4969977 Inquirer Briefing by Cielito Habito

8/14/2019 4969977 Inquirer Briefing by Cielito Habito

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Overview Key Economic Trends for 1st Half of 2008 Persistent Challenges: Storm winds Low fuel Excess baggage

Food and oil prices: quo vadis? Outlook for remainder of 2008 EconomicimperativesAteneo Center for Economic Research and Development


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2008 HighlightsPluses+Private domestic investment has rebounded; offsets drop in public constructionand FDI +Consecutive government surplusesAteneo Center for Economic Research and Development


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2008 Highlights:Minuses Prices: Inflation hits double-digits Jobs: Massive job losses Incomes/Output: Slowdown orreversal across the board Personal Consumption: Dramatic slowdown Net FDI inflows: Steep decline Government Spending: Now a drag Exports & Imports: StunningAteneo Center for Economic Research and Development


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Prices:Steepest rise in 17 yearsYear2003 2004 2005 2006 2007 J uly-08 Non-NCR F ood Year Ave.

Inflation Rate (%)3.1 5.5 7.6 6.2 2.8 12.2 13.9 18.6 8.3


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Jobs (April 2008):Massive Job LossesEmployment (NSO-LFS) Unemployment Rate (%)New Definition

Latest PeriodApr '08 8.0 -168 46 -244 30 19.8

Year Ago

Prev 2007 Period Average(Jan-Apr 2008) 7.7 -10 101 -120 10 19.3

Apr '07 J an '08 7.4 1,005 572 21 413 18.9 7.4 149 156 4 -11 18.9

Jobs Generated ('000)Agriculture Industry Services

Underemployment Rate (%)


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Profile of the Jobless 2.9 million are unemployed 6.6 million are underemployed; mostly inagriculture Of the unemployed: 50% are within ages 15-24 years; 80% are within15-34 years 59% reached only elementary or high schoolAteneo Center for Economic Research and Development


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Where Did The New Jobs Come From?J obs by Sector (T housands) Agri Agri, Hunting & For Fishery Industry MiningManufacturing Utilities Construction Services W&R T rade Hotels & Rest T rans-Stor-Comm Finance Real Est&Bus Act Public Adm Educ Health & SW Other Serv Priv HHEmp Intl Orgs New J obs Apr-07 583 438 112 26 5 -105 4 121 431 -17 -39 77 10 11946 -2 11 94 134 0 New J obs J ul-07 -221 -206 -49 195 5 2 35 154 434 24 42 78 20161 37 9 4 17 43 0 New Jobs Oct-07 -25 22 -47 172 2 44 2 125 335 -78 -20 137 5 7956 48 39 11 58 0 New Jobs Jan-08 -197 -227 -2 23 3 -42 33 29 99 -72 -126 4 74 4

-30 45 2 38 35 0 New J obs Apr-08 41 184 -108 -261 -34 -183 -1 -9 18 -99 63 21 3229 126 28 -2 -105 -75 0


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Production Performance:Services-Led GrowthIndicator GNP Growth (%) Net Factor Inc fr Abr GDP Growth (%) Agri, Fish &Forestry Industry Services 2006 FY 6.1 13.3 5.4 3.8 4.5 6.7 Q1f 7.3 11.3 7.0 4.06.6 8.4 Q2f 9.8 25.3 8.3 4.2 10.3 8.4 2007 Q3f 9.1 31.9 7.1 5.7 6.6 8.0 Q4f 6.00.6 6.4 5.7 4.9 7.8 FYf 8.0 16.5 7.2 4.9 7.1 8.1 2008 Q1 7.3 30.3 5.2 3.0 3.9 6.9

Ateneo Center for Economic

Research and Development


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Services Sector Performance:Real Estate & Finance Continue to 2006 Lead 2007 2008 SectorFY Q1f Q2f Q3f Q4f FYf Q1 SERVICE SECT OR T rans, Comm & Stor Transport & StorageCommunication T rade Finance Own Dwell & Real Est Real Estate Private ServicesGovernment Servcs 6.7 6.3 3.1 9.0 6.1 11.4 5.7 17.1 6.9 4.7 8.4 10.5 7.0 13.2 7.216.3 5.5 19.1 8.4 1.7 8.4 9.6 5.5 13.0 7.6 14.2 6.0 21.4 9.1 2.4 8.0 5.8 5.2 6.49.1 11.4 6.8 21.3 8.7 3.4 7.8 7.4 6.6 8.0 8.8 10.7 5.0 11.4 7.6 2.9 8.1 8.3 6.110.1 8.2 13.1 5.9 18.1 8.4 2.6 6.9 6.7 10.0 4.3 6.8 12.9 5.8 15.6 5.1 3.5




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Demand Side:Last Years Main Booster, Government Spending, Fizzles Out 2006 2007 2008IndicatorF Y Q1f 5.9 9.5 8.7 20.4 18.9 21.3 4.3 2.0 10.8 -1.8 Q2f 5.6 11.9 17.6 34.4 59.413.7 8.8 7.1 4.9 -10.5 Q3f 5.7 6.4 7.6 16.8 11.5 19.5 2.3 3.6 3.7 -5.0 Q4f 6.2 4.611.0 11.7 15.4 9.2 2.6 5.1 3.9 0.2 F Yf Q1 Personal Consn Exp Govt ConsumptionCapital F ormation Of which: Construction Public Private Durable Eqpt Br S tck &Orch Dev Exports Imports 5.5 6.1 2.7 5.5 24.7 -3.7 -1.8 -0.4 11.2 1.9 5.8 8.3 11.2

21.3 29.6 15.9 4.5 4.5 5.6 -4.5 5.1 -1.0 7.3 6.1 -9.5 15.1 8.2 -1.5 -11.1 -6.6




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ASEAN Investment Growth(2002-2006 Annual Growth Rates, %)19.720.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 - 2.0

18.1

11.1

7.5

4.2 3.1

4.7

0.0

0.2

RP

LAO

SIN

MAL

INDO

THA

VIET

CAM

MYA




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Foreign Direct InvestmentSharp Drop in 2008Annual Growth Rate (%)* 2007 2008 F oreign Direct Investments Equity CapitalReinvested Earnings Other Capital 175.9 44.3 -13.9 484.6 -43.5 -59.4 -7.7 -31.9

*Based on J an-Apr figures (Source: BS P)




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Foreign TradeSlowed in 2007; Drops in 200825.0 20.0

15.0

10.0

5.0

0.0 Q1-06 -5.0 Q2-06 Q3-06 Q4-06 F Y-06 Q1-07 Q2-07 Q3-07 Q4-07 F Y-07 Q1-08

-10.0

-15.0




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Government Finances, 2008Goodbye, Balanced Budget Jan-JunFiscal Variables Revenues T ax Non-T ax Expenditures Surplus (Deficit) Full YearTarget '08 (P billion) (P billion) (P billion) 87.56 80.36 7.21 86.80 0.77 0.00122.03 114.00 8.03 96.27 25.76 0.00 569.99 512.27 57.72 587.99 (18.00) 0.00 Jun'08 May '08




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How Does It All Feel From Below?




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Fact:Poverty incidence worsened from 2003 to 2006.Family Income & Expenditures Survey: Proportion of poor rose from 30% to 33% Number of poor Filipinos increased bynearly 4 million Poor families rose from 24.4% to 26.9% Number of poorfamilies increased by Ateneo Center for Economic Research and Development


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Fact:Average Filipino family income had gone down in recent years.Family Income & Expenditures Survey: Average annual family income fell from P148,000 in 2003 to P144,000 in 2006 (inconstant 2003 prices) First time FIES average real income fell More consistentwith tax revenue trends Middle & lower income groups took the hitAteneo Center for Economic Research and Development


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Self Rated Poverty:Rising again


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Hunger is on the rise anew


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and climbs steeply in Metro Manila


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Whats in store for the rest of 2008?Ateneo Center for Economic Research and Development


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Storm Winds US slowdown/recessionCredit crisis now beyond sub-prime housing loans (auto loans, credit cards) Consumption & investment slowdown IMF: GDP growth 0.8% (vs. 2.6% in 2007)

Global economic slowdownUS: 21% of Chinas exports IMF: Global growth to moderate to 4.1% in 2008 (from 4.9% in 2007); emerging markets to 6.9% from 7.8% Ateneo GlobalCenter for

Economic Research and Development food and oil price surge


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Storm WindsThe US Slowdown/Recession: The Plot Thickens Major automakers suffer 18% (GM), 21% (Toyota) & 28% (Ford) sales slump New unemployment claims top 380,000, a level associated with recession Starbucks announces >600 store closures and 12,000 job cuts Slow motion recessionAteneo Center for Economic Research and Development


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US Store ClosuresAnn Taylor Eddie Bauer Cache Lane Bryant Talbots, J. Jill Gap Inc. Foot Locker Wickes (furn) Levitz (furn) : : : : : : : : : 117 stores



27 stores 20-23 stores 150 stores 78+22 stores 85 stores 140 stores out ofbusiness out of business


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US Store ClosuresSprint Nextel : Wilsons : Sharper Image: Bombay Co. : Kaybee Toys : Dillards : Ethan Allen : JC Penneys : Ateneo Center for Economic

125 locations 158 stores 90 stores 384 stores 356 stores scaling back scaling backscaling backResearch and Development


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The US ContagionA 10% drop in US: GDP:

Merchandise Exports Services Exports FDI Remittances

RP% % % %

-0.70 -0.63 -0.04 -0.37

Total Impact 1.74 %Ateneo Center for Economic Research and Development

-


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10.0

15.0

20.0

25.0

0.0

5.0

Tax & Revenue Effort Dropped Anew

Ateneo Center for Economic Research and Development

Low Fuel

19 75 19 76 19 77 19 78 19 79 19 8 0 19 81 19 82 19 83 19 84 19 85 19 86 19 87 1988 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 0120 02 20 03 20 04 20 05 20 06 20 07


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Excess Baggage Governance WeaknessesTax Evasion Smuggling Massive Graft & Corruption Regulatory Capture

Political UncertaintyWeakened Institutions Leadership instability (Cabinet reshuffles; weak Presidency)Ateneo Center for Economic



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Domestic DriversSustained overseas remittances fuels consumption spending Agricultural supplyresponse to higher prices Rebounding private domestic investments (substantialannounced investment intentions for the year)Ateneo Center for Economic Research and Development


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Domestic DragsRapid price increases slower consumption spending Weaker tax revenues

slower government spending

Rising interest ratesDampened investment, consumption

Record high oil prices

higher production, transport costs shifts in consumption patternsAteneo Center for Economic Research and Development


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Oil Price Outlook:Optimistic ViewPrice bubble will eventually burst Fundamentals have not changed as drastically as prices have Dollar weakness &commodity markets Overreaction (i.e., overbuying) by market players Globaleconomic slowdown will weaken demand, pull down pricesAteneo Center for Economic Research and Development


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Oil Price Outlook:Pessimistic View to stay High oil prices are here Rising supplies unable to match surging demands, especially from developingeconomies (e.g. China & India) Resource prices generally up because ofunrelenting global growth (no recession in the last 16 years) This is the morepopular view; prudence is better than Ateneo Center for complacency EconomicResearch and Development


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Food Prices Outlook(UN-FAO) Prices expected to ease worldwide with coming harvest; however Prices notlikely to return to former low levels due to:Escalating input costs (oil-related) Increased utilization by producers,diminished exportable surpluses Rising demands by fast-growing food-importingcountries Development Ateneo Center for Economic Research and


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Outlook for 2008:A Very Different Year Growth in 2007 surprised allPartly a measurement issue Entirely due to government stimulus

2008 a challenging year:Global and US slowdown Faltering revenue performance Rising interest rates Private Investment growth unable to offset the drags

Ateneo Center for Economic Research and Development


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Ateneo Macroeconomic Forecasting Model (AMFM) 2008 Projections from EconometricModel

GDP Growth - 4.55.3% Inflation - 9.010.0% Unemployment - 7.58.5% Assumes: ExchangeRate - P44-45Ateneo Center for Economic Research and Development


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Currency MovementsWeak $ no longer the main driver




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Sectoral GainersGainers:Services: Finance (Banks & Insurance), Real Estate, Transport (Water and Air)Agriculture: Bananas, Corn, Forestry Industry: Mining, Utilities (Electricity)

Slowdown:Communication, Business servicesAteneo Center for Economic Research and Development


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Sectoral LosersNegative Growth:

Agriculture: Livestock, Other Crops Manufacturing: Wood & cork prods,Publishing/ printing, Electrical machinery, Textiles Rubber prods, Chemicalprods, Basic metal industries, Paper prodsAteneo Center for Economic Research and Development


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Sectoral Outlook: Near TermSlowdown:Motor vehicles, Consumer durables Electronics, Apparel, Recreation Finance(Banks, Insurance) Real estate, Power, Transport

Neutral:Food Mfg, Business Svcs (incl BPOs)

Gainers:Agriculture, MiningAteneo Center for Economic Research and Development


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Sectoral Drivers & Imperatives

Agriculture: stronger LGU roles; supply chain management Tourism: properpolicy environment (open skies) Construction: durable govt revenues Mining:social & environmental responsibility, confidence building Real Estate, BPOs:vulnerable to US & global slowdownAteneo Center for Economic Research and Development


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Overall Imperatives Moderate the greed (on both revenue and expenditure sides) Deliberatelypursue broad-based, inclusive growth (agriculture, SMEs)

Its the governance, stupid:Restore public trust in government Restore investor confidence Restore ourfaith in our future!Ateneo Center for Economic Research and Development


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E-mail: [email protected] Center for Economic Research and Development


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4969977 Inquirer Briefing by Cielito Habito

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