country was in a better position than previous crises, 10 of 11 leading indicators are now negative, portending further economic weakness. The outlook could improve if stimulus packages abroad and at home are sizable and effective.

1. Copyright 2009 @ www.pinoymoneyvantage.com Summary Report of What’s been happening in the country from past to present times

2. Outline I. Economic Performance II. Prospects Copyright 2009 @ www.pinoymoneyvantage.com

3. Economic Performance Silver Linings: The Big Picture We’re no longer the basket case of Asia We’ve been growing at a faster pace over a longer period of time than any other period in the past 22 years: Aquino (1986-1992): 4.0% Ramos (1992-1998): 3.8% Estrada (1998-2000): 2.9% Arroyo (2001-2008): 5.4% Copyright 2009 @ www.pinoymoneyvantage.com

4. Some more silver linings Employment increased by 565,000 between Jan 2008 and Jan 2009 Underemployment decreased (18.9% to 18.2%) Percentage of wage and salaried workers increased (51.7% to 52.3%) Copyright 2009 @ www.pinoymoneyvantage.com

5. Still more… Inflation in 2008 remained at single-digit level (9.3%) despite spikes in world fuel and rice prices -- headline inflation decreased by 450 basis points between August and December. February inflation 7.3% Gross Official Reserves reserves are at a healthy 5.9 months of imports ($30.3b)as of February. Copyright 2009 @ www.pinoymoneyvantage.com

6. and still some more.. National government deficit (0.9% - 1.2% of GDP) very manageable Current Account surplus maintained Public sector-, national government- debt, and external debt- to-GDP ratios have declined considerably (rapid pace of debt reduction) Copyright 2009 @ www.pinoymoneyvantage.com

7. What this all means is: The Philippines is facing the global economic crisis from a much better macroeconomic position than it did in previous downturns (1998, 1991, 1983-85) Bonus: banking sector resilient, robust. No credit crunch. Copyright 2009 @ www.pinoymoneyvantage.com

8. Here comes the bad news: (the list is long) The economy suffered a steep decline in its growth rate in 2008 (from 7.2% to 4.6%) and further decline is already visible from the latest economic indicators Agriculture and Service sector “underperformed” in 2008; in 2009, it looks like the Manufacturing subsector is going to be the hardest hit: Average capacity utilization in January 2009 is 77.5 (50% of industries have capacity utilization of 80% and above) Copyright 2009 @ www.pinoymoneyvantage.com

9. Bad News… Unemployment rate increased (7.4% to 7.7%),and there is potential for further weakening of the situation. Imports, exports, are sharply down since October, and remittances have also decelerated sharply since October. Jan 2009 exports down 41% (electronics exports -48.4%), imports down 34% Copyright 2009 @ www.pinoymoneyvantage.com

10. Bad news…. Portfolio investments for the year showed a net outflow of $1.4 b (from a net inflow of $3.1b in 2007) FDI negligible ($1b) tax and revenue effort declining Production costs remain high, squeezing corporate profits-- WPI and PPI continue to be high (20.6% and 8.5% respectively as of end of last year) Copyright 2009 @ www.pinoymoneyvantage.com

11. Bad News: Poverty is winning Poverty Incidence, by administration Marcos 36.5% Aquino 30.1 Ramos 20.5 Estrada 22.3 Arroyo 22.1 Copyright 2009 @ www.pinoymoneyvantage.com

12. What all this means: While the Philippines is in better shape than ever before to face a global downturn, there is no escaping the fact that it will be affected, due to its openness and lack of diversity (exports to GDP ratio has dropped from 50% to 34%, but electronics accounts for 60% of total exports). Copyright 2009 @ www.pinoymoneyvantage.com

13. Aggravating Factor: “ Stimulus” package of government is too small, too vague, and no plans to monitor Too Vague: Government estimate: P300 billion (3.75% of GDP) Salceda estimate: P7 B (0.08%) Legislative plan: P50 B (0.62%) Based on increase in budget deficit (from original plan): P76.2B (0.95%) Not clear where the money will go No provisions for special monitoring (chances of wastage great, particularly in a pre-election year) Copyright 2009 @ www.pinoymoneyvantage.com

14. Stimulus -- or lack of it Too Small:-- Comparing stimulus packages: Singapore: 5% of GDP US: 6% Malaysia: 8% (Note: This is 2nd round) China: 18% ($586 B) Copyright 2009 @ www.pinoymoneyvantage.com

15. II. Prospects Global Prospects: Dim IMF has adjusted its forecasts of world economic outlook downward four times in a row. WB predicts recession in 2009 for US (-0.5%) and the Eurozone (-0.6%), with Japan expected to grow at 0.1% World trade, which grew by 5.9% last year, is predicted to contract by 2.1% this year. Copyright 2009 @ www.pinoymoneyvantage.com

16. Prospects Philippine Prospects: Dimming Various Projections Credit-rating agencies -- 2% IMF -- 2.25% WB -- 3.0% Citigroup -- 3% DB -- 2.0% (down from 3.3% in January) IDEA -- 3.4% - 4.1% PIDS -- 4% NEDA -- maximum 4% Copyright 2009 @ www.pinoymoneyvantage.com

17. Prospects A little bit of history: Seven times in the last 25 years, GDP growth rates were less than 2%. 1983 1.87 1991 (0.58) 1984 (7.32) 1992 0.34 1985 (7.32) 1998 (0.58) 2001 1.76 Copyright 2009 @ www.pinoymoneyvantage.com

18. Prospects A little bit of comparison: 2009 macroeconomic projections for selected countries in Emerging Asia Forecasted 2009 Real GDP growth rates (%) China 7.0 7.0 Hongkong (4.0) (5.0) Indonesia 4.5 (4.0) Malaysia 3.0 0 Philippines 3.2 2.0 Singapore (4.5) (5.0) Thailand 1.5 (-2.5) Emerging Asia ex China and India 0.8 (2.5) Copyright 2009 @ www.pinoymoneyvantage.com

19. Prospects Forecasted 2009 Fiscal Balance (% of GDP) China (2.0) (3.0) Hongkong (7.4) (5.0) Indonesia (1.7) (1.7) Malaysia (4.5) (7.4) Philippines (1.7) (2.2) Singapore 3.3 2.1 Thailand (4.3) (4.0) Copyright 2009 @ www.pinoymoneyvantage.com

20. Prospects Other projections for the Philippines Foreign exchange rate (P/$) 45 - 47 Interest rate 4-6% Inflation rate 4-4.4% Unemployment rate 6.8-7.0% Copyright 2009 @ www.pinoymoneyvantage.com

21. Summary Growth expected to slow considerably given lower export demand from developed countries, lower private consumption due to declining real income and higher unemployment lackluster investment due to risk aversion, high costs of financing, and reduced growth prospects Ineffectiveness of government intervention Copyright 2009 @ www.pinoymoneyvantage.com

22. Portent of things to come? 10 of the 11 leading economic indicators (LEI) for the first quarter of 2009 have have turned negative. (1) consumer price index, (2) electric energy consumption; (3) exchange rate, 4) hotel occupancy rate, 5) money supply; 6) number of new business incorporations, 7) stock price index, 8) terms of trade index, 9) total merchandise imports, 10) tourist arrivals, and 11) wholesale price index. Copyright 2009 @ www.pinoymoneyvantage.com

23. Portent of Things to Come What could reverse the prognosis? (a) If the stimulus packages of other countries are effective. (b) if our stimulus package is large enough and effective. Copyright 2009 @ www.pinoymoneyvantage.com

24. THE END. Copyright 2009 @ www.pinoymoneyvantage.com