Philippine Economic Performance & Outlook · Philippine Economic Performance & Outlook Eagle Watch...
Transcript of Philippine Economic Performance & Outlook · Philippine Economic Performance & Outlook Eagle Watch...
ATENEO CENTER FOR
ECONOMIC
RESEARCH AND
DEVELOPMENT
Philippine Economic Performance &
Outlook
Eagle Watch Economic BriefingAteneo Rockwell, Makati City
25 January 2018
Cielito F. HabitoProfessor of EconomicsAteneo de Manila University
Storyline1. The economic momentum continues.
2. Investment, trade and manufacturing sustain a 7-year surge.
3. There’s less trabaho, but more negosyo.
4. Government spending (esp infra) is crucial.
5. MSMEs are key to our inclusive growth.
6. There are risks & challenges we must address.
7. PH is poised to grow faster and stronger.
1. The economic momentum continues.Dynamism and stability remain, unlike in past post-election years.
PiTiK Test in 7
Presyo: Inflation well within target (2017: 3.2%)
Trabaho: Less trabaho, more negosyo (Oct 7 Unemp Rate: 5.0%)
Kita: 2017 GDP growth of 6.7% (Among Asia s fastest)
Presyo, 2017
Inflation Trends
9.3%
3.2%3.8%
4.4%
3.2%2.9%
4.2%
Malaysia – 3.8% Indonesia – 3.8%
Vietnam – 3.5%
1.4% 1.8%
3.2%
Jobs Decline TapersBut Quality Improving
Trabaho, 2017
Kita, 2017
PH: Among the fastest GDP Growth Rates in Asia
Graphic: NEDA
Kita, 2017
Industry: Strong DriverAgriculture Reverses Last Year s Decline
Graphic: NEDA
Graphic: NEDA
Kita, 2017
Demand Side: Internal & External Boost
The Growth Momentum is Sustained
Graphic: NEDA
2. Investment, trade & manufacturing sustain a 7-year surge.Growth shift began in 2010.
1.8
-1.8
6.2
12.0
15.8
10.5
-5.0 0.0 5.0 10.0 15.0 20.0
2010-2017
2004-2009
Source: PSA
Investment Spending: A 7-Year Roll
Private Construction
Durable Equipment
Fixed Investment
Growth Rate (%)
PH exports to ASEAN zoomed with AFTA.
0 100 200 300
Mineralfuels,oils,distillation
Essentialoils,perfumes,
Cereal,flour,starch,milk
Miscellaneouschemicalproducts
Ediblefruit,nuts,peelofcitrus
Vegetable,fruit,nutetc.food
Miscellaneousedible
Tanning,dyeingextracts,
US$Millions
PHExportstoMalaysia,2003vs.2013
2013level
2003level
0 50 100 150
Machinery,nuclearreactors,boilers,etc.
Optical,photo,technical,medical,
etc.apparatus
Mineralfuels,oils,distillationproducts,etc.
Animal,vegetablefatsandoils,cleavageproducts,etc.
Furniture,lighting,signs,
prefabricatedbuildings
Soaps,lubricants,waxes,candles,modellingpastes
US$Millions
PHExportstoIndonesia,2003vs.2013
2013level
2003level
0 2 4 6 8 10
Organicchemicals
Ediblefruit,nuts,peelofcitrusfruit,melons
Cereal,flour,starch,milkpreparationsandproducts
Articlesofironandsteel
Soaps,lubricants,waxes,candles,modellingpastes
Vegetable,fruit,nut,etc.foodpreparations
Ores,slagandash
US$Millions
PHExportstoVietNam,2003vs.2013
2013level
2003level
THAILAND MALAYSIA
VIETNAMINDONESIA
Trade has resumed growthExport growth nearly doubled (and
goods exports are back on top)Goods exports now growing faster again
Manufacturing ResurgenceGrowing faster than overall economy
Manufacturing, 2017:
Winners• Fab. Metal Prods. (50.3%)
• Basic Metal Prods (23.5%)
• Non-met Minerals (21.6%)
• Furniture & Fixtures (20.4%)
• Office Equipment (16.5%)
• Petroleum/Fuel (12.5%)
• Transport Equipt (12.4%)
• Radio/TV/Comm Eqpt (12.1%)
• Footwear/Leather• Chemical Products
• Misc Manufactures
Losers• Textiles (-19.7%)• Tobacco Mfg• Wearing Apparel
• Electrical Machinery • Wood Etc Prods• Food Manufactures• Paper/Paper Prods• Publishing/Printing
• Non-elec Machinery• Rubber & Plastic Prods• Beverages
.
. There s less trabaho, but more negosyo.
Job quality is improving.
Job Quantity Lower, But Job Quality Better
• Total no. of jobs dropped by 134,000 (but reduction is tapering off)
• 1M Filipinos enter working age (15 years) every year
• Even so, unemployment rate fell from July to Oct due to lower LFPR (most still in school due to K+12)
• Wage & salary workers continue to rise (due to manufacturing surge); underemployment now < 16%
• Entrepreneurs (self-employed who employ others in a business) have risen
Unemployment rate falls, even as jobs decline (but tapering)
Underemployment on downtrend?Hundreds of
thousands of new jobs generated in
industryUnderemployment continues decline
Wage Employment, Entrepreneurship are expanding
4. Government spending (especially in infra) is crucial.Growth driver in 2017, especially Q4
Government spending was a key growth driver in Q4…
…and will be the prominent growth driver in the years ahead
• Direct employment and multiplier effect
• Attraction for long-term private investment
5. MSMEs are key to our inclusive growth.Major economic agenda in our ASEAN Chairmanship.
MSMEs Contribution to GDP (%)
MSMEs Employment Contribution (%)
MSME Development:Starved of Financing
PH SME bank financing is pathetically low, compared to
our neighbors
7 M s of MSME Development1. Mindset – government, banks, and
entrepreneurs themselves
2. Mastery – business & financial management
3. Mentoring – DTI Roving Academy, DBFTA; NGOs
4. Money – financial inclusion (LBP, DBP refocus)
5. Machines – SETUP, SSFs, financing programs
6. Markets – infra, clustering, e-commerce, TF
7. Models – inclusive value chains vs. vertical integration
ASEAN More MSME-friendly regional environment
PH AEC 2025 GameplanInternationalizing MSMEs
6. There are risks and challenges we must address.Both external and internal issues
Medium Term Downside Risks
• Implementation shortcomings (BBB)
• Political distractions and weakened institutions
• Slowing remittances and BPO sector growth
• Inflationary pressures from self-fulfilling (exaggerated) expectations
• Loss of momentum in completing the tax reform program
• Trade slowdown due to TPP exclusion
1996 2006 2016
Metro Manila
Metro Manila + Central Luzon + CALABARZON
Luzon
Persistent Challenge:We re even more Manila- & Luzon-centric now
SHARE OF GDP
Persistent Challenges• Falling farther behind in exports, and still
lagging in FDI
• Weakness in agriculture & agribusiness
• Fiscal pressures from hiked public investments, downscaled PPP, and populist policies (free tuition, irrigation)
• Non-passage of Basic Bangsamoro Law and lack of lasting peace in Mindanao
• Inferior telecommunications quality and Internet speed
External Risks (IMF)
Graphic: IMF
7. PH is poised to grow faster and stronger.But we must do the homework right
IMF World Economic Outlook Global economy is expected to pick up in
2018-2019 (3.9% GDP growth)
Graphic: IMF
PH will do better!
Short Term Outlook (2018)
Inflation Rate: 3.0-4.0%
Jobs: Employment Rate of 94-95% (Unemployment Rate 5-6%)
GDP Growth: 6.5-7.5%, with downside risks
Exchange Rate: P50-52/$1
The Way Forward
For sustained growth:
Build, build, build implementation
Ease trade and investment restrictions; negotiate more trade deals
Regulatory reform
For inclusive development:
Concerted MSME promotion and support
Inclusive value chains (vs. vertical integration)
Strong competition policy enforcement
Investments in human development & social protection
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