Report on Economic and Financial Developments · The Philippines’ CDS traded lower than...

First Quarter 2017

B A N G K O S E N T R A L N G P I L I P I N A S

Report on Economic and Financial Developments

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Report on Economic and Financial Developments First Quarter 2017

Table of Contents

Executive Summary 1

Introduction 4 Real Sector

Aggregate Supply and Demand 5 Labor and Employment 7

Fiscal Sector National Government Cash Operations 8 Monetary Sector Prices 9 Domestic Liquidity 10 Monetary Policy Developments 11 Domestic Interest Rates 12 Financial Sector Banking System 13 Banking Policies 16 Capital Market Reforms 16

Stock Market 16 Bond Market 18 Credit Risk Assessment 19 Payments and Settlements System 21 External Sector Balance of Payments 21 International Reserves 25 Exchange Rate 25 External Debt 27 Foreign Interest Rates 28 Global Economic Developments 30 Financial Condition of the BSP Balance Sheet 32 Income Statement 33 Conclusion, Challenges and Future Policy Directions 33 Annexes Statistical Tables

First Quarter 2017 Report on Economic and Financial Developments | 1

Executive Summary The Philippine economy continues to grow, although at a slower pace in Q1 2017. The economy continued to expand as real gross domestic product (GDP) grew by 6.4 percent in Q1 2017. While this growth was lower than the year-ago and quarter-ago growth rates of 6.9 percent and 6.6 percent, respectively, it is still considered a strong performance given the high base effect coming from the significant rise in spending ahead of the 2016 national election. Growth remained broad-based. On the supply side, the agriculture sector rebounded alongside continued expansion in the services and industry sectors. On the demand side, household spending and capital formation remained the key drivers of growth although both grew at a slower pace compared to previous quarters. This was compensated in part by the strong performance of exports which posted gains amid improving external demand. Overall, the strong and broad-based Q1 2017 GDP growth print serves as a good foundation to achieve the growth target for the year of 6.5 percent to 7.5 percent. Labor market conditions are softening. Preliminary estimates of the latest Labor Force Survey conducted in January 2017 suggested an easing in the country’s labor and employment conditions. In January 2017, the number of employed persons reached 39.3 million, 1.8 percent lower than the 40.1 million in the previous year. The number of jobless persons grew by 11.9 percent to 2.8 million from 2.5 million in the previous year, bringing the unemployment rate to 6.6 percent from 5.7 percent a year ago. Meanwhile, the underemployment rate dropped to 16.3 percent from 19.7 percent. National Government (NG) yields a lower deficit. The cash operations of the NG yielded a deficit of P83.0 billion in Q1 2017. This was equivalent to 2.3 percent of GDP, lower than the year-ago ratio of

3.4 percent. At the current deficit level, total revenue growth has overtaken total expenditure growth. Total revenues for Q1 2017 reached 14.9 percent of GDP, higher than the 14.6 percent ratio from a year-ago, aided by improved tax collections. Meanwhile, total government disbursements stood at 17.2 percent of GDP, lower than the year-ago ratio of 18.1 percent. Disbursements continued to be driven by allotment to local government units as well as infrastructure and other capital outlays. Inflation increases. Headline inflation climbed to 3.2 percent in Q1 2017 from the quarter- and year-ago rates of 2.5 percent and 1.1 percent, respectively. Nonetheless, inflation remained within the NG’s announced target range of 3.0 percent ± 1.0 ppt for 2017. The higher headline inflation during the review quarter was due to an increase in both food and non-food inflation. Similarly, core inflation, which excludes certain volatile food and energy items to measure generalized price pressures, increased to 2.7 percent in Q1 2017, higher than 2.5 percent in the previous quarter. Domestic liquidity remains ample. Money supply grew by 11.6 percent y-o-y as of end-March 2017 to P9.5 trillion, slower than the 12.8-percent expansion as of end-December 2016. The increase in M3 was driven largely by the 16.4-percent y-o-y growth in domestic claims or credits to the economy during the same period. Credits extended to the private sector grew by 18.3 percent, supported by the sustained increase in bank lending. The BSP maintains monetary policy settings in Q1 2017. The BSP decided to keep the key policy interest rate at 3.0 percent for the overnight reverse repurchase or RRP facility. The corresponding interest rates on the overnight lending and deposit

2 | First Quarter 2017 Report on Economic and Financial Developments

facilities were also kept steady. The reserve requirement ratios were likewise left unchanged. Domestic interest rates are generally higher. Primary market interest rates in Q1 2017 rose across all tenors due to heightened uncertainty in the direction of US fiscal and monetary policies as well as political developments in the Eurozone. Similarly, the secondary market yields of actively traded government securities (GS) generally increased as of end-March 2017 relative to yields as of end-December 2016. Meanwhile, other market interest rates showed mixed trends. The interbank call loans and time deposit rates were higher in Q1 2017 while savings deposit and lending rates were lower. Philippine banks remain sound and resilient. The total resources of the banking system grew by 12.6 percent to P14.1 trillion as of end-March 2017 from P12.5 trillion in the same period in 2016. Bank lending by universal and commercial banks (U/KBs), net of banks' RRP placements with the BSP, grew by 20.2 percent as of end March 2017 from the same period in 2016, of which 88.6 percent went to production activities. The Philippine banking system’s gross non-performing loan ratio (NPL) improved to 2.0 percent relative to the previous year’s ratio of 2.2 percent, as its non-performing loan coverage reached 115.2 percent as of end-March 2017. Similarly, capital adequacy ratios as of end-September 2016 stood at 15.4 percent and 16.2 percent on solo and consolidated bases, respectively, and remained well above the 10.0-percent regulatory threshold of the BSP and 8.0-percent minimum by international standards. Local stocks trend upward. In the first three months of 2017, the Philippine Stock Exchange index (PSEi) rose by 1.9 percent, quarter-on-quarter (q-o-q), to average 7,258.3 index points. Expectations of the continued robust growth of the Philippine economy and optimism over the promised tax cuts and additional spending of newly-inaugurated US President Donald Trump to lift the US economy boosted investor sentiments and raised the PSEi above the 7,300 level during the period-in- review. However, the uptick was partly tempered by issues affecting the local mining industry and heightened

expectations of continued US Fed rate hikes since December.

Debt spreads narrow. As of end-March, the Philippines’ 5-year sovereign credit default swaps (CDS) stood at 82 basis points (bps), lower than the 111 bps in end-December 2016. Debt spreads narrowed in January and February due to the upbeat growth momentum that propelled investors to sustain their positive sentiment. In March, debt spreads continued to narrow amidst positive global developments such as the announcement of the European Central Bank (ECB) to keep the massive monetary stimulus in the region. The Philippines’ CDS traded lower than Indonesia’s 128 bps and Malaysia’s 108 bps. Likewise, the EMBIG Philippines ended the quarter narrower at 98 bps when compared to the previous quarter’s closing of 110 bps. The BOP position registers higher deficit. The country’s balance of payments position yielded a deficit of US$994 million in Q1 2017, higher than the US$210 million deficit recorded in Q1 2016. The negative overall BOP position was a result of the deficit in the current account and net outflows (or net lending by residents to the rest of the world) in the financial account. The current account reversed to a deficit of US$318 million in Q1 2017 from a US$730 million surplus in Q1 2016, as the trade-in-goods deficit continued to widen. Meanwhile, the financial account registered lower net outflows of US$579 million mainly on account of the turnaround from net outflows to net inflows in other investment account, along with increased net inflows in direct investments and financial derivatives. This positive outcome partly offset the higher net outflows in the portfolio investment account. Gross international reserves continue to be ample. The country’s gross international reserves (GIR) settled at US$80.9 billion as of end-March 2017, slightly higher than the US$80.7 billion recorded in end-December 2016. The GIR remains adequate as it can cover 8.9 months worth of imports of goods and payments of services and income. It is also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity. The increase in reserves was due mainly to the inflows arising from the BSP’s


investment income and revaluation adjustments on its gold holdings. These were partially offset by the foreign exchange operations of the BSP and payments made by the NG for its maturing foreign exchange obligations.

External debt remains manageable. The country’s outstanding Philippine external debt stood at US$73.8 billion as of end-March 2017, reflecting a decline of US$958 million (or 1.3 percent) from the US$74.8 billion end-December 2016 level. Meanwhile, on a year-on-year (y-o-y) basis, the debt stock likewise dropped by US$3.8 billion from the US$77.6 billion level in March 2016 due to net principal repayments by both the public and private sectors (US$2.1 billion); previous periods’ audit adjustments (negative US$1.5 billion) due to late reporting; and negative FX revaluation adjustments (US$383 million). The full downward impact of these factors on the debt stock was slightly offset by a modest increase in non-residents’ investments in Philippine debt papers issued offshore (US$126 million) during the period. The maturity profile of the country’s external debt was comprised mostly of medium- and long-term obligations implying that foreign exchange (FX) requirements for debt servicing remain manageable.

The peso depreciates further in Q1 2017. On a q-o-q basis, the peso depreciated by 1.79 percent to average ₱50.00/US$1 in Q1 2017 from the previous quarter’s average of ₱49.11/US$1. Likewise, on a y-o-y basis, the peso depreciated by 5.45 percent relative to the ₱47.28/US$1 average in Q1 2016. The weakening of the peso during the review quarter was due mainly to the US Fed rate hike in March 2017, expectation for further rate increases in 2017, and strong US dollar requirement by local corporates. Global growth gains momentum. Global economic activity gained momentum in Q1 2017. Although economic performance has remained mixed in some emerging economies, solid growth in most advanced economies (AEs) has been attributable to the continued recovery of manufacturing output and consumer confidence. Economic activity picked up in the US economy, resulting in an annual growth of 1.9 percent in Q1 2017 due to positive contributions from non-residential fixed investment, exports,

residential fixed investments, and personal consumption expenditure. Eurozone economic activity advanced by 1.7 percent in Q1 2017, unchanged from the previous quarter while Japan registered a 1.6 percent expansion. Meanwhile, most emerging economies in Asia recorded stronger output growth. China grew by 6.9 percent while South Korea and Singapore’s economy both registered a 2.7 percent growth for Q1 2017. In the ASEAN-5 region, growth showed mixed trends.


Introduction

The Philippine economy continued to expand in Q1 2017, registering a growth of 6.4 percent. On the supply side, services and industry sectors continued to drive growth with the agriculture sector making a positive contribution. On the demand side, household spending and capital formation remained the key drivers of growth with exports recording double-digit growth amid improving external demand. The sustained strength of the economy was accompanied by an increase in inflation to 3.2 percent during the review quarter. The average headline inflation for the first quarter of 2017 is within the NG’s announced target range of 3.0 percent ± 1.0 ppt for 2017. The Philippine banking system remained solid and resilient in Q1 2017. Bank lending continued to expand, increasing by 20.2 percent during the review quarter. This was accompanied by improvements in bank capitalization and loan exposure coverage. In terms of external payments position, the country’s external buffers continued to grow, with reserves amounting to US$80.9 billion as of end-March 2017. Remittances and receipts from business process outsourcing continued to support the country’s external position. At the same time, external debt remains manageable, with a debt profile composed largely of medium- to long-term (MLT) maturities.

Monetary policy settings were kept steady in Q1 2017. The BSP’s decision to maintain key policy interest rates was based on its assessment that the inflation environment remained manageable. Moreover, the continued expansion in domestic liquidity, which grew by 11.6 percent as of end-March 2017, point to monetary conditions being supportive of economic activity. Going forward, the Philippine economy faces uncertainty and challenges coming mainly from the external environment. However, the country’s solid macroeconomic fundamentals as well as the adequate space for policy levers to pursue appropriate and timely response to possible shocks are expected to provide impetus for a sustained economic growth.


Real Sector Aggregate Supply and Demand The Philippine economy continued to expand as real Gross Domestic Product (GDP) grew by 6.4 percent in Q1 2017. While this growth was lower than the year-ago and quarter-ago growth rates of 6.9 percent and 6.6 percent, respectively, it is still considered a strong performance given the high base effect amid significant rise in spending due to the 2016 national election.

Real GDP continues to grow, although at a slower pace Growth remained broad-based. On the supply side, the agriculture sector rebounded alongside continued expansion in the services and industry sectors (Table 1). On the demand side, household spending and capital formation remained the key drivers of growth although both grew at a slower pace compared to previous quarters (Table 1a). These were compensated in part by the strong performance of exports which posted gains amid improving external demand. Overall, the strong and broad-based Q1 2017 GDP growth print serves as a good foundation to achieve the growth target for the year of 6.5 percent to 7.5 percent. Chart 1. Gross Domestic Product and Gross National Income Annual growth rate in percent; at constant 2000 prices

GDP by industry Sectoral breakdown of Q1 2017 real GDP growth by industrial origin showed that services sector continued to fuel growth as it expanded by 6.8 percent and accounted for more than half of the Q1 2017 GDP growth at 3.8 percentage points (ppts). This was helped by the strong showing of the following sub-sectors: trade and repair of motor vehicles, motorcycles, personal and household goods which expanded by 7.1 percent and contributed 1.1 ppts to the growth of the services sector during the quarter; real estate, renting and business activities which expanded by 6.9 percent and contributed 0.8 ppt, and financial intermediation, which expanded by 7.4 percent and contributed 0.6 ppt during the review quarter. The services sector continued to benefit from the favorable inflation environment, sound and stable financial system, as well as sustained receipts from overseas Filipinos (OFs) and business process outsourcing (BPO) activities. Chart 2. Gross Domestic Product, by Industry Annual growth rate in percent; at constant 2000 prices

The industry sector also provided strong support to the Q1 2017 growth as it expanded by 6.1 percent and contributed 2.1 ppts of the aggregate growth during the quarter. However, the Q1 2017 growth of the industry sector, which was the lowest since Q2 2015, was moderated by the following: deceleration in construction activities, which grew by 8.2 percent from an average of 13.9 percent in the past four quarters of 2016; slower performance of the utilities sub-sector which grew by 1.4 percent from an average of 9.8 percent in the preceding four quarters; and a contraction in the mining and

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6.0

8.0

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017

Real GDP Real GNI

Source: Philippine Statistics Authority (PSA)

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0.0

5.0

10.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017

Agriculture, Hunting, Forestry and FishingIndustryServices

Source: PSA


quarrying sub-sector by 20.0 percent, a reversal from the 11.4 percent growth in Q1 2016 and a 10.8 percent growth in Q4 2016. Meanwhile, the manufacturing sub-sector continued to be a pillar of strength as it expanded by 7.5 percent and contributed 1.8 ppts of the 2.1 ppts contribution of the industrial sector to the Q1 2017 GDP growth. The agriculture, hunting, forestry, and fishing (AHFF) sector recovered from its year-ago and quarter-ago contraction of 4.3 percent and 1.3 percent, respectively, as it posted a 4.9 percent growth in Q1 2017. This enabled the sector to contribute 0.4 ppt to the 6.4 percent GDP growth in Q1 2017. Notably, this is the highest contribution made by the AHFF sector in the past eight consecutive quarters or since Q1 2015. The solid rebound of the sector may be attributed partly to relatively favorable weather conditions during the first quarter of the year and a low base effect from the previous year’s decline. Palay and corn harvests, two of the major crops in the country, have picked up to post double-digit growth rates of 12.4 percent and 23.4 percent, following contractions in Q1, Q2, and Q4 2016. The fisheries subsector likewise benefited from good weather conditions and the end of the prolonged dry spell that hit the country during the same period last year. Accordingly, the productivity of the fisheries sub-sector also improved in Q1 2017 as it posted a 0.7 percent growth during the review quarter, following five consecutive quarters of contraction. GDP by expenditure On the demand side, apart from the usual growth drivers – household spending and capital formation – the Q1 2017 GDP output was buttressed by the marked improvement of the exports sector. Household consumption posted a 5.7 percent growth in Q1 2017, a deceleration from its year-ago and quarter-ago growth of 7.1 percent and 6.2 percent, respectively. This was on the back of the relatively slower purchases of major consumption items such as transport which posted a 5.0 percent growth in Q1 2017, lower than the 12.0 percent average growth rate of the sub-sector in the preceding three quarters and 6.9 percent growth in Q1 2016; recreation and culture (-2.0 percent from 8.8 percent in Q1 2016); housing and utilities (6.6 percent from

10.5 percent); and furnishings and household maintenance (1.8 percent from 6.9 percent). Despite the slowdown, household consumption continued to account for 4.0 ppts of the Q1 2017 real GDP growth. Capital formation similarly moderated as it registered a 7.9 percent growth during the review quarter, the lowest since Q1 2015. This was attributed to the slump in public construction which grew by 2.0 percent from 38.5 percent in Q1 2016 and 19.2 percent in Q4 2016 on the back of transition-related adjustments and reorientation of programs in line with the priorities of the new administration.11 Nonetheless, capital formation contributed 2.4 ppts to the Q1 2017 GDP outturn. Meanwhile, the exports sector made a remarkable comeback after recording a 20.3 percent growth in Q1 2017, about twice its year-ago and quarter-ago growth performance of 10.2 percent and 13.4 percent. This could be attributed to improving external demand and continued government support for the export sector. Chart 3. Gross Domestic Product, by Expenditure Annual growth rate in percent; at constant 2000 prices

Overall, the performance of the domestic economy continues to paint a picture of strength and resilience in the first quarter of the year. Growth somewhat moderated as expected given the high base effect following an election year. Nonetheless, the underlying growth momentum remains intact with broad sources of growth. The rebound in both the agriculture and exports sectors should augur well for the economy as these sectors have weighed down

11 Source: “Statement of Socioeconomic Planning Secretary on the

2017 Q1 Performance of the Philippine Economy,” National Economic and Development Authority (NEDA) Press Release, 18 May 2017, accessible online at http://www.neda.gov.ph/ 2017/05/18/statement-of-socioeconomic-planning-secretary-on-the-2017-q1-performance-of-the-philippine-economy/.

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10.015.020.025.030.035.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017

Household Final Consumption ExpenditureGovernment Final Consumption ExpenditureCapital Formation

Source: PSA


the real sector in previous quarters. Moreover, the implementation of the planned massive infrastructure program of the government is expected to further provide a boost to the domestic economy and generate optimism in the achievement of the government’s growth targets.

Labor and Employment The preliminary results of the latest Labor Force Survey (LFS) conducted in January 201712 suggested an easing in the country’s labor and employment conditions. In January 2017, the number of employed persons reached 39.3 million, 1.8 percent lower than the 40.1 million in the previous year (Table 2).

Labor market conditions register a slowdown Among the three employment sectors, only the industry sector recorded an increase in the number of employed persons, driven mainly by the additional 171,000 workers in the construction sub-sector. Meanwhile, the agriculture sector incurred employment losses of 786,000 workers due to the onslaught of typhoons Nina and Auring last December 2016 and January 2017, respectively.13 The number of employed persons in the services sector also decreased due to the employment losses in sub-sectors such as education (159,000 workers), accommodation and food services activities (111,000 workers) and the arts, entertainment and recreation sub-sector (102,000 workers). Of the total employed persons, 57.1 percent were in the services sector, 25.5 percent in the agriculture sector, and 17.4 percent in the industry sector. Employment in most classes of workers declined in January 2017. The number of wage and salary workers decreased by 2.4 percent or 596,000 workers compared to the year-ago level with the bulk

12 January 2017 LFS released on 14 March 2017 includes Leyte. 13Press Release of the National Economic Development Authority, retrieved from http://www.neda.gov.ph/2017/03/14/agri-sector-loss-leads-to-employment-decline-in-january-2017/

of employment losses in those who worked for private households. On the other hand, self-employed workers increased by 3.6 percent or 369,000 workers. In terms of employment, those who worked on a part-time basis rose by 4.9 percent or 622,500 workers while those who worked full-time dropped by 5.4 percent or 1.5 million workers. Meanwhile in January 2017, the number of jobless persons grew by 11.9 percent to 2.8 million from 2.5 million in the previous year, bringing the unemployment rate to 6.6 percent from 5.7 percent a year ago. Most of the unemployed persons were male (69.6 percent or 1.9 million), 15-24 years of age (44.1 percent or 1.2 million), and high school graduates (or 31.1 percent 858,000). During the reference period, the underemployment14 rate dropped to 16.3 percent from 19.7 percent. Chart 4. Unemployment and Underemployment Rates In percent

The labor force participation rate15 in January 2017 was at 60.7 percent, lower than previous year’s 63.6 percent, due to the faster growth of the population 15 years old and above compared to the growth in the number of persons in the labor force.

14 Underemployment covers all employed persons who desire to have additional hours of work or additional job, or have a new job with longer working hours. During the reference period, the underemployed persons are those who work for less than 40 hours. 15 Labor Force Participation Rate is computed by dividing the total number of persons in the labor force by the total population 15 years old and above.

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2014 2015 2016 2017

Unemployment Rate (LHS)

Underemployment Rate (RHS)

Source: Labor Force Survey (LFS) - PSA


Based on the PSA’s Labor Turnover Survey (LTS)16 for Q4 2016, the labor turnover rate17 in the National Capital Region (NCR) rose to 3.4 percent, which is significantly higher than the 0.6 percent recorded a quarter ago. The accession rate of 11.1 percent exceeded the total separation rate of 7.8 percent, i.e., additional 111 workers per 1,000 were newly hired to the enterprise workforce due to expansion or replacement; while 78 workers per 1,000 were separated from their jobs. All the major sectors posted employment gains in Q4 2016. Due to business expansion, high accession rates were recorded in the wholesale and retail trade, repair of motor vehicles and motorcycles (12.6 percent) and administrative and support service activities (12.5 percent) sub-sectors. High accession rates due to replacement of separated workers were recorded in the accommodation and food service activities sub-sector (9.5 percent). Meanwhile, the highest separation rate was recorded in the mining and quarrying sub-sector (14.8 percent).

Fiscal Sector

National Government Cash Operations The cash operations of the NG yielded a deficit of P83.0 billion in Q1 2017. This was equivalent to 2.3 percent of GDP, lower than the year-ago ratio of 3.4 percent (Table 3).

NG cash operations yield a lower deficit Total revenues for Q1 2017 reached P532.4 billion, higher than the year-ago level of P479.0 billion. Total revenues as a share of GDP was recorded at

16 The LTS aims to capture the quarterly “job creations” and “job displacements” in business enterprises in Metro Manila. The Q4 2016 LTS was released in April 2017. 17 Labor turnover rate is the percent difference between accession rate and separation rate.

14.9 percent in Q1 2017, slightly higher than the previous year’s 14.6 percent. The y-o-y increase in revenues was due mainly to improved collections by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). Tax collections, which constituted 90.1 percent of total revenues, amounted to P479.6 billion, 12.8 percent higher than the year-ago level. Non-tax revenues, which consisted mainly of collections made by the Bureau of the Treasury (BTr), decreased by 1.5 percent y-o-y. Meanwhile, total expenditures in Q1 2017 reached P615.4 billion, 4.0 percent higher than the P591.5 billion expenditures in Q1 2016. The y-o-y increase in expenditures can be attributed mainly to increased allotment to local government units (LGUs) as well as infrastructure and capital outlays18 during the quarter. Total government expenditures stood at 17.2 percent of GDP, lower than the year-ago ratio of 18.1 percent. Chart 5. Cash Operations of the National Government In billion pesos

Netting out the interest payments from total expenditures, the resulting primary balance amounted to P14.9 billion, representing 0.4 percent of GDP in the review quarter. The NG made net availments in Q1 2017 amounting to P87.4 billion, an increase from the P86.3 billion made in Q1 2016. The net availments came mainly from domestic borrowings.

18 Personnel services and subsidy also recorded significant increases during the review period.

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2014 2015 2016 2017

Revenues Expenditures Surplus/Deficit (-)

Source: Bureau of the Treasury


Fiscal discipline has generated sufficient fiscal space which can be allocated to accelerate infrastructure development. The need to address infrastructure gaps is a top priority for the country to increase productive capacity and competitiveness. The government plans to pursue massive buildup in infrastructure and increase infrastructure spending, amounting to 5.3 percent of GDP in 2017.

Monetary Sector

Prices Headline Inflation. Headline inflation climbed to 3.2 percent in Q1 2017 compared to quarter- and year-ago rates of 2.5 percent and 1.1 percent (Table 4), respectively. Nonetheless, inflation remains within the NG’s announced target range of 3.0 percent ± 1.0 ppt for 2017.

Inflation rate rises given higher prices of food, oil, and electricity rates

Core Inflation. Likewise, core inflation, which excludes certain volatile food and energy items to measure generalized price pressures, increased to 2.7 percent in Q1 2017, higher than 2.5 percent in the previous quarter and 1.6 percent a year ago. Meanwhile, two out of the three alternative measures of core inflation estimated by the BSP increased in Q1 2017 compared to the rates registered in the previous quarter. In particular, the trimmed mean and net of volatile items measures were both higher at 2.2 percent. Meanwhile, the weighted median measure remained the same at 1.9 percent relative to the previous quarter’s rate.

Table A. Alternative Core Inflation Measures Quarterly averages of year-on-year change

Food inflation rose to 4.0 percent in Q1 2017 on higher prices of major commodity items like meat, fish, oils and fats, as well as milk, cheese, and eggs. Similarly, rice prices also went up partly due to lower supply coming from major rice-producing regions with the end of the main harvest season. Inflation rates of fruit, vegetables, and sugar remained elevated during the quarter, albeit posting lower inflation readings compared to the previous quarter. Non-food inflation also accelerated to 2.4 percent from 1.5 percent in Q4 2016 and 0.5 percent in Q1 2016. This could be attributed to higher international crude oil prices, which were reflected in higher inflation outturns for oil-related CPI items namely, transport services, gas, and other fuels. Inflation for transport services rose during the quarter due to approved fare hikes in February 2017,

influenced by upward adjustments in domestic prices of petroleum products during the quarter. At the same time, electricity rates went up as a result of the maintenance shutdown of the Malampaya facility.

QuarterOfficial

Headline Inflation

Official Core Inflation

Trimmed Mean 1

Weighted Median 2

Net of Volatile Items 3

2014 4.1 3.0 3.5 2.9 2.6Q1 4.1 3.0 3.3 2.6 2.8Q2 4.4 3.0 3.6 3.2 2.6Q3 4.7 3.3 3.8 3.1 2.8Q4 3.6 2.7 3.3 2.7 2.4

2015 1.4 2.1 1.9 1.9 1.8Q1 2.5 2.5 3.0 3.0 2.3Q2 1.7 2.2 2.1 2.2 1.9Q3 0.6 1.6 1.3 1.2 1.5Q4 1.0 1.8 1.3 1.3 1.5

2016 1.8 1.9 1.6 1.8 1.6Q1 1.1 1.6 1.2 1.3 1.3Q2 1.5 1.7 1.5 1.7 1.3Q3 2.0 2.0 1.8 2.1 1.7Q4 2.5 2.5 1.9 1.9 2.0

2017 2.6 1.9 2.2 1.9 2.2Q1 3.2 2.7 2.2 1.9 2.2

1 The trimmed mean represents the average inflation rate of the (weighted) middle 70 percentin a lowest-to-highest ranking of year-on-year inflation rates for a l l CPI components .2 The weighted median represents the middle inflation rate (corresponding to a cumulative CPIweight of 50 percent) in a lowest-to-highest ranking of year-on-year inflation rates .3 The net of volati le i tems method excludes the fol lowing i tems: bread and cerea ls , meat, fi sh,frui t, vegetables , gas , sol id fuels , fuels and lubricants for personal transport equipment, andpassenger transport by road, which represents 39.0 percent of a l l i tems. The series has been recomputed us ing a new methodology that i s a l igned with PSA's method of computing theofficia l core inflation, which re-weights remaining i tems to comprise 100 percent of the corebasket after excluding non-core i tems. The previous methodology reta ined the weights of volati le i tems in the CPI basket whi le keeping their indices constant at 100.0 from month to month.Source: PSA, BSP estimates


Chart 6. Food and Non-Food Inflation in the Philippines (2006=100) In percent

In terms of geographical location, inflation in the National Capital Region (NCR) rose to 3.5 percent in Q1 2017 from 2.3 percent in the previous quarter (Table 4a). Food inflation increased to 6.7 percent in Q1 2017 (from 5.7 percent) as most food commodities posted higher inflation rates during the quarter namely, rice, fish, meat, and vegetables.

Likewise, non-food inflation continued to increase in Q1 2017 to 2.0 percent from 0.7 percent in the previous quarter. Following the upward trend in global oil prices for the first quarter, prices of domestic petroleum products were adjusted higher, which led to faster y-o-y inflation for transport and fuel items. At the same time, electricity rates also went up during the quarter on higher generation charge. Inflation in the areas outside NCR (AONCR) rose to 3.1 percent in Q1 2017 from 2.5 percent in the previous quarter (Table 4b). Food inflation increased to 3.6 percent from 3.1 percent in the previous quarter on higher prices of key food items namely, rice, meat, fish, as well as oils and fats. Non-food inflation in AONCR accelerated further in Q1 2017 to 2.6 percent (from 1.9 percent) due mostly to higher inflation of transport, electricity, gas, and other fuels. Meanwhile, inflation rates of the following non-food items were lower relative to the previous quarter: furnishings and household equipment; health, on higher prices of medical products and outpatient services, as well as

restaurants and other miscellaneous goods and services. Chart 7. Inflation Rate (2006=100) In percent

Domestic Liquidity19

Money supply or M3 grew by 11.6 percent y-o-y as of end-March 2017 to P9.5 trillion, slower than the 12.8-percent expansion as of end-December 2016 (Table 5). The increase in M3 was driven largely by the 16.4-percent y-o-y growth in domestic claims or credits to the economy during the same period. Credits extended to the private sector grew by 18.3 percent, supported by the sustained increase in bank lending. Meanwhile, net claims on the central government rose by 15.0 percent as a result of increased borrowings and the continued NG withdrawal from its deposits with the BSP as part of NG cash operations.

Domestic liquidity remains ample

19 The indicators used for money supply are: M1 (or narrow money), comprised of currency in circulation and demand deposits; M2, composed of M1 plus savings and time deposits (quasi-money); M3, consisting of M2 plus deposit substitutes; and M4, consisting of M3 plus foreign currency deposits.

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017

Headline InflationFood InflationNon-Food Inflation

Source: PSA 0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2014 2015 2016 2017

PhilippinesNational Capital RegionAreas Outside the National Capital Region

Source: PSA


Table B. Domestic Liquidity (M3)

Levels (in billion pesos) Growth Rates (in %)

Particulars Mar 2017 Dec 2016 Mar 2016 Quarter-

on-Quarter

Year-on-

Year

Domestic Liquidity (M3), 9,535.5 9,506.0 8,542.0 0.3 11.6

of which:

Net Foreign Assets 4,377.8 4,309.0 4,100.3 1.6 6.8

Domestic Claims 9,397.8 9,199.9 8,075.9 2.2 16.4

of which:

Net Claims on Central Government 1,663.6 1,603.0 1,447.1 3.8 15.0

Claims on the Private Sector 6,602.3 6,486.4 5,578.9 1.8 18.3

Net foreign assets (NFA) in peso terms rose by 6.8 percent y-o-y in March 2017. The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from OFs’ remittances and BPO receipts. Similarly, the NFA of banks expanded due mainly to the growth in banks’ foreign assets resulting from higher loans, deposits with other banks, and investments in marketable debt securities. Meanwhile, the growth of M4, a broader concept of domestic liquidity comprising broad money liabilities and foreign currency deposits of residents, grew by 12.4 percent y-o-y in March 2017 compared to the 13.4-percent growth in December 2016.

Monetary Policy Developments During the monetary policy meetings on 9 February and 23 March 2017, the BSP decided to maintain the key policy interest rate at 3.0 percent for the overnight reverse repurchase or RRP facility. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement ratios were likewise left unchanged.

Monetary policy settings are unchanged

The BSP’s decision to keep the policy rate steady is based on its assessment of inflation dynamics and the risks to the inflation outlook over the policy

horizon. While headline inflation has risen due to the recent increases in food and oil prices as well as base effects, latest forecasts continue to show average inflation firmly settling within the target range of 3.0 percent ± 1 ppt for 2017-2018. The overall balance of risks surrounding the inflation outlook also remains tilted to the upside, given possible adjustments in electricity rates and transportation fares as well as the transitory impact of the government’s proposed fiscal reform program. Meanwhile, lingering uncertainty over the prospects of the global economy, due in part to possible shifts in macroeconomic policies in AEs, continues to pose a key downside risk to the inflation outlook. Nevertheless, inflation expectations remain anchored to the inflation target over the policy horizon. At the same time, the BSP stressed that while the global economic environment has become more challenging, domestic economic activity is expected to stay firm, supported by buoyant household consumption and private investment, increased fiscal spending, and ample credit and liquidity. With these considerations, the Monetary Board (MB) believes that prevailing monetary policy settings remain appropriate. Going forward, the BSP will continue to monitor and assess evolving economic developments and will calibrate its policy tools as appropriate to ensure sustained price and financial stability. Chart 8. BSP Policy Rates In percent

01234567

Jan

2014 Fe

bM

arAp

rM

ay Jun Jul

Aug

Sep

Oct

Nov De

cJa

n 20

15 Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

n 20

16 Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov De

cJa

n 20

17Fe

bM

ar

Overnight RRP RateOvernight RP Rate/Overnight Lending FacilitySDA Rate/Overnight Deposit Facility

* On 3 June 2016, Special Deposit Accounts (SDAs) were replaced by the Overnight Deposit Facility (ODF) in line with the implementation of the Interest Rate Corridor (IRC) System. Similarly, the RP facility was replaced by the overnight lending facility (OLF). Source: BSP

Source: BSP


Domestic Interest Rates The primary market rates of the 91-day, 182-day, and 364-day treasury bills (T-bill) increased in Q1 2017 by 73.9 bps, 69.1 bps and 83.0 bps relative to Q4 2016, to settle at 2.2 percent, 2.4 percent and 2.7 percent, respectively (Table 6). Investors preferred shorter-tenored government securities during the period due to heightened uncertainty on the direction of US fiscal and monetary policies as well as political developments in the Eurozone.

Primary market interest rates rise sharply across all tenors Similarly, the secondary market yields of actively traded government securities (GS) generally increased as of end-March 2017 relative to yields as of end-December 2016. The yields climbed by at least 17.7 bps (7-year) to at most 89.4 bps (3-month), after the US Federal Reserve hiked its policy rate in the March 2017 Federal Open Market Committee (FOMC) meeting. Meanwhile, the yields of other tenors fell by at least 34.7 bps (20-year) to at most 61.8 bps (2-year) GS. Chart 9. Yield Curve of Government Securities In percent

Domestic market interest rates showed mixed trends. The interbank call loans and time deposit rates were higher in Q1 2017 by 2.8 bps and 11.1 bps, respectively. Meanwhile, the savings deposit and lending rates were lower by 1.0 bp and 8.8 bps, respectively.

Other market interest rates show mixed trends During its monetary policy meetings on 9 February and 23 March 2017, the MB kept the interest rate on the BSP’s RRP facility at 3.0 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady at 3.5 percent and 2.5 percent, respectively. The reserve requirement ratios were likewise left unchanged. Meanwhile, the interest rates on the 7-day and the 28-day term deposit facilities (TDF) rose by 22.8 bps and 47.4 bps from Q4 2016 levels to settle at 3.0 percent and 3.4 percent as of Q1 2017. This could be attributed to reduced funds available for placement amid tax remittances and the settlement of Retail Treasury Bonds (RTBs).

TDF rates increase Meanwhile, the differentials (gross and net of tax) between the domestic and US interest rates widened in Q1 2017 relative to Q4 2016. The higher interest rate differential can be traced to the 64.4 bps increase in RP 91-day T-bill rate relative to a much smaller 14.1 bps gain in 90-day LIBOR, and a 10.3 bps gain in average US 90-day T-bill rate. Cautious investor sentiment due to heightened uncertainty on the direction of US fiscal and monetary policies, as well as political moves in the Eurozone pushed domestic interest rates up during the quarter. Meanwhile, the release of stronger-than-expected US data led to the rise in foreign interest rates.

Adjusted for risk premium, interest rate differentials show mixed trends The positive differential between the BSP's policy interest rate (overnight borrowing or RRP rate) and the US Federal Funds target fell to 200 bps as of end-March 2017, given the 25 bps increase in the US Federal Funds rate against the unchanged BSP policy rate. Compared to its December 2016 value, the risk-adjusted spread between the two policy rates narrowed further to 117 bps as of end-March 2017

0

1

2

3

4

5

6

7

3 mo 6 mo 1 yr 2 yr 3 yr 4 yr 5 yr 7 yr 10 yr 20 yr

Q1 2016 Q4 2016 Q1 2017

Source: BSP-Department of Economic Statistics (DES)


due to a 3.0 bps increase in risk premium (measured as the difference between the 10-year ROP and the 10-year US note). The higher risk premium was due to a 9.9 bps decrease in the yields of the 10-year US Treasury note relative to a much smaller 7.0 bps decrease in the yields of 10-year ROP note.

Financial Sector Banking System Financial Sector

Philippine banking system posts steady growth in assets and deposits The Philippine banking system remained supportive of economic growth and stable financial condition. In Q1 2017, banks’ balance sheets exhibited steady growth in assets and deposits. Furthermore, asset quality indicators improved while capital adequacy ratios remained above international standards. Banks continued to dominate the financial sector, with universal and commercial banks (U/KBs) accounting for 90 percent of total banks’ assets. In terms of the number of head offices and branches/agencies, non-bank financial intermediaries maintained its relatively widest physical network, consisting mainly of pawnshops. Performance of the Banking System Market Size

Number of banks declines but operating network expands The number of banking institutions (head offices) decreased to 602 as of end-December 2016 from 632 recorded in the previous year and from 613 in the previous quarter. The bank head offices are comprised of 42 U/KBs, 60 thrift banks (TBs), and 500 rural banks (RBs). The lower number of bank head

offices reflected the continued consolidation of banks as well as the exit of weaker players in the banking system. Meanwhile, the operating network (head offices and branches/agencies) of the banking system expanded to 11,178 offices in end-December 2016 from 10,756 offices a year ago and 11,024 offices in end-September 2016, due mainly to the increase in the branches/agencies of U/KBs and RBs (Table 7). The total resources of the banking system grew by 12.6 percent to P14.1 trillion as of end-March 2017 from P12.5 trillion in the same period in 2016, and by 1.4 percent from P13.9 trillion in the previous quarter (Table 8). As a percent of GDP, total resources stood at 95.5 percent as of end-March 2017 which was slightly lower than the previous quarter’s 96.0 percent. Chart 10. Total Resources of the Banking System Levels in trillion pesos; share in percent

Savings Mobilization

Demand deposits continue to grow; savings and time deposits contract slightly Savings and demand deposits remained the primary sources of funds for the banking system. As of end-March 2017, banks’ total deposits20 amounted to P8.3 trillion, 11.0 percent and 0.6 percent higher than the year- and quarter-ago levels, respectively. Demand deposits grew by 3.6 percent to P2.2 trillion while both savings and time deposits dropped by

20 This refers to the total peso-denominated deposits of the banking system.

0

20

40

60

80

100

0

2

4

6

8

10

12

14

Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar

Total Resources (LHS) as % of GDP (RHS)

2012 2013 2014 2015 20172016

Source: BSP


0.4 percent. Meanwhile, foreign currency deposits owned by residents (FCD-Residents) increased by 1.4 percent to P1.7 trillion, q-o-q.21 Chart 11. Deposit Liabilities of Banks In billion pesos

Bank Lending Operations

Bank lending sustains y-o-y growth Outstanding loans of U/KBs, net of banks' RRP placements with the BSP, grew by 20.2 percent as of end March 2017 from the same period in 2016. Similarly, bank lending, inclusive of RRPs, increased by 18.4 percent, y-o-y. Loans for production activities, which comprised 88.6 percent of U/KBs’ aggregate loan portfolio (net of RRPs), expanded by 18.9 percent y-o-y in end-March 2017. Chart 12. Loans Outstanding of Commercial Banks (Gross of RRPs) In trillion pesos

21 FCD-Residents, along with M3, forms part of a money supply measure called M4. Meanwhile, M3 consists of savings deposits, time deposits, demand deposits, currency in circulation, and deposit substitutes.

The growth in production loans was driven primarily by increased lending to the following sectors: real estate activities (19.0 percent); manufacturing (17.1 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (14.4 percent); electricity, gas, steam and air-conditioning supply (15.8 percent); financial and insurance activities (17.7 percent); and information and communication (40.0 percent). Bank lending to other sectors also increased, y-o-y, except in the case of public administration and defense, compulsory social security (-10.0 percent). Loans for household consumption likewise increased by 24.5 percent due to higher credit card loans, auto loans, salary-based general-purpose loans, and other household loans. Credit Card Receivables

Credit card receivables continue to rise The combined credit card receivables (CCRs) of the banking system as of end-December 2016, inclusive of credit card subsidiaries, increased by 10.3 percent to P197.7 billion, y-o-y, and by 7.9 percent, q-o-q. Meanwhile, the ratio of CCRs to the total loan portfolio (TLP) slightly decreased to 2.7 percent as of end-December, relative to a year-ago ratio of 2.9 percent, and unchanged relative to the previous quarter. In terms of loan quality, the ratio of non-performing CCRs to total CCRs improved, as it fell to 5.9 percent from 7.6 percent, y-o-y, and 6.2 percent posted, q-o-q. Motor Vehicle Loans22

Motor vehicle loans maintain strong growth As of end-December 2016, the banking system’s combined motor vehicle loans (MVLs), inclusive of non-bank subsidiaries, increased to P388.4 billion or by 27.8 percent, y-o-y, and 6.6 percent, q-o-q.

22 Formerly “Auto Loans”, renamed effective September 2015

Source: BSP

0

1

2

3

4

5

6

7

Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar

2012 2013 2014 2015 2016 2017

Source: BSP


Consumers’ strong demand for passenger cars and commercial vehicles, the introduction of new and refreshed models, appropriate product mix, as well as flexible financing schemes from banks and other car financing firms helped sustain the rise in vehicle purchases. The share of total MVLs to TLP increased to 5.4 percent from the previous year’s ratio of 4.9 percent but decreased slightly from the previous quarter’s ratio of 5.5 percent. In terms of loan quality, the ratio of non-performing MVLs to total MVLs declined to 4.2 percent from the year-ago ratio of 4.6 percent and the quarter-ago ratio of 4.3 percent Salary-Based General-Purpose Consumption Loans23

Salary loans are on the uptrend The banking system’s Salary-Based General-Purpose Consumption Loans (SBGPCL), inclusive of non-bank subsidiaries, increased by 33.7 percent to P139.5 billion as of end-December 2016 from the year-ago level of P104.3 billion and by 4.0 percent from the quarter-ago level of P134.1 billion. 24 The share of total SBGPCLs to TLP increased to 1.9 percent from 1.7 percent registered a year-ago but decreased slightly from 2.0 percent posted a quarter-ago. In terms of loan quality, the ratio of non-performing SBGPCLs to total SBGPCLs improved to 3.7 percent relative to the previous year and quarter’s ratio of 3.9 percent and 4.1 percent, respectively. Residential Real Estate Loans

Residential real estate loans sustain growth As of end-December 2016, the total residential real estate loans (RRELs) of the banking system grew by 17.1 percent to P519.9 billion from P444.0 billion a year-ago, and by 4.7 percent from P496.8 billion a quarter-ago. Sustained household investments in residential properties, the slow rise in the cost of construction materials, the increase in the number of

23 Formerly “Salary Loans” 24 Data collection started with June 2014 data.

projects unveiled by real estate developers and the intensified promotional campaigns by banks, supported the growth in real estate purchases during the review period. Total RRELs to TLP remained unchanged at 7.2 percent relative to the ratio posted last year, but decreased compared to the previous quarter’s 7.4 percent. In terms of loan quality, the non-performing RRELs declined to 2.8 percent from 3.1 percent registered a year-ago but remain unchanged relative to the previous quarter. Asset Quality and Capital Adequacy The Philippine banking system’s gross non-performing loan (GNPL) ratio improved to 2.0 percent, as of end-March 2017, relative to the previous year’s ratio of 2.2 percent but increased slightly from the previous quarter’s ratio of 1.9 percent. Banks’ initiatives to improve their asset quality along with prudent lending regulations helped maintain the GNPL ratio below its pre-Asian crisis level of 3.5 percent.25 Chart 13. Ratio of Gross NPLs and Net NPLs to Total Loans of the Banking System In percent

Similarly, the net non-performing loan (NNPL) ratio of 0.6 percent as of end-March 2017 was unchanged at previous quarter’s rate but was lower relative to the previous year’s ratio of 0.8 percent (Table 9). In computing for the NNPLs, specific allowances for credit losses on TLP are deducted from the GNPLs. Said allowances increased to P104.2 million in end-March 2017 from P94.6 million and P100.9 million posted a year and a quarter ago.26 The Philippine

25 The 3.5 percent NPL ratio was based on the pre-2013 definition. 26 This type of provisioning applies to loan accounts classified

Source: BSP


banking system’s GNPL ratio of 2.0 percent was higher relative to that of Malaysia (1.2 percent) and South Korea (1.4 percent) but lower than that of Indonesia (2.9 percent) and Thailand (3.0 percent).27 The loan exposures of banks remained adequately covered as the banking system registered an NPL coverage ratio of 115.2 percent as of end-March 2017 from 112.5 percent registered a year ago and 119.9 percent a quarter ago.

Banks maintain high levels of CAR amid tighter capital requirements The capital adequacy ratio (CAR) of U/KBs at end-September 2016 remained unchanged at 15.4 percent on a solo basis, relative to the previous quarter. Meanwhile, the CAR, on a consolidated basis, increased slightly to 16.2 percent from the quarter-ago ratio of 16.1 percent. These figures were well above the BSP regulatory threshold of 10.0 percent and international minimum of 8.0 percent. Chart 14. Capital Adequacy Ratio of Universal and Commercial Banks In percent

under loans especially mentioned (LEM), substandard-secured loans, substandard-unsecured loans, doubtful accounts and loans considered as loss accounts. 27 Sources: Malaysia (Banking System’s Ratio of net impaired loans to net total loans, Q1 2017); South Korea (Domestic Banks’ Substandard or Below Loans [SBLs] ratio, Q4 2016); Indonesia, IMF Financial Soundness Indicators (Banks’ Nonperforming Loans to Gross Loans Ratio, Q4 2016); and Thailand (Total Financial Institutions’ Gross NPLs ratio, Q1 2017).

The CAR of Philippines’ U/KBs on a consolidated basis was higher than that of South Korea (14.9 percent) but lower than that of Malaysia (16.9 percent), Thailand (17.8 percent) and Indonesia (20.6 percent).28

Banking Policies Banking policies implemented during the quarter were aimed at enhancing/providing guidelines/regulations on the following: (1) domestic remittance charges by all BSP-supervised entities with domestic remittance transactions; (2) anti-money laundering regulations; (3) social media risk management; (4) handling of checks under the new check image clearing system (CICS); (5) supervisory policy on the grant of a license/authority; (6) virtual currency (VC) exchanges; (7) Basel III leverage ratio; (8) past due and non-performing loans; and (9) deposit and cash servicing outside bank premises (Annex A).

Capital Market Reforms Capital market policy reforms continued to gain ground during the first quarter of 2017 as landmark institutional measures were adopted by the Philippine Stock Exchange (PSE) and the BSP. During the period, the reforms focused on (i) the launching of PSE’s electronic system for expanding available payment channels and allowing easier access to funding by retail clients and corporations; and ii) strengthening the regulatory frameworks for VCs and anti-money laundering (Annex B).

Stock Market

In the first three months of 2017, the Philippine Stock Exchange index (PSEi) rose by 1.9 percent, q-o-q, to average 7,258.3 index points. Expectations of the

28 Sources: South Korea (Domestic Banks’ Capital Ratio, Q4 2016); Malaysia (Banking System’s Total Capital Ratio, Q1 2017); Thailand (Commercial Banks’ Capital Funds Percentage of Risk Assets, Q1 2017); and Indonesia, IMF Financial Soundness Indicators (Commercial Banks, Regulatory Capital to Risk-Weighted Assets Ratio Q4 2016).

Source: BSP


continued robust growth of the Philippine economy and optimism over the promised tax cuts and higher fiscal spending of newly-inaugurated US President Donald Trump to lift the US economy boosted investor sentiments and raised the PSEi above the 7,300 mark during the period-in-review. However, the uptick was partly tempered by issues affecting the local mining industry; and heightened expectations of a US Fed rate hike since December. Moreover, geopolitical concerns such as heightened tensions from North Korea’s missile test launches and the impeachment of South Korean President also dampened sentiments as the quarter drew to a close. Nonetheless, the PSEi closed the quarter at 7,311.72 index points on 31 March 2017, which was higher q-o-q by 6.9 percent and y-o-y by 0.7 percent (Table 10). Chart 15. Average PSEi In index points

Mirroring the uptick in the benchmark stock index, total market capitalization rose by 5.9 percent from the end-December 2016 level to reach P15.3 trillion in end-March 2017. Almost all sub-indices posted gains except for the mining and oil sub-index which ended the quarter in negative territory. Moreover, value turnover dropped by 3.7 percent q-o-q to average P6.8 billion during the quarter-in-review.

Chart 16. PSE Market Capitalization by Sector Q1 2017, percent share Given the uncertainty in the global environment, preliminary data from the PSE showed that foreign investors registered net sales of P18.3 billion during the review quarter. This was lower than the P33.8 billion net sales posted in the preceding three months ending December. Foreign transactions accounted for 53 percent of the total transactions during the period-in-review. Chart 17. PSEi Foreign Transactions In billion pesos

Meanwhile, data from Bloomberg reflected the uptick in the PSEi as the domestic price-earnings (P/E) ratio rose from 19.0x in end-December 2016 to 20.2x in end-March 2017. This makes local shares one of the most expensive in the region next to Indonesia’s P/E ratio of 24.0x. Lastly, the average indices of ASEAN stock exchanges rose during the quarter in review relative to the

Source: Philippine Stock Exchange (PSE)

Source: PSE

Source: PSE


preceding quarter. The rally was led by Singapore, which rose by 7.5 percent q-o-q. This was followed by increases in the stock indices of Thailand (4.7 percent), Malaysia (3.4 percent), the Philippines (1.9 percent) and Indonesia (1.8 percent).

Bond Market

Local Currency Bond Market

Size and Composition29 Local currency (LCY) bonds issued by both the public and private sectors amounted to P200.5 billion in Q1 2017, 34.0 percent higher than the P149.7 billion registered in the previous quarter and 42.0 percent higher than the P141.2 billion recorded in the same period last year.

LCY bond issuances of public sector increase

The NG issued Treasury bills (T-bills) and Fixed-rate Treasury bonds (T-bonds) amounting to P148.2 billion in Q1 2017, higher by 91.1 percent from Q4 2016. The increase in government issuances reflected the strong demand and interest of investors to support the government's priority programs particularly infrastructure spending. Meanwhile, the private sector issuance of LCY bonds amounted to P52.3 billion, 27.4 percent lower than the level registered in previous quarter but 481.5 percent higher than that registered Q1 2016. The local firms continued to tap the bond market to take advantage of relatively lower rates as they anticipated the US Fed to resume the hike in its policy rate within the year.

29 This refers to the peso-denominated bond issuances by both public and private sectors. Public sector issuances of LCY bonds include issuances in the primary market and rollovers of maturing series which were issued by the BTr and GOCCs. This excludes issuances by the central bank.

Chart 18. LCY Bond Issuances In billion pesos

In terms of market share, issuances from the public sector comprised 73.9 percent share of the total bond issuances while the private sector took the remaining 26.1 percent. Bonds issued by the BTr accounted for the entire public sector issuances while private sector issuances came from banks and real estate companies. Chart 19. LCY Bond Issuances As percent of market share; Q1 2017

Primary Market 30 In the primary auctions conducted for both T-bills and T-bonds, the NG offered an aggregate of P175.0 billion worth of debt securities. Demand was robust as tenders were oversubscribed by about 1.5 times. Tenders for T-bills reached P47.5 billion as against the NG’s offering of P45.0 billion while tenders for T-bonds reached P223.0 billion against the P130.0 billion offering.

30 The discussion includes primary market for government issuances only.

Source: BTr, Bloomberg, Staff calculation

Source: BTr, Bloomberg, Staff calculation


The NG partially awards bids for T-bills due to higher yields demanded The NG partially awarded the P175.0 billion offering in GS in Q1 2017 as it rejected some bids for T-bills which were found to be relatively higher than the NG’s preferred rates. Demand for shorter-term debt instruments tended to be higher than long-term instruments given the uncertain external developments that affected investment decisions in the long-term. Secondary Market Trading of both government and private corporate bonds in the secondary market increased by 133.3 percent to P806.9 billion from P345.9 billion registered in the previous quarter. Meanwhile, on a y-o-y basis, trading in the secondary market decreased by 9.9 percent.

Trading increases at the secondary market Trading was dominated mostly by Fixed Income Treasury Notes (FITNs) which accounted for about 78.7 percent of the total trading while the share of corporate bonds traded at the Exchange remained marginal at 1.4 percent. The upbeat trading at the secondary market reflected improved investor confidence due to global positive developments such as the “market-friendly” outcome of the French presidential election that eliminated the risk of “Frexit” or French exit from the European Union (EU).

Chart 20. Secondary Market Volume In billion pesos

Foreign Currency Bond Market During the quarter, the government tapped the offshore market with US$2 billion bond issuance with 25-year tenor. The bond offering had a record-low yield of 3.7 percent indicating positive market perception of the country's strong leadership and economic performance. Meanwhile, the private sector took advantage of the ample domestic liquidity and refrained from tapping the foreign capital market. Sourcing by corporates of their financing needs from the local capital market reflects prudent liability management amid rising foreign interest rates given the planned gradual US Fed rate hikes.

NG taps the international bond market in raising funds Credit Risk Assessment On 29 March 2017, Fitch Ratings affirmed the Philippines’ investment grade sovereign credit rating at “BBB-“ as well as the positive outlook on the rating.

Fitch Ratings affirms Philippines’ investment grade rating The Philippines’ rating reflected the following: 1) strong growth momentum; 2) robust net external creditor position; 3) low and manageable debt levels; 4) strong banking metrics; and 5) the BSP’s effective monetary policy stance given the

Source: Philippine Dealing and Exchange Corporation (PDEx)


maintenance of a modest inflation level and its managed floating exchange rate regime which allows the peso to act as a cushion against external shocks. Table C. Latest Philippine Sovereign Credit Ratings As of end-March 2017 Bond spreads In January, debt spreads narrowed as global financial conditions remained favorable despite the protectionist stance of the Trump administration such as the withdrawal of the US from the Trans-Pacific Partnership (TPP).31 Domestically, investor confidence was boosted by the encouraging full year GDP growth data together with the positive growth outlook given by Standard and Poor’s (S&P) and World Bank (WB). S&P raised its growth forecast for the Philippines by 0.1 percent to 6.4 percent for 2017. WB gave a similar picture for the Philippines by increasing overall economic prospects by 0.7 percent to 6.9 percent for 2017.32

Debt spreads narrow on PHL’s positive growth outlook In February, debt spreads further narrowed falling below the 90 bps which was last seen in August 2016. The tighter debt spreads were due to the upbeat growth momentum that supported investor appetite for Philippine debt and kept low the premium on sovereign debt. Meanwhile, the higher probability of

31 A 12-nation deal that had been negotiated under former President Barack Obama that would have reduced tariffs for American imports and exports with the countries in the region. 32 Asia-Pacific Sovereign Rating Trends, January 2017 and Global Economic Prospects, January 2017.

a US Fed rate hike33 pushed US interest rates higher. The tightening of spreads continued in March amidst positive global developments such as the ECB’s decision to maintain the massive monetary stimulus in the region. As of end-March 2017, the Philippines’ 5-year sovereign credit default swaps (CDS) stood at 82 bps, lower than the 111 bps in end-2016. It has remained lower than Indonesia’s 128 bps and Malaysia’s 108 bps. Likewise, the EMBIG Philippines ended the quarter narrower at 98 bps when compared to the previous quarter’s closing of 110 bps. Chart 21. 5-Year CDS Spreads of Selected ASEAN Countries In basis points

Chart 22. EMBIG Spreads of Selected ASEAN Countries In basis points

33 Bloomberg estimates roughly about 86 percent probability of a fed rate hike as of 2 March 2017.

0

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200

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016 2017

Philippines Indonesia Thailand Malaysia

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200

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350

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014 2015 2016

EMBIG Philippines EMBIG MalaysiaEMBIG Indonesia

Source: Report of Credit Rating Agencies

Source: Bloomberg

Source: Bloomberg


Payments and Settlements System34 In Q1 2017, the total number of transactions settled and processed in the Philippine Payments and Settlements System (PhilPaSS) increased by 3.1 percent to 419,455 from the previous quarter’s level of 406,791. The increase in volume was due mainly to the uptick in trades in government securities (89.9 percent) and interbank transactions (3.7 percent). Table D. PhilPaSS Transactions

The total value of transactions declined by 29.5 percent to P78.7 trillion from the previous quarter level of P111.5 trillion. The drop in the value of transactions was due to the decline in the level of overnight deposit facility placements/maturities (60.5 percent) and interbank transactions (51.0 percent). OF remittances coursed through the REMIT system and interbank dealings continue to dominate the volume of transactions in the PhilPaSS, comprising 73.6 percent of the total volume for the quarter. In terms of value, interbank dealings, RRP, TDF, and ODF placements/maturities make up 87.5 percent of the total value of transactions for the quarter. On a y-o-y basis, both the volume and value of transactions increased by 12.5 percent and 3.0 percent, respectively. Following the increase in volume of transactions, total revenue derived from PhilPaSS operations (mainly fees from third party and settled debit instructions) rose to P35.5 million or 8.9 percent higher than the quarter-ago level of P32.6 million. On a y-o-y basis, total revenues similarly grew by 0.8 percent.

34 Starting 1 April 2014, the volume and value of transactions exclude payment transfers to BSP Payments Unit.

External Sector

Balance of Payments The country’s balance of payments position yielded a deficit of US$994 million in Q1 2017, higher than the US$210 million deficit recorded in Q1 2016 (Table 11).

Q1 2017 BOP position registers higher deficit

The negative overall BOP position was a result of the deficit in the current account and net outflows (or net lending by residents to the rest of the world) in the financial account. The current account reversed to a deficit of US$318 million in Q1 2017 from a US$730 million surplus in Q1 2016, as the trade-in-goods deficit continued to widen. Meanwhile, the financial account registered lower net outflows of US$579 million on account mainly of the turnaround of the other investment account to net inflows from net outflows, along with increased net inflows of direct investments and financial derivatives. This positive outcome partly offset the higher net outflows in the portfolio investment account. Global economic growth remained uneven with slower expansion in the euro area, India and the ASEAN region even as economic activity continued to pick up pace in the US, Japan and China. The lingering volatility in the external environment continued to affect the country’s external trade and capital flows.

2017

Q1 Q4 Q1 Q-o-Q Y-o-Y

Volume 419,455 406,791 372,734 3.1 12.5Value (in Tril l ion PhP) 78.7 111.5 76.4 -29.5 3.0Transaction Fees (in Mill ion Ph 35.5 32.6 35.2 8.9 0.8

Source: Payments and Settlements Office, Bangko Sentral ng Pilipinas

2016 Growth rates (%)


Table E. Balance of Payments In million US$

Current Account. The current account registered a deficit of US$318 million (equivalent to 0.4 percent of GDP) in Q1 2017, a reversal of the US$730 million surplus (1.1 percent of GDP) posted in Q1 2016.

Current account reverses to deficit This development emanated primarily from the widening of the trade-in-goods deficit as the growth in imports of goods outpaced that of exports of goods. Meanwhile, higher net receipts in the secondary income, services, and primary income accounts helped offset the increase in the trade-in-goods deficit. Trade-in-Goods. The trade-in-goods deficit increased to US$9.8 billion in Q1 2017 from US$7.8 billion in Q1 2016 due to the faster expansion in imports of goods at 19.2 percent relative to the 14.1 percent growth in exports.

Trade-in-goods deficit widens Exports of Goods. Exports of goods rose to US$11.6 billion in Q1 2017, higher than the US$10.2 billion in Q1 2016, indicating improved external demand from major trading partners, notably the US, Asia (i.e., China, Hong Kong, Singapore, and South Korea) and in the EU during the quarter.

Exports of goods increase Stronger export performance was attributed mainly to increased shipments of manufactures (by 9.2 percent), particularly machinery and transport equipment (by 26.8 percent) and garments (by 90.7 percent). Exports of electronics products (including other electronics), chemicals, and processed food and beverages, and other manufactures also supported the growth in manufactured exports. Shipments of other major commodity groups, notably coconut and mineral products, likewise increased markedly, by 132.3 percent and 55.4 percent, respectively, during the quarter fueled by a notable rise in world market prices of coconut oil and copper metal. Chart 23. Exports by Major Commodity Group In percent share, Q1 2017

Source: PSA

Imports of Goods. Imports of goods amounted to US$21.5 billion in Q1 2017, posting a 19.2 percent increment relative to the US$18 billion imports in Q1 2016. This developed on account of increased importation across all major commodity groups.

Imports of goods expand Growth in total imports was boosted primarily by raw materials and intermediate goods which grew by 25.7 percent to US$8.3 billion. Imports of semi-processed raw materials grew by 21.4 percent, consisting mostly of manufactured goods. Imports of manufactured goods rose by 33.9 percent to US$2.8 billion during the quarter fueled by increased imports of iron and steel (by 72.1 percent). Imports

2016 2017

Current Account 730 -318Capital Account 24 9Financial Account 955 579Net Unclassified Items -8 -106

Overall BOP* -210 -994

Q1

*Positive balance in the financial account indicates net outflows while a negative balance indicates net inflows. The overall BOP position, therefore, is equal to the current account plus the capital account minus the financial account plus net unclassified items. Details may not add up to total due to rounding.

Source: Department of Economic Statistics (DES), BSP


of raw materials for non-consigned electronics, and chemicals likewise registered double-digit growth of 16 percent and 15.2 percent, respectively. Imports of consumer goods went up by 15.9 percent, buoyed by growth in durables (18.3 percent) and non-durables (13.1 percent). Capital goods imports rose by 6.9 percent to US$5.1 billion, following increased purchases of power generating and specialized machines (by 14.9 percent) and land transport equipment, excluding passenger cars and motorized cycle. Meanwhile, imports of petroleum crude oil increased by 56.4 percent to US$1.1 billion, buoyed by the recent hike in global oil prices.35 In terms of volume, however, purchases of petroleum crude fell to 25 million barrels in Q1 2017 from 28 million barrels in Q1 2016. Chart 24. Imports by Major Commodity Group In percent share, Q1 2017

Source: PSA

Trade-in-Services. Net receipts in trade-in-services rose to US$2.4 billion in Q1 2017, exceeding the US$2 billion net receipts registered during the same quarter a year ago.

Net receipts in trade-in-services increase The 19-percent expansion was driven largely by higher net receipts in technical, trade-related and other business services (by 17.0 percent),36

35Based on World Bank Commodities Price data, the average price of Dubai crude oil in Jan-Mar 2017 increased to US$52.9/barrel from US$30.6/barrel in Jan-Mar 2016. 36Include business process outsourcing (BPOs) services pertaining mostly to contact centers, animation, and medical transcriptions.

manufacturing services on physical inputs owned by others (by 30.9 percent), and computer services (by 4.4 percent)37 combined with the reversal of financial services from net payments to net receipts during the quarter. Export revenues in BPO services totaled US$5.5 billion in Q1 2017, or a growth of 9.9 percent from the US$5 billion earnings in the same quarter last year. Primary Income. The primary income account recorded net receipts of US$678 million in Q1 2017, 5.7 percent higher than the US$642 million net receipts in Q1 2016.

Net receipts in primary income post modest growth The improvement was due mainly to the decline in net payments of investment income (by 6.3 percent) brought about by: a) lower dividends paid to foreign direct investors on their equity and investment fund shares in resident enterprises (by 33.1 percent); b) lower net payments of interest on short-term and long-term investments in debt securities (by 17.6 percent); and c) lower net payments of interest on other investments by local corporations. Increased interest receipts on reserve assets (by 20.1 percent) also contributed to the growth in the primary income account. However, these gains were partially offset by the 1.9 percent decline in compensation inflows from resident OF workers. Secondary Income. Net receipts in the secondary income account reached US$6.5 billion in Q1 2017, higher by 9.5 percent than the US$5.9 billion net receipts in Q1 2016.

Net receipts in secondary income rise Growth was driven mainly by receipts of personal transfers, which increased by 10.9 percent to reach US$6.2 billion during the quarter. The bulk of these personal transfers (about 98 percent) were non-resident OF workers' remittances.

37Include BPOs pertaining to software publishing and development.

Capital Goods, 24.0%

Raw Materials,

38.7%

Minerals, 12.6%

Consumer Goods, 17.3% Others,

7.4%


Capital Account. Net receipts in the capital account declined substantially to US$9 million in Q1 2017 from US$24 million in Q1 2016.

Capital account registers lower net receipts This developed following the reversal to US$10 million net payment of the other capital transfers of financial corporations, non-financial corporations, households, and non-profit institutions serving households (NPISHs) in Q1 2017 from US$1 million net receipts in Q1 2016. Financial Account. The financial account registered net outflows of US$579 million during the period in review, 39.4 percent lower than the US$955 million net outflows in Q1 2016.

Net outflows in the financial account decline This resulted as the other investment account reversed to net inflows during the quarter from net outflows in the same period last year, and following increases in net inflows in the financial derivatives and direct investment accounts. Meanwhile, portfolio investments posted higher net outflows during the quarter. Direct Investments. Direct investments continued to record net inflows in Q1 2017 amounting to US$1.1 billion from US$1 billion in Q1 2016.

Direct investments continue to post net inflows This developed as the rise in residents’ net incurrence of liabilities (foreign direct investments in the Philippines or FDI) more than compensated for the increase in their net acquisition of financial assets. In particular, FDI expanded by 16.6 percent to US$1.6 billion, reflective of investors’ sustained confidence in the Philippine economy due to its strong macroeconomic fundamentals. In particular, investments in debt instruments (i.e., lending by

parent companies abroad to their local affiliates to fund existing operations and business expansion) more than doubled to reach US$1.3 billion from US$606 million in the same quarter last year. Reinvestment of earnings also increased by 6.7 percent to US$193 million. However, investments in equity capital registered lower net inflows of US$101 million compared to last year’s US$550 million. Gross equity capital placements of US$191 million during the period came mostly from Japan, the US, Singapore, Hong Kong, and Germany. The said investments were channeled mainly in real estate; wholesale and retail trade; financial and insurance; information and communication; and manufacturing activities. Meanwhile, residents’ net acquisition of financial assets rose by 45.1 percent to US$417 million driven mainly by the expansion in net placements of equity capital by more than eightfold toUS$345 million from the level posted in same quarter last year. Equity capital placements grew by 52.8 percent to US$397 million, while withdrawals decreased by 76.3 percent to US$52 million.

Net outflows in portfolio investment account more than double Portfolio Investments. Portfolio investments posted net outflows of US$3.2 billion in Q1 2017, more than twice the US$1.4 billion net outflows registered in Q1 2016. This resulted from residents’ higher net repayment of liabilities amounting to US$2.6 billion during the quarter coupled with an increase in their net acquisition of financial assets, which reached US$564 million. Residents’ net repayment of liabilities consisted largely of net redemption of non-residents’ holdings of debt securities, particularly those issued by the NG (US$1.5 billion), local banks (US$472 million), and local corporates (US$281 million). Non-residents’ net withdrawal of placements in equity securities reached US$349 million during the quarter, reversing their net placements of US$77 million in the same quarter last year. Meanwhile, residents’ net acquisition of financial assets consisted mainly of net placements in non-residents’ debt securities, particularly by local corporates (US$352 million) and local banks (US$185 million).


Financial Derivatives. The financial derivatives account posted a higher net gain of US$183 million during the review quarter compared to only US$3 million in Q1 2016.

Trading in financial derivatives results in net gain

Other Investments. The other investment account reversed to a net inflow of US$1.3 billion in Q1 2017 from net outflow of US$562 million a year ago.

Other investment account reverses to net inflows On the liability side, net inflows increased by more than threefold due largely to residents’ net availment of loans from non-residents totalling US$359 million, a turnaround from the net repayments of US$1.3 billion recorded during the comparable quarter last year. Trade credit and advances extended by non-residents to residents, which more than doubled to reach US$1.1 billion during the quarter, likewise contributed to the increase in net inflows. On the asset side, residents’ other investments abroad dipped by 44.4 percent to US$592 million on account of their net withdrawal of currency and deposits held abroad (US$309 million).

International Reserves

The country’s GIR settled at US$80.9 billion as of end-March 2017, slightly higher than the US$80.7 billion recorded in end-December 2016 (Table 12). The GIR level remains adequate as it can cover 8.9 months worth of imports of goods and payments of services and income. It is also equivalent to 5.2 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.

Reserves continue to be ample The increase in reserves was due mainly to the inflows arising from the BSP’s investment income and revaluation adjustments on its gold holdings. These

were partially offset by the foreign exchange operations of the BSP and payments made by the NG for its maturing foreign exchange obligations. Of the total reserves as of end-March 2017, 83.7 percent were held in foreign investments; 9.8 percent in gold; and 6.5 percent in holdings of Special Drawing Rights (SDRs), the BSP’s reserve position in the IMF, and foreign exchange. Net international reserves (NIR), which refer to the difference between the BSP’s GIR and total short-term liabilities, amounted to US$80.9 billion as of end-March 2017, an increase of US$191 million from end-December 2016. Chart 25. Gross International Reserves In billion US dollars

Exchange Rate The peso depreciated against the US dollar in Q1 2017. On a q-o-q basis, the peso is weaker by 1.77 percent as it averaged ₱49.99/US$1 from the previous quarter’s mean trading level of ₱49.11/US$1 (Table 13). Likewise, on a y-o-y basis, the peso depreciated by 5.40 percent relative to the ₱47.29/US$1 average in Q1 2016.38 The weakening of the peso during the review quarter was due mainly to the following developments: (i) the US Fed rate hike in March 2017 and the expectation for further rate increases in 2017; (ii) persisting political noise in Europe; and (iii) strong US dollar requirement by local corporates.

38 Dollar rates (per peso) or the reciprocal of the peso-dollar rates were used to compute for the percentage change.

72

76

80

84

88

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016 2017

Source: BSP


Peso depreciates against the US dollar In January 2017, the peso appreciated against the US dollar by 0.16 percent to average ₱49.74/US$1 relative to the ₱49.82/US$1 average in December 2016 following: (i) the release of the FOMC minutes which bared a gradual increase in interest rates by the US Federal Reserve; (ii) lower-than-expected US GDP growth in the last quarter of 201639; (iii) Bank of Japan’s move to keep policy rates unchanged40; and (iv) the release of strong full year 2016 Philippine GDP data. In February, the trend reversed as the peso weakened against the US dollar by 0.45 percent to average ₱49.96/US$1. Markets turned cautious given the increased probability of an interest rate hike by the US Federal Reserve in March given improvement in the US jobs market and as inflation showed signs of nearing the US Fed’s two percent goal. In addition, strong corporate demand for US dollar ahead of the expected rate hike added pressure on the peso. The depreciation of the peso continued as it averaged ₱50.28/US$1 in March, shedding 0.62 percent in value relative to February average. The peso’s depreciation was due mainly to hawkish comments from a number of Fed officials prior to the 15 March 2017 FOMC meeting. Their statements bolstered expectation of a policy rate hike in the US41 and was accompanied by a surge in

39 US economic growth slowed in the last quarter of 2016 to 1.9 percent from the 3.5 percent recorded in the third quarter. The fourth quarter’s figure brought full-year GDP growth to 1.6 percent in 2016, its worst performance since 2011. 40 The Bank of Japan (BoJ) kept monetary policy steady on 31 January 2017 and roughly maintained its upbeat price forecasts. This signaled that a steady economic recovery will help accelerate inflation towards its 2 percent target without additional stimulus. In a widely expected move, the BoJ maintained the 0.1 percent interest it charges on a portion of the excess reserves that financial institutions park with the central bank. 41 San Francisco Federal Reserve President John Williams had said “there are no more reasons to further delay the US central bank’s plan of hiking interest rates soon with the US economy now at full employment and with higher chances of inflation spiking on the back of potential tax cuts from US President Donald J. Trump.” Similarly, New York Federal Reserve President William Dudley had said the case for tightening monetary policy “has become a lot more compelling.” In addition, Federal Reserve Board Governor Lael Brainard, a known dove at the US central bank, said in an address at Harvard University that “after being an important constraint in the past few years, the external environment currently appears more benign than it has been for some time even though risks remain. Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path”.

month-end demand for the US dollar and safe-haven buying on the back of persisting political noise in Europe.42 On a year-to-date basis, the peso depreciated against the US dollar by 0.9 percent on 31 March 2017 as it closed at ₱50.16/US$1. This is in contrast with the strengthening of most Asian currencies during the same period.43

Chart 26. Year-to-date Appreciation/Depreciation of Asian Currencies against US dollar In percent, as of 31 March 2017

Nonetheless, the sustained inflows of foreign exchange from OF remittances, foreign direct investments, BPO and tourism receipts, as well as the ample level of the country’s GIR and the country’s robust economic growth are expected to continue to provide stabilizing influence on the peso.

Meanwhile, the volatility of the peso’s daily closing rates (as measured by the coefficient of variation) stood at 0.54 percent during the review quarter, lower than the 1.43 percent registered in the previous quarter.44 Relative to other currencies in the region, the volatility of the peso was in the middle of the pack.45 On a real trade-weighted basis, the peso lost external price competitiveness in Q1 2017, against the basket

42 Britain has formally begun its process of leaving the European Union (EU) on 29 March 2017 after declaring that the country is triggering Article 50 of the Lisbon Treaty. Investors believe this could usher some uncertainty for the British and EU economies 43 Based on the last done deal transaction in the afternoon. 44 The coefficient of variation is computed as the standard deviation of the daily closing exchange rate divided by the average exchange rates for the period. 45 The volatility of the peso was higher than that of Indonesian rupiah, Chinese yuan, and Malaysian ringgit but lower than that of Singapore dollar, Thai baht, Japanese yen, and South Korean won.


of currencies of all trading partners (TPI), trading partners in advanced (TPI-A) and developing countries (TPI-D). The real effective exchange rate (REER) index of the peso increased, relative to Q4 2016, by 2.70 percent, 5.37 percent, and 0.79 percent, respectively, mainly on account of widening inflation differential (Table 13b).46,47

On the other hand, the peso gained external price competitiveness against the TPI, TPI-A, and TPI-D baskets, relative to Q1 2016. This developed as the nominal depreciation of the peso offset the impact of widening inflation differential against these currency baskets, resulting to a decrease in the REER index of the peso by 3.52 percent, 3.66 percent, and 3.42 percent against the TPI, TPI-A, and TPI-D baskets, respectively.

External Debt

Outstanding Philippine external debt stood at US$73.8 billion as of end-March 2017, reflecting a decline of US$958 million (or 1.3 percent) from the US$74.8 billion end-December 2016 level (Table 14). On a y-o- y basis, the debt stock likewise dropped by US$3.8 billion from the US$77.6 billion level in March 2016.

External debt remains manageable

The q-o-q decline in the debt levels resulted mainly from: (a) prior periods’ adjustments (negative US$673 million) due to late reporting of principal

46 The Trading Partners Index (TPI) measures the nominal and real effective exchange rates of the peso across the currencies of 14 major trading partners of the Philippines, which includes US, Euro Area, Japan, Australia, China, Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand. The TPI-Advanced measures the effective exchange rates of the peso across currencies of trading partners in advanced countries comprising of the US, Japan, Euro Area, and Australia. The TPI-Developing measures the effective exchange rates of the peso across 10 currencies of partner developing countries which includes China, Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand. 47 The REER index represents the Nominal Effective Exchange Rate (NEER) index of the peso, adjusted for inflation rate differentials with the countries whose currencies comprise the NEER index basket.

payments; (b) transfer of Philippine debt papers from non-residents to residents (US$497 million); and (c) net principal repayments of US$255 million. The downward impact of these developments on the debt stock was partially offset by the positive FX revaluation adjustments (US$466 million) as the Japanese yen strengthened against the US dollar.

The y-o-y drop in debt stock was due to: (a) net principal repayments by both the public and private sectors (US$2.1 billion); (b) previous periods’ audit adjustments (negative US$1.5 billion) due to late reporting; and (c) negative FX revaluation adjustments (US$383 million). The full downward impact of these factors on the debt stock was slightly offset by a modest increase in non-residents’ investments in Philippine debt papers issued offshore (US$126 million) during the period.

Chart 27. Philippine External Debt In billion US dollars

Source: BSP-International Operations Department (IOD)

By Maturity Based on original maturity, the profile of the country’s external debt continued to be largely medium- to long-term (MLT) in nature [i.e., those with original maturities longer than one year] with share to total at 79.6 percent or US$58.7 billion, lower by US$1.5 billion than the end-2016 level of US$60.2 billion. This shows that FX requirements for debt payments are well spread out, and more manageable. The weighted average maturity for all MLT loans improved to 17.4 years by end-March 2017, from the 16.9 years in the preceding quarter. The 20.4 percent balance of debt stock consisted of short-term (ST) accounts [or those with original maturities of up to one year] which grew to

71.0

72.0

73.0

74.0

75.0

76.0

77.0

78.0

79.0

80.0


US$15.1 billion from US$14.5 billion as of end-2016. These accounts consisted of: (a) bank liabilities of US$11.8 billion (domestic banks - US$6.4 billion; foreign bank branches - US$4.8 billion; and government financial institutions - US$648 million); (b) trade credits (US$3.1 billion); and (c) other non-bank liabilities (US$189 million). Chart 28. Philippine External Debt by Maturity As of end-March 2017

Source: BSP-IOD

By Borrower

Public sector external debt stood at US$37.7 billion (or 51.0 percent of total debt stock), slightly higher than the US$37.5 billion (50.1 percent of total) in the previous quarter due largely to: (a) net availments of US$637 million, mainly by the NG (US$583 million) and the Development Bank of the Philippines or DBP (US$251 million); and (b) upward FX revaluation adjustments (US$461 million). These were partly mitigated by the US$917 million decline in non-residents’ investments in debt papers issued offshore by the public sector. About US$30.6 billion (81.3 percent of public sector obligations) were NG borrowings.

Private sector debt, on the other hand, aggregating US$36.1 billion (49.0 percent of total) were down by US$1.1 billion quarter on quarter due to: (a) net repayments of US$893 million; and (b) previous periods’ adjustments (negative US$680 million). Increased non-resident holdings of private sector debt papers issued offshore (US$420 million) partially offset the downward pressures on private sector debt. About US$13.2 billion of these accounts were borrowings without BSP approval (including capital leases of US$1.3 billion).

Chart 29. Philippine External Debt by Borrower As of end-March 2017

Source: BSP-IOD

The DSR, which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations. As of end-March 2017, the ratio improved to 8.7 percent from the 9.2 percent recorded for the same period a year ago but higher compared to the quarter-ago ratio of 7.8 percent as of end-December 2016. Nevertheless, the DSR has consistently remained at single digit level, and well below the international benchmark range of 20.0 to 25.0 percent. The external debt ratio (a solvency indicator), or total outstanding debt expressed as a percentage of annual aggregate output or gross national income (GNI), continued to improve to 20.0 percent in Q1 2017 from 20.4 percent in Q4 2016 and 21.9 percent a year ago (Table 15). The same trend was observed using GDP as denominator, signifying the country's sustained strong position to service its foreign obligations in the medium term.

Foreign Interest Rates The timing of exit from accommodative monetary policy in AEs has differed across countries depending on the strength of their economic growth. Accommodative monetary policy is expected to continue in countries where risk of low inflation persists and recovery remains fragile due to weakness in labor market conditions, slowdown in spending, and anemic bank lending growth.

ST US$15.1 billion 20.4%

MLT US$58.7 billion 79.6%

Total = US$73.8 billion

Total = US$73.8 billion Public Sector

US$37.7 billion

Private Sector US$36.1 billion 49.0%


Monetary policy in some AEs continues to be accommodative, as recovery remains fragile In Q1 2017, the US Fed raised the target range for the federal funds rate at 0.75-1.0 percent. At the same time, the Fed maintained its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.48 Both the average US prime rate and discount rate increased to 3.793 percent and 1.293 percent from the previous quarter’s figures of 3.512 percent and 1.049 percent, respectively (Table 16). Moreover, the US Fed funds rate increased to 0.697 percent from the 0.499 percent average reported in the previous quarter. The Monetary Policy Committee (MPC) of the Bank of England (BOE) maintained the official bank rate paid on commercial banks’ reserves at 0.25 percent. It also continued the purchase of up to £10 billion of corporate bonds and £60 billion of government bonds, increasing the stock of the asset purchases to £435 billion.49 The Bank of Japan (BOJ) introduced the “Quantitative and Qualitative Monetary Easing with Yield Curve Control” as a new framework to further strengthen its monetary easing scheme. The framework is composed of two components: the first component is the "yield curve control" in which the BOJ controls short-term and long-term interest rates; and the second component is an "inflation-overshooting commitment" in which the BOJ commits itself to expand the monetary base until inflation exceeds the target of 2 percent. As for the short-term interest rate, the BOJ applies a negative interest rate of 0.1 percent to current accounts that financial institutions hold at the Bank. For the long- term interest rate, the BOJ buys Japanese government

48 Press Release. (n.d.). Retrieved from https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm 49 Press Release. (n.d.). Retrieved from http://www.bankofengland.co.uk/publications/Pages/news/2017/002.aspx

bonds (JGBs) at a rate of 80 trillion yen per year in order for the 10-year JGB yields to remain at around zero percent. In terms of asset purchases, the BOJ has doubled the purchase of exchange-traded funds (ETFs) at an annual pace of 6 trillion yen from 3.3 trillion yen while the purchase of Japan real estate investment trusts (J-REITs) were maintained at 90 billion yen annually. Likewise, the BOJ continues its purchases of commercial papers and corporate bonds until their outstanding amounts reach 2.2 trillion yen and 3.2 trillion yen, respectively.50 Meanwhile, the Governing Council of the ECB decided to maintain the interest rates on the deposit facility, main refinancing operation, and marginal lending facility at -0.40 percent, 0.0 percent, and 0.25 percent, respectively. The Governing Council also decided to continue its purchases under the asset purchase program (APP) at a monthly pace of €80 billion until the end of March 2017 and starting in April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017.51 Meanwhile, both the 90-day LIBOR and 90-day Singapore Interbank Offered Rate (SIBOR) increased in Q1 2017 to 1.068 percent and 0.953 percent from 0.921 percent and 0.906 percent, respectively, as global financial markets remained generally liquid. Chart 30. Selected Foreign Interest Rates In percent

50 Press Release. (n.d.). Retrieved from https://www.boj.or.jp/en/announcements/release_2017/k170316a.pdf 51 Press Release. (n.d.). Retrieved from https://www.ecb.europa.eu/press/pr/date/2017/html/pr170309.en.html


Global Economic Developments Recent developments showed that global economic activity gained momentum in Q1 2017. Although economic performance has remained mixed in some emerging economies, solid growth in most AEs has been attributable to the continued recovery of manufacturing output and consumer confidence. (See Table F. Macroeconomic Indicators for Selected Economies) Economic activity picked up in the US economy, resulting in an annual growth of 1.9 percent in Q1 2017. The increase in US real GDP was driven primarily by positive contributions from non-residential fixed investment, exports, residential fixed investments, and personal consumption expenditure which were partly offset by negative contributions from private inventory, increased imports, and government spending.52 Driven by the continued strength in exports and improved domestic demand, Japan registered a 1.6 percent expansion amid weakened investment growth and slowdown in private non-residential investment. A competitive yen and robust global demand have fueled the expansion in exports of goods and services in the face of rising cost for raw materials.53 The Eurozone economic activity advanced by 1.7 percent in Q1 2017, unchanged from the previous quarter. The expansion was a result of combined strong domestic demand in Germany and growth pick-up in Spain, Belgium and Latvia but slight easing in France and Lithuania.54

52 US Bureau of Economic Analysis News Release, 26 May 2017 53 “GDP in Japan,” FocusEconomics, 54 Eurostat News Release and Euro Indicators, 82/2017, 16 May 2017

Chart 31. Real GDP of G3 Countries Year-on-year growth; in percent

Meanwhile, most emerging economies in Asia recorded stronger output growth. China’s 6.9 percent expansion was driven by continued policy support and expansion in services, renting and leasing activities, and transportation and storage industries.55 Growth in Hong Kong’s economy stood at 4.3 percent underpinned largely by the acceleration in private consumption expenditure, government consumption expenditure, gross domestic fixed capital formation and exports.56 Meanwhile, South Korea and Singapore’s economy both registered a 2.7 percent growth for Q1 2017. Growth in South Korea was helped by robust increase in exports while facilities investments have been gaining more traction.57 On the other hand, Singapore’s growth was primarily driven by the electronics and precision engineering clusters, even as the transport engineering and general manufacturing clusters continued to contract.58 In the ASEAN-5 region, member countries posted mixed GDP growth rates. The Indonesian economy recovered at 5.0 percent growth in the reference quarter driven by improved export performance due to better commodity prices of coal and palm oil; expanded investment performance supported by structure investment in line with the continuing government infrastructure project and increasing constructions by private sector; and moderate

55 “Preliminary Accounting Results of GDP for the First Quarter of 2017,” National Bureau of Statistics of China, 18 April 2017 56 “Gross Domestic Product for the 1st Quarter 2017,“ Census and Statistics Department, Hong Kong, 12 May 2017 57 Press Release on “Recent Economic Developments, “ The Bank of Korea, 25 May 2017 58 “Economic Survey of Singapore First Quarter 2017,” Ministry of Trade and Industry Singapore

Source: Bloomberg, Country Websites


domestic consumption growth.59 The Malaysian economy remained resilient with 5.6 percent growth during the review quarter, a modest improvement from the 4.5 percent growth in the previous quarter. This was supported by the favorable growth in all sectors of the production side except for mining and quarrying sector.60 In Thailand, GDP growth registered at 3.3 percent brought about by acceleration in private consumption, exports of goods and service and the continued expansion of total investment.61 Meanwhile, Vietnam recorded slightly weaker growth rate in the review quarter at 5.1 percent. The slowdown in Vietnam’s economic growth was dragged by sharp contraction industrial sectors particularly in mining and quarrying, and manufacturing. Manufacturing was greatly affected by the cancellation of Samsung Galaxy Phone 7 production as Vietnam accounted for a significant portion of the product’s exports.62 Average headline inflation has been picking up in major AEs due to higher commodity prices. Inflation in the US edged up to 2.5 percent from 1.8 percent while Japan’s inflation remained at 0.3 percent, and Euro area inflation climbed to 1.8 percent from 0.7 percent in the previous quarter. Chart 32. Inflation of G3 Countries Quarterly average, in percent

Most emerging Asian economies also recorded higher inflation in Q1 2017, except for Hong Kong

59 “Economy during the first Quarter of 2017 Improves (Indonesia),” Bank Indonesia, 5 May 2017 60 Press Release on “Gross Domestic Product First Quarter 2017,“ Malaysia Department of Statistics Malaysia, 19 May 2017 61 National Economic and Social Development Board (NESDB) Economic Report on “Thai Economic Performance in Q1 and Outlook in 2017,” Thailand, 15 May 2017 62 “GDP in Vietnam,” Focus Economics

and India. Higher petrol prices, expiration of road tax rebate as well as rise in parking fees and car prices contributed significantly to Singapore’s average inflation rate at 0.7 percent. Meanwhile, higher raw material prices in China as well as efforts to reduce excess industrial capacity resulted in an increased average inflation rate at 2.1 percent. South Korea recorded a higher inflation rate at 2.0 percent during the review quarter due to faster increased in prices of food & non-alcoholic beverages, clothing and footwear, furnishings and household equipment, and transport. In contrast, average inflation rates in Hong Kong and India were lower at 0.6 percent and 2.4 percent during the review quarter as compared to the 1.2 percent, and 2.7 percent in the previous quarter, respectively. In the ASEAN-5 region, average inflation rates generally inched up in Q1 2017, with Malaysia recording the highest inflation as prices of food and non-alcoholic beverages and housing and utilities increased further while cost of transport surged. The higher inflation in Indonesia was due to the adjustments in the prices of gasoline and cigarette products while the rise in non-food and beverage and domestic retail fuel prices led to Thailand‘s increased inflation rate. In Vietnam, the price of eight groups out of eleven groups of commodities increased as compared to the previous period. These price increases included that for medicine and health services; education; housing and construction materials; transport; family equipment and appliances; other commodities and services; culture, entertainment and tourism; and postal services. Global labor market conditions moderately improved. The unemployment rate in the Japan and Euro area eased to 2.9 percent and 9.5 percent, respectively, during the review quarter while US unemployment rate remained steady at 4.7 percent.

Source: Bloomberg, Country Websites


Chart 33. Unemployment Rates of G3 Countries In percent

In Asia, the unemployment rates in South Korea and Singapore slightly inched up to 3.8 percent and 2.3 percent, respectively, while Hong Kong’s remained at 3.3 percent. Likewise, unemployment rate showed a moderate uptick in Thailand (1.2 percent). Table F. Macroeconomic Indicators in Selected Economies In percent

Financial Condition of the BSP

Balance Sheet The BSP’s total assets stood at P4,612.7 billion as of end-March 2017, slightly higher by P53.6 billion or 1.2 percent than the quarter-ago level of P4,559.1 billion, and higher by P207.2 billion or 4.7 percent

relative to the year-ago level of P4,405.5 billion (Table 17). Similarly, the BSP’s liabilities grew by P50.9 billion or 1.1 percent, q-o-q, to P4,551.6 billion, and still higher by P188.7 billion or 4.3 percent compared to the end-March 2016 level. Consequently, BSP’s net worth for the review period was reported at P61.1 billion or 4.6 percent above the quarter-ago level of P58.4 billion, and significantly greater by 43.2 percent than the year-ago net worth of P42.6 billion.

BSP’s net worth improves from the previous quarter The BSP’s assets were composed largely of international reserves amounting to P4,044.1 billion as of end- March 2017, 1.2 percent higher than the quarter-ago balance of P3,998.0 billion. The growth in the international reserves was brought about by inflows arising from net foreign currency deposits by the NG, revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold in the international market, and its income from investments abroad. These were partially offset by the payments made by the NG for its maturing foreign exchange obligations and by the BSP’s foreign exchange operations. As of end-March 2017, the BSP’s liabilities amounted to P4,551.6 billion, comprised mostly of deposits and currency issues. This amount was above the quarter-ago level of P4,500.7 billion due mainly to increases in the Treasurer of the Philippines (TOP) deposit account (P90.7 billion), term deposit facility (P47.4 billion), reserve deposits of other depository corporations or ODCs (P55.1 billion) and revaluation of international reserves account (P90.3 billion). However, these were subdued by the decline in the levels of currency issue (P78.1 billion), as well as the overnight deposit (P104.7 billion) and reverse repurchase (P55.3 billion) facilities.

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

G3 US 1.6 1.3 1.7 2.0 1.9 1.1 1.0 1.1 1.8 2.5 4.9 4.9 4.9 4.7 4.7 Japan 0.2 0.6 0.9 1.7 1.6 0.0 -0.4 -0.5 0.3 0.3 3.2 3.2 3.0 3.1 2.9 Euro Area 1.7 1.6 1.6 1.7 1.7 0.0 -0.1 0.3 0.7 1.8 10.3 10.1 10.0 9.7 9.5Emerging Asia3/

Hong Kong 0.8 1.7 1.9 3.1 4.3 2.8 2.6 3.1 1.2 0.6 3.3 3.4 3.4 3.3 3.3 South Korea 2.8 3.3 2.6 2.3 2.7 1.0 0.9 0.8 1.4 2.0 3.8 3.7 3.8 3.6 3.8 Singapore 2.0 2.0 1.1 2.9 2.7 -0.8 -0.9 -0.4 0.0 0.7 1.9 2.1 2.1 2.2 2.3 China 6.7 6.7 6.7 6.8 6.9 1.3 1.0 1.3 1.5 2.1 4.0 4.1 4.0 4.0 n.a. India 7.9 7.1 7.3 7.0 5.7 6.2 5.3 2.7 2.4 n.a. n.a. n.a. n.a. n.a.

ASEAN-54/

Indonesia 4.9 5.2 5.0 4.9 5.0 4.3 3.5 3.0 3.3 3.6 5.5 5.5 5.6 n.a. n.a. Malaysia 4.2 4.0 4.3 4.5 5.6 3.4 1.9 1.4 1.7 4.3 3.4 3.4 3.5 3.5 n.a. Philippines 6.8 7.0 7.1 6.6 6.4 1.1 1.5 2.0 2.5 3.1 5.8 6.1 5.4 4.7 6.6 Thailand 3.2 3.5 3.2 3.0 3.3 -0.5 0.3 0.3 0.7 0.9 0.9 1.1 0.9 1.0 1.2 Vietnam 5.5 5.5 5.9 6.2 5.1 1.3 2.2 2.8 4.5 5.0 2.1 2.1 2.1 n.a. n.a.Sources: Bloomberg, Country Websites

CountryReal GDP (y-o-y growth rate)

1/ Average inflation rate was around -0.03 percent for the second quarter of 2015 2/ Unemployment rate is the proportion (in percent) of the total number of unemployed as a percentage of the labor force3/ Includes Emerging Asia countries classified in the July 2016 IMF World Economic Outlook (WEO) Update , plus Hong Kong, South Korea, and Singapore.4/ ASEAN-5 pertains to those countries in the said WEO Update.

Unemployment rate2/Inflation (quarterly average)1/

Source: Bloomlberg, Country Websites


Table G. Balance Sheet of the BSP In billion pesos

2017 2016

Mar p Dec u Mar

Assets 4,612.7 4,559.1 4,405.5

Liabilities 4,551.6 4,500.7 4,362.9

Net Worth 61.1 58.4 42.6

Note: Details may not add up to total due to rounding off.

p

Based on the tentative BSP Financial Statements (FS) as of end-March 2017.

u

Based on the unaudited pre-closing BSP FS as of end-December 2016..

p & u Figures may change once the end-2016 FS become final and audited.

Source: BSP

Income Statement Based on preliminary and unaudited data, the BSP registered a net income of P1.7 billion for Q1 2017, lower than the previous quarter’s net income of P3.0 billion. Net income continued to be supported by foreign exchange gains which amounted to P4.7 billion for Q1 2017 (Table 18).

BSP registers net income in Q1 2017 Total revenues for Q1 2017 amounted to P12.6 billion, 3.9 percent higher than the P12.1 billion posted in the previous quarter, as income on reserves and domestic securities rose to a combined P11.8 billion from the previous quarter’s level of P11.5 billion. Meanwhile, total expenditures decreased by P3.8 billion to P15.6 billion. The q-o-q decline in expenditures was mainly brought about by lower interest expenses on overnight deposit facility and cost of minting/ printing of currency.

Table H. Income Position of the BSP In billion pesos

Conclusion, Challenges and Future Policy Directions On the whole, the Philippine economy is in a position of strength, characterized by broad-based growth, within-target inflation environment, ample liquidity and credit, sound banking system, healthy external payments position, and adequate level of reserves. Over the medium term, the Philippines is expected to sustain its economic growth momentum, supported by various sectors of the economy. Growth is expected to settle within the DBCC-approved medium-term assumption of 6.5 percent to 7.5 percent in 2017 and 7.0 percent to 8.0 percent in 2018-2022. On the demand side, the domestic economy’s expansion could be driven by solid household consumption (boosted by strong

2017 2016

Q1 p Q4 u Q1

Revenues

12.557

12.085

13.167

Less: Expenses

15.588

19.364

16.684

Net Income/(Loss) Before Gain/(Loss) on FXR

Fluctuations and Income Tax Expense/(Benefit)

(3.031)

(7.279)

(3.517)

Gain/(Loss) on Foreign Exchange Rate Fluctuations 4.695

10.413 3.673

Income Tax Expense/(Benefit) - 0.104 -

Net Income/(Loss) After Tax 1.664 3.030 0.156

Note: Details may not add up to total due to rounding off. p Based on the tentative BSP Financial Statements (FS) as of end-

March 2017. u Based on the unaudited pre-closing BSP FS as of end-December

2016. p & u Figures may change once the end-2016 FS become final and

audited.

Source: BSP


consumer confidence, sustained remittance inflows, and relatively low inflation), step-up in government spending (supported by expansion of infrastructure projects and social protection programs), more investments and exports (supported by recovery in the global economy, closer ASEAN economic integration, improving bilateral relations with China, and good prospects for Business Process Management or BPM) and improved tourism. On the supply side, domestic growth could likewise be sourced from the different sectors of the economy such as construction and infrastructure development, resurgence of manufacturing, BPM, tourism, as well as wholesale and retail trade. While the country’s progress toward a high growth trajectory appears to be on track, several external and domestic developments have posed potential risks and challenges to the economic outlook. The IMF expects global economic growth to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018. Most of the projected pickup in global growth will still stem from stronger activity in emerging markets (EMs) even with the observed stronger-than-expected growth in AEs.63 However, the global economic recovery in the near-term remains fragile, with elevated policy uncertainty including the Brexit process and inward-looking agenda in some advanced economies. A possible shift towards protectionist policies could be disruptive to trade and financial flows as well as migration. These policies could have important implications for Philippine remittances, offshoring/outsourcing industry, and trade. The continued normalization in US interest rates could influence investment strategies and lead to portfolio rebalancing, resulting in capital outflows from EMs and exchange rate pressures in these economies. Data from the Institute of International Finance (IIF) showed capital flows reversing in EMs since October 2016, persisting towards the end of the year as the US Fed raised its policy rate in December 2016. The Philippines also experienced similar capital outflows during the same period which

63 IMF (2017). World Economic Outlook, April 2017.

continued in the first three months of 2017. After the increase in the Fed funds rates during the US Federal Reserve’s FOMC March 2017 meeting, markets continue to expect two more rate hikes for the rest of the year. Another risk to the global economy is the protracted slowdown of the Chinese economy. The rebalancing of growth sources in China has continued but vulnerabilities in the financial system remain due to the rapid expansion of its credit. Adverse developments in China have the potential to generate negative spillovers for the Philippines given the increasing bilateral relations between the two economies in recent years. In the domestic sphere, the impact of severe weather disturbances and the infrastructure gaps remain as important challenges. On the inflation outlook, latest forecasts show that inflation would likely settle within the target range of 3.0 percent ± 1.0 percentage point in 2017-2018. The path of inflation is projected to rise close to the high-end of the target range in the third quarter of 2017, driven by weaker exchange rate and continued strength in domestic economic activity before reverting back to the midpoint of the target range in 2018. On one hand, the upside risks to inflation forecasts include possible adjustments in electricity rates as well as the initial impact of the government’s proposed tax reform program. On the other hand, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook. Meanwhile, inflation expectations continue to be broadly anchored to the inflation target over the policy horizon. Amid the uncertainties engulfing the global environment, the government remains focused on strengthening anchors and building defenses to protect the economy from negative surprises and buoy its sustainable growth momentum. First, on the fiscal front, there is elbow room for fiscal authorities to further boost public spending. The narrowing debt-to-GDP ratio affords the government to increase the fiscal deficit-to-GDP ratio target to 3.0 percent for 2017-2022. The NG is keen on implementing its tax-reform agenda by pushing for


the passage of the Tax Reform for Acceleration and Inclusion Act (TRAIN).64 This allows greater flexibility to accelerate infrastructure spending and investments in human capital, and pursue much-needed structural reform agenda, steering a stronger and more inclusive Philippine economy. Second, there is enough leg room for monetary policy to support economic activity while ensuring price stability. Future monetary policy decisions will remain data-dependent. The BSP continues to be vigilant against any risks to the inflation outlook and will adjust policy settings as needed to ensure future inflation remains consistent with the target while being supportive of sustainable growth. The BSP adopted operational reforms through the introduction of interest rate corridor (IRC) system on 3 June 2016 to further enhance monetary policy transmission. Since its implementation in June 2016, market reception to the IRC system has been positive. Market participants have adjusted relatively quickly to the new framework for the monetary operations of the BSP. Banks and trust institutions are participating actively in the open market operations, specifically, in the TDF auctions. Auctions for both the 7-day and 28-day term deposits have been relatively well-subscribed, reflecting the sustained ample liquidity in the financial system. Going forward, the BSP will continue to keep a watchful eye over how domestic and external developments will evolve to ensure that an enabling monetary and financial environment is maintained to achieve the country’s growth objectives, while safeguarding price and financial stability. The BSP is also equipped to help mitigate the adverse impact of capital outflows on the domestic economy by ensuring adequate level of liquidity in the economy and the financial markets during periods of heightened uncertainty and increased risk aversion. While guarding against speculative flows that could contribute to the peso’s volatility and undermine the

64 TRAIN contains the first package of the Department of Finance-proposed comprehensive tax-reform program, which aims to lower personal income-tax rates and implement offsetting measures, like broadening the taxpayer base, limiting value-added tax (VAT) exemptions, and increasing excise taxes on automobiles and oil and fuel products.

inflation target, the BSP will continue to maintain a market-determined exchange rate and a comfortable level of international reserves as safeguard against external shocks. The BSP also continues to further refine and expand its crises surveillance and monitoring toolkit as well as its risk assessment framework in order to guard against possible formation of financial imbalances and ensure timely policy response. At the same time, the BSP coordinates with other government agencies through the Financial Stability Coordination Council (FSCC)65 on issues pertaining to financial stability. The FSCC is tasked to identify, manage, prevent or address external and internal shocks and pressures on the Philippine financial system. The sound and stable condition of the Philippine banking system has been one of the anchors of the sustained robust performance of the domestic economy. The state of the country’s financial system, at present, is grounded on the structural and regulatory reforms pursued by the BSP over the years. This reform momentum will be further sustained with a view to toughen its resilience against shocks as well as to boost its role as a catalyst for durable long-term economic growth. To this end, the BSP will continue to ensure that a sound regulatory framework, that would allow Philippine banks to cope with challenges related to global financial volatilities, is in place. The BSP will also continue to pursue reforms promoting effective risk management, a stronger capital base and improved corporate governance standards, which are essential ingredients to ensuring stability in the financial system. The BSP will continue to craft banking regulations that are responsive, consistent with best practices and in line with the international financial architecture reform agenda. In addition, the BSP will continue to actively pursue initiatives to promote a deeper domestic capital market that will complement the presence of a

65 The Financial Stability Coordination Council (FSCC) is a voluntary interagency body created on 4 October 2011 and is composed of the Securities and Exchange Commission (SEC), the Insurance Commission (IC), the Philippine Deposit Insurance Corporation (PDIC), and the BSP.


resilient banking system. The policy thrust is to focus on enhancing further the infrastructure and the regulatory framework for capital market transactions to promote efficiency in trading, settlement and delivery of securities. At the same time, the BSP will continue to adopt policies and programs that would help develop a sound, responsive, and inclusive financial system that will broaden the access of the underserved and the unbanked segments of our population to the financial sector. Among the key strategies in the BSP’s financial inclusion agenda are putting in place banking regulations that leverage on technology to increase access to financial products; strengthening financial consumer protection; and raising financial education and awareness to new financial products and modes of delivery. The BSP will likewise remain proactive in ensuring the credibility and promoting a safe, sound and efficient payments and settlements system with the continued enhancement of its processes and provision of necessary infrastructure through the operation of the Philippines’ real time gross settlement system or the PhilPaSS. Finally, amid the increasing interconnectedness of global financial markets, the BSP will remain an active participant in regional and international cooperation programs and fora, in order to reap the benefits of collaborative engagement.


Annexes

Annex A. Banking Policies

Disclosure of Domestic Remittance Charges by All BSP-Supervised Entities with Domestic Remittance Transactions (BSP Circular No. 952 dated 22 March 2017)

The MB approved a regulation that seeks to level the playing field between banks and other non-bank BSP-supervised entities that offer domestic remittance transactions.

Last year, BSP Circular No. 928 was issued to amend regulations governing fees on retail bank products and services, including dormant deposit accounts. This Circular also required banks to charge all remittance fees upfront so that the sender is aware of the full cost of the transaction, and the exact amount to be received by the beneficiary. The intention is to improve the transparency of remittance charges and enable consumers to determine the most cost-efficient means of sending remittances.

The recently approved regulation will make the aforementioned provision of BSP Circular No. 928 applicable to all non-bank BSP-supervised entities that offer domestic remittance transactions.

This is in line with the objective of the BSP to foster a robust consumer regulatory environment to enable citizens to make wiser financial decisions and to contribute actively to the promotion of financial stability. Amendments to the Anti-Money Laundering Regulations of the Manual of Regulations for Banks and Manual of Regulations for Non-Bank Financial Institutions (BSP Circular No. 950 dated 15 March 2017)

The MB recently approved the amendments to BSP’s AML/CFT (Anti-Money Laundering-Combating the Financing of Terrorism) regulations. This is part of the BSP’s ongoing efforts to strengthen the financial

system’s safeguards against money laundering (ML) and terrorist financing (TF) balanced against the objective of also promoting financial inclusion of the unbanked.

Primary considerations in effecting the amendments were the latest Revised Implementing Rules and Regulations of the Anti-Money Laundering Act, as amended, which took effect on 7 January 2017; lessons learned from recent ML/TF cases; and the latest Financial Action Task Force (FATF) Recommendations and Guidance Papers, particularly on applying a risk-based approach to AML/CFT standards and striking a balance between financial integrity and financial inclusion.

The revised regulations emphasize the importance of a sound ML/TF risk assessment, the foundation of a proportionate, risk-based approach, to appropriately focus greater efforts and resources on areas posing higher risks, while reducing these for low-risk transactions. Requirements for group-wide AML compliance function and monitoring systems are incorporated for a holistic management and prevention of ML/TF risks.

The amendments feature refinements in the conduct of customer due diligence, more pragmatic definition of “official document” and the use of other reliable, independent source documents, data or information for customer identification and verification. The new rules likewise introduced the concept of a “restricted account” to cater to targeted unbanked sector, wherein minimal customer information are required subject to certain conditions, such as constraints in terms of activity. These will provide much greater flexibility in on-boarding unbanked customers, especially in rural areas where official IDs are not prevalent.

With the advent of new technologies in the financial system, the new rules recognize and allow the use of information and communication technology in the conduct of customer identification subject to implementation of appropriate measures to manage attendant risks.

Finally, to realize desired change towards effective implementation, escalation of supervisory


enforcement action is introduced in cases of heightened AML/CFT supervisory concerns as reflected in the overall AML risk rating of the covered person.

To facilitate transition, covered persons are allowed six months from effectivity of the revised regulations to update their AML/CFT policies. Guidelines on Social Media Risk Management (BSP Circular No. 949 dated 15 March 2017)

In line with the BSP’s thrust to foster a balanced and coherent approach to innovation, the MB recently approved the issuance of pioneering guidelines on social media risk management that advocate responsible use of social media by BSP Supervised Financial Institutions (BSFIs). BSP recognizes that social media presents vast potential benefits and opportunities for greater economic advancement and financial inclusion. The guidelines ensure that the necessary safeguards, governance structure and standards are in place to effectively manage the associated risks.

The issuance is timely and suitable considering that the Philippines, with over 48 million active social media accounts (or 47 percent of the entire population), is currently one of the world’s fastest growing nations in terms of social media usage and level of engagement across various social media platforms. Likewise, BSFIs have been aggressively leveraging on social media platforms for marketing, offering of innovative financial products and services and engaging their customers and stakeholders.

At the back of this evolving and increasingly dynamic operating environment, the new regulation underscores the importance of having a well-defined social media risk management strategy aligned with BSFIs’ strategic business goals/plans. Depending on the extent and degree of social media usage, the BSP Circular requires BSFIs to adopt commensurate risk management mechanisms and governance structure to effectively identify, measure, manage, and monitor risks arising from social media platforms. Aside from ensuring that the pertinent legal, reputational, strategic, operational, and compliance risks are addressed, the new guidelines

highlight added dimensions to these traditional risks which BSFIs need to consider in designing their social media risk management program. These include the growing threats on information security and fraud such as account take over, malware attacks, and phishing and spoofing schemes, among others.

A BSFI’s social media risk management program should, at a minimum, be able to address potential reputational risks as well as provide guidance on acceptable use of social media by employees, whether for official or personal purposes. BSFIs, in formulating and implementing their social media policies, should see to it that existing rules and regulations on financial consumer protection, cyber-security, outsourcing and anti-money laundering, among others, are complied with. Amendments to the Manual of Regulations for Banks (BSP Circular No. 948 dated 1 March 2017)

The Philippine Clearing House Corporation (PCHC) issued on 24 January 2017 a Memorandum to All Clearing Banks/Institutions clarifying the advisories previously issued with regard to the handling of checks under the new Check Image Clearing System or CICS.

Memorandum Circular No. 3306 clarifies that the reminders stated in the Advisories are issued primarily for the protection of the customers. Non-conformity with the reminders should not be a reason for non-acceptance of the checks.

PCHC specifically states that checks which are folded or have staple holes should be accepted by banks as long as the image and the information on the check are still clearly visible upon unfolding or inspection.

Further, checks without the word “only” after the amount written on the check, with empty spaces not ruled out, or information not written in dark-colored ink should not be reasons for non-acceptance by banks. No standard format on the date on the checks is required.

The BSP enjoins banks to remain prudent in implementing the new check clearing process but at the same time not too rigid in accepting checks.


The BSP upholds consumer protection and promotes efficient payment systems which are ingredients in maintaining financial stability.

Supervisory Policy on the Grant of a License/Authority (BSP Circular No. 947 dated 15 February 2017)

Consistent the with BSP mandate to promote a safe and sound banking system, the MB approved the enhanced Supervisory Policy on the Grant of a License/Authority (Licensing Policy) to strengthen and align its screening function with international standards and provide more consistency in how the risk-focused supervision is applied to the licensing process. This will also rationalize and streamline the criteria that BSFI need to comply with to facilitate ease of doing business. The BSP thereby reaffirmed its policy of not restricting the scope of risk-taking activities of BSFIs, provided the licenses and/or authorities are in line with their business model and strategic direction, and the BSFIs demonstrate the capacity to implement these strategies and the ability to manage attendant risks.

The enhanced Licensing Policy sets forth BSP’s expectations and criteria in granting licenses and/or authorities, as well as the right to reject applications that do not meet the criteria and/or deploy appropriate enforcement actions against BSFIs that no longer meet the criteria or standards. To be eligible, BSFIs are expected to meet three basic prudential criteria (i.e. CAMELS rating of at least “3”; governance and independent control functions that meet what is considered appropriate given the BSFI’s size, complexity of activities and risk profile; and compliance with BSP directives). These criteria are intended to incorporate the licensing process into BSP’s enforcement regime, anchored on good governance, sound risk management system and effective controls system.

The enhanced Licensing Policy features a 3-tier licensing system to facilitate ease of doing business and submission of applications. Type A category are license applications where compliance with the prudential screening criteria is a pre-condition for the applicant BSFI to be considered eligible. Type B category are license applications that do not require

compliance with prudential screening criteria. Type C categories are for activities which no longer require prior BSP approval but subject to submission of reports/certification/notification that pre-qualification requirements are met. Along with the rationalized and simplified prudential criteria, the 3-tier licensing system promotes transparency of the licensing process and facilitates much faster action on applications.

Guidelines for Virtual Currency (VC) Exchanges (BSP Circular No. 944 dated 06 February 2017)

Consistent with the policy of the BSP to provide an environment that encourages financial innovation while at the same time ensuring that (1) the Philippines shall not be used for ML or terrorist TF activities, and (2) the financial system and financial consumers are adequately protected, the MB recently approved the regulatory framework for VC exchanges and similar entities operating in the Philippines. The MB decided to move ahead in adopting a formal regulatory framework and in recognition of the rapid growth of VC-based payments and remittance transactions. Such transactions were estimated at around US$ 5 - 6 million per month for certain major players.

The new regulation, a pioneer in Asia, seeks to balance the interests of promoting technological innovations with the potential to improve the level of inclusion and efficiency in the financial system, and to proactively address emerging risks to the system arising out of these new technologies. Specifically, it does not cover VC creators but only focuses on entities facilitating the conversion or exchange of any VC into fiat currency or vice versa. Such VC exchanges serve as the crucial link of VCs with the financial system.

Conceptually, these VC exchanges are considered to be and are similarly treated as companies offering money or value transfer services. The latter are classified as remittance and transfer companies (RTCs) under the new BSP framework for money service businesses. Thus, the basic requirements for RTCs such as, registration, minimum capital, internal


controls, regulatory reports and compliance with the Anti-Money Laundering Act, as amended, and its implementing rules and regulations, shall likewise apply to VC exchanges. The approach is essentially aligned with the June 2015 Financial Action Task Force Guidance for a Risk-Based Approach to VCs. It also promotes a level regulatory playing field for financial service providers performing similar services.

VC exchanges are required to execute a Deed of Undertaking to implement, among others, minimum standards of consumer protection. Transactional requirements for large value pay-outs were also adopted to manage ML/TF risk. Finally, technology risk management is a minimum requirement for VC exchanges given the nature of their business.

Major violations of specific provisions of the VC exchange regulatory framework as well as non-compliance with the Deed of Undertaking will be penalized and may result in the cancellation of the BSP Certificate of Registration or other applicable sanctions depending on the gravity. BSP-registered financial institutions, particularly banks, are prohibited from dealing with unregistered VC exchanges or similar entities.

Extension of the Basel III Leverage Ratio Monitoring Period (BSP Circular No. 943 dated 26 January 2017)

The MB deferred by one year the full adoption of the Basel III leverage ratio standard in view of recent revisions to the said global standard by the Basel Committee on Banking Supervision (BCBS). Under Circular No. 881 dated 9 June 2015, U/KBs and their subsidiaries had been scheduled to wind-up the monitoring period and begin adhering to the five percent minimum leverage ratio by 01 January 2017.

The MB decided on the deferment considering BCBS’ issuance of the consultative document, “Revisions to the Basel III leverage ratio framework” in April 2016. The BCBS is set to finalize the said document by end-2016. In relation to this, the MB also extended the monitoring period for the leverage ratio until 31 December 2017. The additional year for monitoring provides more time for banks to calibrate their exposures in view of the requirements.

Under Basel III, the leverage ratio acts as a supplementary measure to the risk-based CAR. It serves as a simple, non-risk-based “backstop” measure that intends to restrict the build-up of leverage in the banking system. The leverage ratio relates the level of a bank’s Tier 1 capital against its total exposures. Effectively, this means that the maximum exposure that a bank can keep is 20x its Tier 1 capital.

Basel III reforms are integral to the banking reform agenda of the BSP which is ultimately aimed at promoting financial stability.

Amendment to Section 4511N of the Manual of Regulations for Non-Bank Financial Institutions (BSP Circular No. 942 dated 20 January 2017)

The MB has approved an updated comprehensive framework aimed at enhancing BSP oversight over the operations of Money Service Businesses (MSBs) [i.e. RTCs, Money Changers (MCs)/Foreign Exchange Dealers (FXDs)], for the primary purpose of promoting more effective compliance with the Anti-Money Laundering Law, as amended, and its Implementing Rules and Regulations.

As of June 2016, there were more than 18,000 BSP-registered MSBs (5,300 head offices and 12,700 branches), 6,700 of which are also BSP-authorized pawnshops. The MSB in the Philippines is continuously growing and evolving to support the expanding needs of its customers. It now includes, among others, the electronic money business subsidiaries of telecommunication companies.

Under the new rules, the BSP will regulate all RTCs such as Remittance Agents, Remittance Platform Providers, and E-money Issuers. RTCs and other MSBs are now required to notify the BSP in cases of: commencement of operations, new accreditation of Remittance Sub-agents (RSAs), change of tie-up partner/s, transfer of location, and closure of business. They shall be further required to obtain prior BSP approval in the event of change in ownership or control. They shall also submit activity level reports to the BSP. Finally, the new rules require MSBs to register with the Anti-Money Laundering


Council Secretariat for purposes of covered and suspicious transactions reporting.

Since MSBs are numerous but generally interconnected, BSP will adopt a network-based regulatory approach. Under this approach, an entity that operates an MSB especially a remittance business shall be held responsible for monitoring the operations of its remittance network for compliance with rules and regulations as well as for their accreditation and training. The new framework also introduces different classifications of MSBs depending on their average monthly network volume of transactions. There will be corresponding minimum capital requirement for each type. Registration fees and annual service fees shall also be based on the said classification scheme.

MSBs are required as part of the registration process, to execute a Deed of Undertaking, which includes, among others, compliance with all the provisions of the Anti-Money Laundering Act of 2001 (Republic Act No. 9160, as amended) and its revised implementing rules and regulations as well as the implementing rules issued by the BSP, and adoption of the minimum standards of consumer protection in the areas of disclosure and transparency, protection of client information, fair treatment, effective recourse, and financial education.

Existing MSB operators are given six months from the date of the effectivity of the new regulations to secure BSP registration. Upon the expiration of the transitory period, all Certificates of Registration (COR) previously issued by the BSP shall be considered automatically cancelled. Banks are prohibited from doing business with unregistered MSBs.

The BSP is also limiting the ability of MSBs to transact in cash. Large value pay-outs of more than P500,000 or its foreign currency equivalent, in any single transaction with customers or counterparties, shall only be made via check payment or direct credit to deposit accounts. Also, FXDs/MCs shall be allowed to sell foreign currencies in the amount not exceeding US$10,000 or its equivalent and not to exceed US$50,000, or its equivalent per month per customer. However, exemption or higher limits may

be granted by the BSP upon application if justified by the business model of the FXDs/MCs.

Major violation/s of specific provisions of the new regulation and non-compliance with the Deed of Undertaking may result in the cancellation of the BSP COR or other sanctions depending on the gravity.

The recently approved MSB oversight framework is part of the package of reforms being instituted by the BSP to promote a more responsive regulatory environment for non-bank financial institutions under the BSP’s jurisdiction.

Amendments to the Regulations on Past Due and Non-Performing Loans (BSP Circular No. 941 dated 20 January 2017)

The MB has approved the amendments to the regulatory definitions of past due and non-performing exposures, including restructured loans, to align with predominant global conventions and to achieve internal consistency of classification across all types of loan products regardless of payment schedule. These refined definitions are part of a series of reforms instituted by the BSFI. The revised definitions are likewise intended to complement the BSFIs’ credit risk management as part of their internal credit rating and classification systems.

Under the new definition, the general rule is that an account that does not pay on contractual due date is deemed past due the following day. However, BSFIs are allowed to provide for a cure period policy on a credit product-specific basis within which clients may be allowed to catch up on a late payment without being considered as past due, provided that the cure period policy is based on actual collection experience and reasonable judgment that support tolerance of occasional payment delays.

On the other hand, an account or exposure is considered non-performing, even without any missed contractual payments, when it is deemed impaired under existing applicable accounting standards, classified as doubtful or loss, in litigation, and/or there is evidence that full repayment of principal and interest is unlikely without foreclosure of collateral, in the case of secured accounts. All other accounts,


even if not considered impaired, shall be considered non-performing if any contractual principal and/or interest are past due for more than ninety (90) days, or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement.

Shown below is a comparison of the revised against the existing guidelines based on the mode of payment:

COMPARISON WITH THE OLD POLICY BASED ON THE MODE OF PAYMENT

New Policy Old Policy

Mode of Payment Past Due NPL Past Due NPL

Monthly Installment

1 day after due date excluding cure period, if any

Past due for more than 90 days

3 installments missed

Installments unpaid for more than 90 days

Quaterly/ Semestral/ Annual

1 installment missed Past due for more

than 30 days

At Maturity Not paid at maturity

Daily/weekly/ semi-monthly

1 day after contractual due date; 11th day if with cure period

Arrears is 10% of O/S balance

Upon past due

Microfinance (PAR)

1 installment

Upon past due

The revised policy also provides a clearer basis for a restructured loan as its definition now includes the purpose for restructuring, which is to lessen the financial difficulty of the borrower and maximize collection and realizable economic value on an obligation within a reasonable period of time.

To facilitate transition, BSFIs are given until 31 December 2017 to make the necessary revisions in their management information and reporting systems relating to their past due and non-performing exposures. Effective 01 January 2018, past due and non-performing exposures shall be mandatorily reported in accordance with the requirements of the revised policy. Guidelines on Deposit and Cash Servicing Outside of Bank Premises (BSP Circular No. 940 dated 20 January 2017)

In line with the thrust of the BSP to create an enabling regulatory environment for innovations and allow banks to exponentially expand reach and serve clients more efficiently, the MB recently approved the guidelines for new bank service channels and

relaxed existing regulations on deposit taking activities outside bank premises.

Under the new regulations, banks are now allowed, with prior BSP authorization, to serve clients through cash agents contracted by banks to accept and disburse cash in its behalf, facilitating online self-service deposits, withdrawals and fund transfers, as well as bills payment. Cash agents can also perform Know-Your-Customer procedures as well as collect and forward application documents for loan and account opening. They may also sell and service insurance as may be authorized by the Insurance Commission. These cash agents are typically cash rich third party entities with many outlets that conduct regular business in fixed locations anywhere in the country, such as convenience stores, pharmacies and other highly accessible retail outlets.

Cash agents enable banks to leverage on innovative digital solutions to serve a wider client base, particularly in the low-income and rural areas where there is limited commercial incentive to establish a full branch or even a micro-banking office (MBO). Through this new cost-efficient service channel, serving the currently unbanked and low-income segments can become more viable and sustainable for banks. Data from the BSP shows that more than 36% of all the municipalities in the country have no banking presence although most of these are served by a variety of non-bank financial institutions like pawnshops, cooperatives, and lending investors. In addition to these new service delivery models, the MB also relaxed existing regulations on offsite deposit servicing as well as deposit solicitation, by removing highly prescriptive operational requirements and conditions before banks may engage and offer these services. The amended regulations provide banks with more flexibility in designing appropriate and cost-efficient ways to render deposit pick-up and delivery services and as a result, enhance client experience.

To ensure the safety and soundness of banks as well as to uphold consumer protection, the guidelines emphasize banks’ responsibility for ensuring the adequacy of risk management and internal control


systems for these liberalized deposit servicing activities. The BSP will evaluate the quality and sufficiency of these risk management and control systems before granting authorization to perform banking services outside bank premises.

Annex B. Capital Market Reforms66

Philippine Stock Exchange (PSE) pushes structural reforms · In February, the PSE and Dragonpay Corporation

formally launched PSE's e-payment system aimed to expand available payment channels for its retail data clients and improve convenience in purchasing PSE products and services. Under the agreement, the PSE will utilize Dragonpay’s e-payment system to process the purchase of retail data and PSE reports, certification of stock price for investors and certificate of good standing for listed companies. The system will also enable real-time tracking of payment and generation of electronic report to effectively monitor transactions.

· In the same month, the PSE inked a Memorandum of Agreement (MOA) with the Public-Private Partnership (PPP) Center of the Philippines that will formalize its partnership for information sharing to facilitate the processing of listing applications.

· In March, the PSE signed an agreement with the Bankers Association of the Philippines (BAP) to resume discussions on the purchase of BAP's 28.9 percent stake in the Philippine Dealings System Holdings Corporation (PDS). The PSE and BAP intend to sign a new Share Purchase Agreement that will outline the terms of the acquisition, including securing the necessary regulatory approvals. BSP strengthens regulatory frameworks

· In January, the BSP approved an updated comprehensive framework under Circular No.

66 Source: Bangko Sentral ng Pilipinas, and Philippine Stock Exchange Q1 2017 Media Releases.

950, Series of 2017 containing the amendments to Anti-Money Laundering-Combating the Financing of Terrorism (AML/CFT) regulations. One of the major changes was aimed at enhancing BSP oversight over the operations of MSBs such as RTCs, money changers or foreign exchange dealers.

· The new rules likewise featured refinements in the conduct of customer due diligence, more pragmatic definition of “official document” and the use of other reliable, independent source documents, data or information for customer identification and verification.

· In February, the BSP adopted a formal regulatory framework for VC in recognition of the rapid growth of VC-based payments and remittance transactions. The new regulation seeks to balance the interests of promoting technological innovations with the potential to improve the level of inclusion and efficiency in the financial system, and to proactively address emerging risks to the system arising out of these new technologies.

Report on Economic and Financial Developments – First Quarter 2017 Statistical Tables

1 Gross National Income and Gross Domestic Product by Industrial Origin

1a Gross National Income and Gross Domestic Product by Expenditure Shares

2 Selected Labor, Employment and Wage Indicators

3 Cash Operations of the National Government

4 Consumer Price Index in the Philippines

4a Consumer Price Index in the National Capital Region

4b Consumer Price Index in Areas Outside the National Capital Region

5 Monetary Indicators

6 Selected Domestic Interest Rates

7 Number of Financial Institutions

8 Total Resources of the Philippine Financial System

9 Ratios of Non-Performing Loans and Loan Loss Provisions to Total Loans of the Banking System

10 Stock Market Transactions

11 Balance of Payments

12 International Reserves of the Bangko Sentral ng Pilipinas

13 Exchange Rates of the Peso (Peso per Unit of Foreign Currency)

13a Exchange Rates of the Peso (Unit of Foreign Currency per Peso)

13b Effective Exchange Rate Indices of the Peso

14 Total External Debt

15 Selected Foreign Debt Service Indicators

16 Selected Foreign Interest Rates

17 Balance Sheet of the Bangko Sentral ng Pilipinas

18 Income Statement of the Bangko Sentral ng Pilipinas

1 GROSS NATIONAL INCOME AND GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGINfor periods indicated

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Agriculture, Hunting, Forestry and Fishing 179.7 167.0 155.8 216.3 181.4 166.9 155.6 215.8 173.6 163.6 160.2 213.0 182.1

Industry 561.3 614.6 558.1 657.3 592.4 654.6 594.7 703.8 647.4 704.4 646.9 759.6 686.7Mining and Quarrying 21.7 30.3 16.4 13.3 21.1 27.7 16.4 15.2 23.5 26.6 16.1 16.9 18.8Manufacturing 400.8 414.7 378.6 472.4 425.0 434.2 400.7 501.2 459.0 461.1 428.0 536.2 493.6Construction 87.3 109.0 98.5 114.5 91.8 129.5 108.0 127.7 104.8 147.0 126.6 141.4 113.4Electricity, Gas and Water Supply 51.5 60.6 64.6 57.2 54.4 63.2 69.6 59.7 60.0 69.8 76.2 65.2 60.8

Services 941.0 1,052.3 1,001.4 1,060.6 993.6 1,123.2 1,074.1 1,144.1 1,068.4 1,215.1 1,147.3 1,226.7 1,141.1Transportation, Storage and Communication 130.0 144.0 119.1 144.9 141.0 153.6 128.7 158.1 148.4 164.4 134.6 168.2 155.6Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 255.2 288.4 312.0 330.2 270.3 307.6 338.3 354.3 290.7 334.9 359.7 377.4 311.4Financial Intermediation 125.5 136.7 124.0 129.2 130.9 144.6 130.7 140.4 143.7 154.6 141.8 148.1 154.3Real Estate, Renting and Busines Activities 181.2 208.7 204.5 203.6 192.6 222.3 220.5 219.3 209.4 241.8 240.1 239.2 223.8Public Administration and Defense; Compulsory Social Security 69.0 83.4 71.2 70.3 66.2 82.8 73.1 75.4 69.7 88.1 75.7 85.4 73.5Other Services 180.1 191.1 170.6 182.4 192.5 212.3 183.0 196.5 206.7 231.4 195.4 208.2 222.5

Gross Domestic Product 1,682.0 1,833.8 1,715.4 1,934.3 1,767.4 1,944.7 1,824.4 2,063.7 1,889.4 2,083.2 1,954.5 2,199.3 2,009.9

Net Primary Income 372.0 365.0 358.5 379.3 381.3 372.7 377.5 411.5 417.1 395.3 393.0 425.0 433.5

Gross National Income 2,054.0 2,198.8 2,073.9 2,313.5 2,148.7 2,317.4 2,201.9 2,475.2 2,306.5 2,478.5 2,347.5 2,624.3 2,443.4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Agriculture, Hunting, Forestry and Fishing 0.9 3.3 -2.3 4.1 1.0 -0.1 -0.1 -0.2 -4.3 -2.0 3.0 -1.3 4.9

Industry 4.8 9.0 7.8 9.2 5.5 6.5 6.5 7.1 9.3 7.6 8.8 7.9 6.1Mining and Quarrying 17.4 10.8 12.7 6.3 -2.5 -8.6 0.5 14.0 11.4 -4.0 -2.0 10.8 -20.0Manufacturing 7.0 11.1 7.5 7.7 6.0 4.7 5.8 6.1 8.0 6.2 6.8 7.0 7.5Construction -4.2 3.9 12.0 17.1 5.1 18.8 9.6 11.6 14.2 13.5 17.2 10.7 8.2Electricity, Gas and Water Supply 0.5 4.3 2.5 7.4 5.8 4.4 7.7 4.5 10.2 10.3 9.6 9.2 1.4

Services 7.0 6.0 5.7 5.5 5.6 6.7 7.3 7.9 7.5 8.2 6.8 7.2 6.8Transportation, Storage and Communication 8.2 6.8 5.3 5.5 8.4 6.6 8.0 9.1 5.3 7.0 4.6 6.4 4.9Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 6.3 6.7 7.0 3.4 5.9 6.7 8.4 7.3 7.5 8.9 6.3 6.5 7.1Financial Intermediation 5.7 6.1 8.4 8.9 4.3 5.8 5.4 8.7 9.7 6.9 8.5 5.5 7.4Real Estate, Renting and Busines Activities 9.5 7.9 5.9 8.9 6.3 6.5 7.8 7.7 8.7 8.8 8.9 9.1 6.9Public Administration and Defense; Compulsory Social Security 7.0 1.8 -2.4 11.5 -4.0 -0.7 2.6 7.3 5.2 6.4 3.7 13.3 5.5Other Services 5.5 4.3 5.0 1.5 6.9 11.1 7.3 7.7 7.3 9.0 6.8 6.0 7.6

Gross Domestic Product 5.6 6.8 5.6 6.6 5.1 6.0 6.4 6.7 6.9 7.1 7.1 6.6 6.4

Net Primary Income 11.4 9.6 -1.9 2.7 2.5 2.1 5.3 8.5 9.4 6.1 4.1 3.3 3.9

Gross National Income 6.6 7.2 4.2 5.9 4.6 5.4 6.2 7.0 7.3 7.0 6.6 6.0 5.9

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Agriculture, Hunting, Forestry and Fishing 0.1 0.3 -0.2 0.5 0.1 . . . -0.4 -0.2 0.3 -0.1 0.5

Industry 1.6 3.0 2.5 3.0 1.8 2.2 2.1 2.4 3.1 2.6 2.9 2.7 2.1Mining and Quarrying 0.2 0.2 0.1 . . -0.1 . 0.1 0.1 -0.1 . 0.1 -0.2Manufacturing 1.6 2.4 1.6 1.9 1.4 1.1 1.3 1.5 1.9 1.4 1.5 1.7 1.8Construction -0.2 0.2 0.6 0.9 0.3 1.1 0.5 0.7 0.7 0.9 1.0 0.7 0.5Electricity, Gas and Water Supply . 0.1 0.1 0.2 0.2 0.1 0.3 0.1 0.3 0.3 0.4 0.3 .

Services 3.9 3.5 3.3 3.1 3.1 3.9 4.2 4.3 4.2 4.7 4.0 4.0 3.8Transportation, Storage and Communication 0.6 0.5 0.4 0.4 0.6 0.5 0.6 0.7 0.4 0.6 0.3 0.5 0.4Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 0.9 1.1 1.3 0.6 0.9 1.0 1.5 1.2 1.2 1.4 1.2 1.1 1.1Financial Intermediation 0.4 0.5 0.6 0.6 0.3 0.4 0.4 0.6 0.7 0.5 0.6 0.4 0.6Real Estate, Renting and Busines Activities 1.0 0.9 0.7 0.9 0.7 0.7 0.9 0.8 0.9 1.0 1.1 1.0 0.8Public Administration and Defense; Compulsory Social Security 0.3 0.1 -0.1 0.4 -0.2 . 0.1 0.3 0.2 0.3 0.1 0.5 0.2Other Services 0.6 0.5 0.5 0.1 0.7 1.2 0.7 0.7 0.8 1.0 0.7 0.6 0.8


. Rounds off to zero

Note: Total may not add up due to rounding.Data on real GDP and its components are based on 2000 prices. The use of terminology Gross National Income (GNI) in place of Gross National Product (GNP) has been adopted in the revised/rebased Philippine System of National Accounts (PSNA) in accordance with the 1993/1998 System of National Accounts prescribed by the United Nations. Source of basic data: Philippine Statistics Authority (PSA)

2017

2017

2017CONTRIBUTION TO GDP GROWTH (in percent)

LEVELS (in billion pesos; at constant 2000 prices)

ANNUAL CHANGE (in percent)

2016

2014 2015

2014 2015 2016

2016

2014 2015

1aGROSS NATIONAL INCOME AND GROSS DOMESTIC PRODUCT BY EXPENDITURE SHARESfor periods indicated

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Household Final Consumption Expenditure 1,161.4 1,212.1 1,172.8 1,406.6 1,231.6 1,289.8 1,245.1 1,500.1 1,319.5 1,386.5 1,334.3 1,592.5 1,394.7

Government Final Consumption Expenditure 185.2 219.5 168.9 155.3 185.2 224.3 195.0 179.5 207.1 254.5 201.1 187.5 207.4

Capital Formation 370.0 315.4 386.6 481.1 428.2 405.7 445.5 559.0 563.0 528.5 542.3 640.9 607.8 Fixed Capital 373.8 358.9 379.8 427.8 425.3 406.4 442.6 526.2 545.6 529.7 555.2 623.8 610.0

Construction 135.0 163.9 152.6 180.7 142.2 190.4 167.6 201.6 163.7 224.4 199.1 220.3 179.9Durable Equipment 202.7 163.1 194.3 203.0 244.2 183.1 237.2 274.2 335.6 268.2 312.3 346.3 377.7Breeding Stock & Orchard Dev't 26.1 22.5 18.3 30.4 26.1 23.0 19.0 31.2 27.1 23.8 19.6 32.3 28.0Intellectual Property Products 9.9 9.5 14.5 13.7 12.7 9.9 18.8 19.2 19.1 13.3 24.3 24.8 24.3

Changes in Inventories -3.8 -43.5 6.8 53.3 3.0 -0.7 2.9 32.7 17.5 -1.3 -12.9 17.2 -2.2

Exports 811.6 906.8 964.8 723.3 899.5 937.0 1,054.1 804.9 991.4 1,036.6 1,149.3 912.9 1,192.9

Less: Imports 859.1 802.4 966.8 847.6 968.4 909.5 1,106.1 1,000.2 1,172.9 1,140.5 1,253.4 1,154.6 1,377.8

Statistical Discrepancy 12.9 -17.5 -10.9 15.5 -8.7 -2.7 -9.1 20.5 -18.8 17.7 -19.0 20.1 -15.2

Gross Domestic Product 1,682.0 1,833.8 1,715.4 1,934.3 1,767.4 1,944.7 1,824.4 2,063.7 1,889.4 2,083.2 1,954.5 2,199.3 2,009.9

Net Primary Income 372.0 365.0 358.5 379.3 381.3 372.7 377.5 411.5 417.1 395.3 393.0 425.0 433.5

Gross National Income 2,054.0 2,198.8 2,073.9 2,313.5 2,148.7 2,317.4 2,201.9 2,475.2 2,306.5 2,478.5 2,347.5 2,624.3 2,443.4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Household Final Consumption Expenditure 6.3 5.6 5.0 5.3 6.0 6.4 6.2 6.6 7.1 7.5 7.2 6.2 5.7

Government Final Consumption Expenditure 3.4 1.5 -1.1 11.1 . 2.2 15.5 15.5 11.8 13.5 3.1 4.5 0.2


Construction -5.5 7.2 12.8 19.0 5.3 16.2 9.9 11.6 15.1 17.9 18.8 9.3 9.9Durable Equipment 4.8 3.9 11.3 5.2 20.5 12.3 22.0 35.1 37.4 46.5 31.7 26.3 12.5Breeding Stock & Orchard Dev't -4.4 -2.0 -1.6 2.3 0.1 2.3 3.6 2.6 3.8 3.6 3.1 3.7 3.1Intellectual Property Products 15.7 38.6 46.4 9.5 28.3 4.7 29.6 40.7 50.4 34.2 28.7 29.0 27.2

Changes in Inventories 87.9 -34.9 -85.2 -24.8 178.4 98.5 -57.5 -38.6 489.7 -88.7 -549.5 -47.6 -112.6

Exports 13.3 10.3 14.6 12.3 10.8 3.3 9.3 11.3 10.2 10.6 9.0 13.4 20.3

Less: Imports 17.9 4.9 8.0 9.5 12.7 13.3 14.4 18.0 21.1 25.4 13.3 15.4 17.5

Statistical Discrepancy 281.2 -66.3 -264.3 40.7 -167.1 84.7 16.3 31.8 -116.4 760.3 -108.6 -1.6 19.1


Net Primary Income 11.4 9.6 -1.9 2.7 2.5 2.1 5.3 8.5 9.4 6.1 4.1 3.3 3.9

Gross National Income 6.6 7.2 4.2 5.9 4.6 5.4 6.2 7.0 7.3 7.0 6.6 6.0 5.9

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Household Final Consumption Expenditure 4.3 3.8 3.5 3.9 4.2 4.2 4.2 4.8 5.0 5.0 4.9 4.5 4.0

Government Final Consumption Expenditure 0.4 0.2 -0.1 0.9 . 0.3 1.5 1.2 1.2 1.6 0.3 0.4 .


Construction -0.5 0.6 1.1 1.6 0.4 1.4 0.9 1.1 1.2 1.7 1.7 0.9 0.9Durable Equipment 0.6 0.4 1.2 0.6 2.5 1.1 2.5 3.7 5.2 4.4 4.1 3.5 2.2Breeding Stock & Orchard Dev't -0.1 . . . . . . . 0.1 . . 0.1 .Intellectual Property Products 0.1 0.2 0.3 0.1 0.2 . 0.3 0.3 0.4 0.2 0.3 0.3 0.3

Changes in Inventories 1.7 -0.7 -2.4 -1.0 0.4 2.3 -0.2 -1.1 0.8 . -0.9 -0.8 -1.0

Exports 6.0 4.9 7.6 4.4 5.2 1.6 5.2 4.2 5.2 5.1 5.2 5.2 10.7

Less: Imports 8.2 2.2 4.4 4.1 6.5 5.8 8.1 7.9 11.6 11.9 8.1 7.5 10.8

Statistical Discrepancy 1.3 -0.4 -1.1 0.2 -1.3 0.8 0.1 0.3 -0.6 1.0 -0.5 . 0.2


. Rounds off to zero

Accounts (PSNA) in accordance with the 1993/1998 System of National Accounts prescribed by the United Nations. Total may not add up due to rounding.

Source : Philippine Statistics Authority (PSA)

LEVELS (in billion pesos; at constant 2000 prices)

2015 2016

2014 2015 2016

Note: Data on Real GDP and its components are based on 2000 prices. The use of terminology Gross National Income (GNI) in place of Gross National Product (GNP) has been adopted in the revised/rebased Philippine System of National

CONTRIBUTION TO GDP GROWTH (in percent)

2014 2015 2016

2017

2017

2017

ANNUAL CHANGE (in percent)

2014

2 SELECTED LABOR, EMPLOYMENT AND WAGE INDICATORS

Q1w/ Leyte w/o Leyte5 w/ Leyte w/o Leyte w/ Leyte w/ Leyte w/o Leyte w/ Leyte w/o Leyte w/ Leyte w/ Leyte w/ Leyte

Employment Status 1

Labor Force (in thousands) 41,379 41,343 43,206 42,520 41,637 43,289 41,727 43,286 43,704 42,109 Employed 38,651 38,741 40,837 40,052 39,213 40,664 39,202 40,954 41,664 39,347

Employment Created2 1,253 752 44 1,777 1,889 (705)Agriculture 186 (123) (786)Industry 812 825 136 Services 779 1,186 (53)

Unemployed 2,728 2,602 2,367 2,468 2,424 2,625 2,525 2,332 2,040 2,761 Underemployed 7,118 7,180 7,478 7,881 7,716 7,431 7,148 7,134 7,508 6,398

Labor Force Participation Rate (%) 64.6 63.7 63.4 63.3 63.4 63.5 63.7 63.2 63.6 60.7 Employment Rate (%) 93.4 93.7 94.5 94.2 94.2 93.9 93.9 94.6 95.3 93.4 Unemployment Rate (%) 6.6 6.3 5.5 5.8 5.8 6.1 6.1 5.4 4.7 6.6 Underemployment Rate (%) 18.4 18.5 18.3 19.7 19.7 18.3 18.2 17.4 18.0 16.3 NCR Labor Turnover Rate (%) 1.2 1.4 1.0 2.3 3.7 3.4

Overseas Employment (Deployed, in thousands)2 1,833 1,844 Land-based 1,431 1,438 Sea-based 402 407

Strikes

Number of New Strikes 2 5 15 0 3 5 7 1 Number of Workers Involved 51 730 3,106 0 650 283 2173 214

Nominal Daily Wage Rates (in pesos)3

Non-Agricultural

NCR 466.0 481.0 491.0 481.0 491.0 491.0 491.0 491.0Regions Outside NCR 362.5 362.5 378.5 362.5 364.0 378.5 378.5 378.5

Agricultural

NCR

Plantation 429.0 444.0 454.0 444.0 454.0 454.0 454.0 454.0 Non-Plantation 429.0 444.0 454.0 444.0 454.0 454.0 454.0 454.0Regions Outside NCR

Plantation 337.5 337.5 353.5 337.5 337.5 353.5 353.5 353.5 Non-Plantation 322.0 335.0 335.0 335.0 335.0 335.0 335.0 348.0

Real Daily Wage Rates (in pesos), 2006=100 4

Non-Agricultural

NCR 356.5 363.8 361.6 364.7 369.2 366.1 361.6 357.9Regions Outside NCR 260.2 257.8 265.2 259.1 250.7 268.3 265.2 262.1

Agricultural

NCR

Plantation 328.2 335.9 334.3 336.6 341.4 338.6 334.3 330.9 Non-Plantation 328.2 335.9 334.3 336.6 341.4 338.6 334.3 330.9Regions Outside NCR

Plantation 242.3 240.0 247.7 241.2 240.0 250.5 247.7 244.8 Non-Plantation 224.7 229.5 223.5 228.5 225.9 225.1 223.5 230.0

Notes:1

2 Details may not add up to totals due to rounding.3

4

5 Annual 2014 data refer to the average estimates for April, July and October survey rounds only excluding data of the province of Leyte.P Preliminary

Sources: Philippine Overseas Employment Administration (POEA), National Wages and Productivity Commission (NWPC), and National Conciliation and Mediation Board (NCMB) and Philippine Statistics Authority (PSA)

Starting 10 November 1990, adjustments in the minimum legislated wage rates are being determined by the Regional Tripartite Wages Productiviity Board. Starting 2010, real terms is computed using 2006 as base year.

Starting with January 2007 LFS round, the population projection based on the 2000 Census of Population was adopted to generate the labor force statistics per NSCB Resolution No. 1 Series of 2005.

Ave/Total Q1 Q2 Q3

Source of data for both nominal and real wage rates is the National Wages and Productivity Commission. Includes basic minimum wage and cost of living allowance (COLA). Starting 2006, annual average/total is as of December.

2014Ave/Total

2015 2016 2016p

Q42017p

Ave/Total

3 CASH OPERATIONS OF THE NATIONAL GOVERNMENT for periods indicated in billion pesos

2017 2017Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1

Program

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jun-16Revenues 398.4 535.3 491.3 483.5 470.5 615.2 519.2 504.0 479.0 622.0 545.8 549.2 532.4 - Ratio to GDP 13.8 17.1 16.2 13.5 15.5 18.5 16.3 13.3 14.6 17.2 15.7 13.4 14.9 -

Tax 355.4 469.1 449.9 444.7 403.7 489.4 462.7 459.8 425.3 557.6 489.7 507.7 479.6 -Non-tax 43.0 66.3 41.4 38.9 66.9 125.8 56.6 44.2 53.6 64.4 56.1 41.4 52.8 -

Expenditures 482.5 505.2 468.4 525.5 504.0 567.9 558.5 600.1 591.5 629.8 639.2 688.9 615.4 - Ratio to GDP 16.7 16.1 15.4 14.7 16.6 17.1 17.5 15.9 18.1 17.4 18.3 16.8 17.2 -

Interest Payments 103.1 56.6 97.7 63.8 100.6 55.5 99.6 53.6 102.6 51.1 96.1 54.7 97.9 -Equity 0.1 0.3 0.8 0.5 0.1 0.2 . 0.4 8.2 0.3 . 3.2 0.0 -Net Lending 4.9 1.5 2.0 5.0 2.2 0.4 1.8 5.2 3.5 0.6 -0.4 11.6 -1.7 -Subsidy 1.2 48.3 12.7 18.2 3.7 40.3 11.8 22.2 8.2 28.4 45.8 20.8 19.7 -Allotment to LGUs 85.1 89.0 85.8 84.4 97.1 96.8 96.8 96.8 121.7 108.5 108.1 111.5 122.3 -Tax Expenditures 0.1 12.3 0.7 12.9 5.6 1.9 0.5 5.6 0.1 3.5 0.9 7.8 0.2 -Others 288.0 297.1 268.7 340.8 294.7 372.8 347.9 416.2 347.1 437.6 388.8 479.3 377.1 -

Surplus/Deficit (-) -84.1 30.1 22.9 -42.0 -33.5 47.3 -39.3 -96.1 -112.5 -7.8 -93.4 -139.7 -83.0 - Ratio to GDP -2.9 1.0 0.8 -1.2 -1.1 1.4 -1.2 -2.5 -3.4 -0.2 -2.7 -3.4 -2.3 -Primary Balance 19.0 86.8 120.6 21.8 67.1 102.8 60.3 -42.5 -9.9 43.3 2.7 -85.0 14.9 - Ratio to GDP 0.7 2.8 4.0 0.6 2.2 3.1 1.9 -1.1 -0.3 1.2 0.1 -2.1 0.4 -

Financing 1 7.0 31.3 69.9 67.0 -9.3 24.8 60.7 16.7 86.3 25.0 109.1 0.5 87.4 -84.1 -30.1 -22.9 42.0 33.5 -47.3 39.3 96.1 112.5 7.8 93.4 139.7 0.0

External Borrowings -4.2 -5.3 26.6 -4.6 22.6 28.2 -0.6 14.5 14.6 -7.4 -5.6 -25.8 29.8 -Domestic Borrowings 11.2 36.6 43.3 71.6 -31.9 -3.5 61.3 2.2 71.6 32.4 114.7 26.3 57.7 -

Total Change in Cash: Deposit/Withdrawal (-) -170.8 88.5 85.5 34.6 30.7 29.8 23.4 -85.5 -116.3 -9.2 -15.7 -116.4 50.5 -

Budgetary -77.1 61.5 92.8 25.0 -42.8 72.0 21.4 -79.4 -26.2 17.2 15.7 -139.2 4.5 -Non-Budgetary Accounts 2 -93.7 27.0 -7.4 9.6 73.6 -42.2 2.0 -6.1 -90.1 -26.4 -31.4 22.7 46.0 -

1 Availment less repayment2 Refers to accounts not included in the NG budget, e.g., sale, purchase or redemption of government securities, but included in the cash operations report to

show the complete relations in the movements of the cash accounts.. rounds off to zero- not available

Note: Details may not add up to total due to rounding offSource: Bureau of the Treasury

201620152014

4 CONSUMER PRICE INDEX IN THE PHILIPPINESfor periods indicated(2006=100)Quarterly Average

2017Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

ALL ITEMS 124.3 126.0 126.7 127.6 128.2 129.7 131.2 131.4 132.3 133.2 134.4 135.9 137.7 139.0 140.7 140.8 141.1 141.3 141.5 142.2 142.7 143.4 144.4 145.7 147.2FOOD AND NON-ALCHOLIC BEVERAGES 135.2 136.2 136.7 138.1 138.0 138.9 141.0 141.5 141.7 142.2 144.1 147.1 149.7 151.8 155.6 156.4 156.9 156.4 157.3 158.5 159.4 160.0 161.6 164.0 165.5

FOOD ITEMS 136.5 137.4 137.9 139.4 139.2 140.1 142.3 142.7 142.9 143.3 145.4 148.6 151.3 153.5 157.5 158.4 158.8 158.2 159.2 160.5 161.4 162.0 163.7 166.2 167.9ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 120.0 122.3 123.7 124.6 125.8 128.4 129.7 130.8 158.4 168.5 170.1 171.1 173.6 175.2 176.1 177.8 180.5 181.8 182.6 184.8 189.3 191.8 193.6 196.4 200.7NON-FOOD 117.3 119.3 120.3 120.7 121.9 123.7 124.8 124.8 125.3 126.0 126.7 127.4 128.6 129.3 129.7 129.2 129.4 130.0 129.8 129.9 130.1 130.8 131.3 131.9 133.2CLOTHING AND FOOTWEAR 116.5 117.8 119.3 119.9 120.9 123.7 125.3 125.9 126.8 128.2 129.1 129.7 131.3 132.5 133.5 134.1 135.4 136.0 136.6 137.2 138.0 139.1 140.1 140.8 141.8HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 117.7 120.6 121.1 121.7 123.4 125.9 127.2 126.5 126.9 127.7 127.8 129.1 130.9 131.5 130.9 129.6 129.4 130.1 128.7 128.1 128.1 128.8 129.0 129.6 131.8

of which: ELECTRICITY, GAS AND OTHER FUELS 125.8 132.1 132.7 134.4 137.4 140.1 141.6 139.2 138.7 139.2 138.7 142.6 146.8 146.9 143.6 138.7 134.0 134.9 129.5 126.5 124.7 125.8 125.3 126.3 132.2FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 115.6 116.6 117.3 117.6 118.2 120.6 122.4 123.2 124.0 125.0 125.5 126.0 127.4 128.1 128.9 129.4 130.2 130.8 131.1 131.5 132.2 132.9 133.9 134.6 135.3HEALTH 122.8 123.8 125.0 125.5 126.2 128.0 129.3 129.8 130.7 131.8 132.7 133.2 135.0 135.8 137.2 137.7 138.6 138.9 139.5 140.2 141.2 142.2 143.2 143.8 144.9TRANSPORT 120.0 123.5 124.0 124.1 125.2 126.3 125.5 125.9 126.3 126.1 126.8 126.9 127.7 127.8 128.2 126.9 126.8 127.8 127.6 128.1 127.2 127.8 127.6 129.2 130.6

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 121.9 126.9 125.9 125.5 128.4 128.6 126.3 127.9 128.4 127.2 130.5 130.8 133.8 134.3 133.4 127.9 119.8 122.7 120.5 119.5 116.7 119.7 119.5 121.3 124.6COMMUNICATION 92.5 92.4 92.4 92.2 92.2 92.5 92.6 92.6 92.7 92.6 92.7 92.6 92.7 92.7 92.7 92.7 92.6 92.6 92.7 92.7 92.7 92.8 92.8 92.8 92.9RECREATION AND CULTURE 105.8 106.5 107.2 107.4 108.3 109.3 110.1 110.2 110.7 111.6 112.8 112.9 113.5 113.8 114.3 114.6 114.8 115.1 115.5 115.8 116.1 116.9 117.5 117.8 118.2EDUCATION 126.8 128.7 132.7 132.8 132.9 134.8 138.7 138.7 138.7 140.8 145.2 145.2 145.2 147.5 152.6 152.6 152.6 154.4 158.1 158.1 158.1 159.0 160.9 161.0 161.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 117.9 119.0 119.9 120.4 121.5 123.0 123.8 124.2 125.0 125.9 126.5 126.9 127.6 128.3 128.7 129.2 129.6 129.9 130.3 130.9 131.7 132.7 133.4 133.8 134.4


ALL ITEMS 2.0 1.4 0.6 0.7 0.5 1.2 1.2 0.2 0.7 0.7 0.9 1.1 1.3 0.9 1.2 0.1 0.2 0.1 0.1 0.5 0.4 0.5 0.7 0.9 1.0FOOD AND NON-ALCHOLIC BEVERAGES 2.7 0.7 0.4 1.0 -0.1 0.7 1.5 0.4 0.1 0.4 1.3 2.1 1.8 1.4 2.5 0.5 0.3 -0.3 0.6 0.8 0.6 0.4 1.0 1.5 0.9

FOOD ITEMS 2.8 0.7 0.4 1.1 -0.1 0.6 1.6 0.3 0.1 0.3 1.5 2.2 1.8 1.5 2.6 0.6 0.3 -0.4 0.6 0.8 0.6 0.4 1.0 1.5 1.0ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 2.3 1.9 1.1 0.7 1.0 2.1 1.0 0.8 21.1 6.4 0.9 0.6 1.5 0.9 0.5 1.0 1.5 0.7 0.4 1.2 2.4 1.3 0.9 1.4 2.2NON-FOOD 1.6 1.7 0.8 0.3 1.0 1.5 0.9 0.0 0.4 0.6 0.6 0.6 0.9 0.5 0.3 -0.4 0.2 0.5 -0.2 0.1 0.2 0.5 0.4 0.5 1.0CLOTHING AND FOOTWEAR 1.0 1.1 1.3 0.5 0.8 2.3 1.3 0.5 0.7 1.1 0.7 0.5 1.2 0.9 0.8 0.4 1.0 0.4 0.4 0.4 0.6 0.8 0.7 0.5 0.7HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 2.1 2.5 0.4 0.5 1.4 2.0 1.0 -0.6 0.3 0.6 0.1 1.0 1.4 0.5 -0.5 -1.0 -0.2 0.5 -1.1 -0.5 0.0 0.5 0.2 0.5 1.7

of which: ELECTRICITY, GAS AND OTHER FUELS 4.1 5.0 0.5 1.3 2.2 2.0 1.1 -1.7 -0.4 0.4 -0.4 2.8 2.9 0.1 -2.2 -3.4 -3.4 0.7 -4.0 -2.3 -1.4 0.9 -0.4 0.8 4.7FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.7 0.9 0.6 0.3 0.5 2.0 1.5 0.7 0.6 0.8 0.4 0.4 1.1 0.5 0.6 0.4 0.6 0.5 0.2 0.3 0.5 0.5 0.8 0.5 0.5HEALTH 0.9 0.8 1.0 0.4 0.6 1.4 1.0 0.4 0.7 0.8 0.7 0.4 1.4 0.6 1.0 0.4 0.7 0.2 0.4 0.5 0.7 0.7 0.7 0.4 0.8TRANSPORT 2.8 2.9 0.4 0.1 0.9 0.9 -0.6 0.3 0.3 -0.2 0.6 0.1 0.6 0.1 0.3 -1.0 -0.1 0.8 -0.2 0.4 -0.7 0.5 -0.2 1.3 1.1

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 5.8 4.1 -0.8 -0.3 2.3 0.2 -1.8 1.3 0.4 -0.9 2.6 0.2 2.3 0.4 -0.7 -4.1 -6.3 2.4 -1.8 -0.8 -2.3 2.6 -0.2 1.5 2.7COMMUNICATION -0.1 -0.1 0.0 -0.2 0.0 0.3 0.1 0.0 0.1 -0.1 0.1 -0.1 0.1 0.0 0.0 0.0 -0.1 0.0 0.1 0.0 0.0 0.1 0.0 0.0 0.1RECREATION AND CULTURE 0.2 0.7 0.7 0.2 0.8 0.9 0.7 0.1 0.5 0.8 1.1 0.1 0.5 0.3 0.4 0.3 0.2 0.3 0.3 0.3 0.3 0.7 0.5 0.3 0.3EDUCATION 0.1 1.5 3.1 0.1 0.1 1.4 2.9 0.0 0.0 1.5 3.1 0.0 0.0 1.6 3.5 0.0 0.0 1.2 2.4 0.0 0.0 0.6 1.2 0.1 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 1.0 0.9 0.8 0.4 0.9 1.2 0.7 0.3 0.6 0.7 0.5 0.3 0.6 0.5 0.3 0.4 0.3 0.2 0.3 0.5 0.6 0.8 0.5 0.3 0.4



FOOD ITEMS 5.9 6.3 5.4 5.0 2.0 2.0 3.2 2.4 2.7 2.3 2.2 4.1 5.9 7.1 8.3 6.6 5.0 3.1 1.1 1.3 1.6 2.4 2.8 3.6 4.0ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 3.8 5.3 6.1 6.2 4.8 5.0 4.9 5.0 25.9 31.2 31.1 30.8 9.6 4.0 3.5 3.9 4.0 3.8 3.7 3.9 4.9 5.5 6.0 6.3 6.0NON-FOOD 3.6 4.0 4.4 4.5 3.9 3.7 3.7 3.4 2.8 1.9 1.5 2.1 2.6 2.6 2.4 1.4 0.6 0.5 0.1 0.5 0.5 0.6 1.2 1.5 2.4CLOTHING AND FOOTWEAR 3.2 3.7 4.0 3.9 3.8 5.0 5.0 5.0 4.9 3.6 3.0 3.0 3.5 3.4 3.4 3.4 3.1 2.6 2.3 2.3 1.9 2.3 2.6 2.6 2.8HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 4.8 4.9 5.1 5.6 4.8 4.4 5.0 3.9 2.8 1.4 0.5 2.1 3.2 3.0 2.4 0.4 -1.1 -1.1 -1.7 -1.2 -1.0 -1.0 0.2 1.2 2.9

of which: ELECTRICITY, GAS AND OTHER FUELS 10.5 8.3 8.9 11.3 9.2 6.1 6.7 3.6 0.9 -0.6 -2.0 2.4 5.8 5.5 3.5 -2.7 -8.7 -8.2 -9.8 -8.8 -6.9 -6.7 -3.2 -0.2 6.0FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.4 2.4 2.6 2.4 2.2 3.4 4.3 4.8 4.9 3.6 2.5 2.3 2.7 2.5 2.7 2.7 2.2 2.1 1.7 1.6 1.5 1.6 2.1 2.4 2.3HEALTH 3.1 3.4 3.3 3.1 2.8 3.4 3.4 3.4 3.6 3.0 2.6 2.6 3.3 3.0 3.4 3.4 2.7 2.3 1.7 1.8 1.9 2.4 2.7 2.6 2.6TRANSPORT 4.2 6.6 6.9 6.3 4.3 2.3 1.2 1.5 0.9 -0.2 1.0 0.8 1.1 1.3 1.1 0.0 -0.7 0.0 -0.5 0.9 0.3 0.0 0.0 0.9 2.7

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 8.2 10.8 11.1 8.9 5.3 1.3 0.3 1.9 0.0 -1.1 3.3 2.3 4.2 5.6 2.2 -2.2 -10.5 -8.6 -9.7 -6.6 -2.6 -2.4 -0.8 1.5 6.8COMMUNICATION -0.1 -0.2 -0.3 -0.4 -0.3 0.1 0.2 0.4 0.5 0.1 0.1 0.0 0.0 0.1 0.0 0.1 -0.1 -0.1 0.0 0.0 0.1 0.2 0.1 0.1 0.2RECREATION AND CULTURE 1.1 1.3 1.6 1.7 2.4 2.6 2.7 2.6 2.2 2.1 2.5 2.5 2.5 2.0 1.3 1.5 1.1 1.1 1.0 1.0 1.1 1.6 1.7 1.7 1.8EDUCATION 4.3 4.5 5.1 4.8 4.8 4.7 4.5 4.4 4.4 4.5 4.7 4.7 4.7 4.8 5.1 5.1 5.1 4.7 3.6 3.6 3.6 3.0 1.8 1.8 1.8RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 2.4 2.8 3.1 3.2 3.1 3.4 3.3 3.2 2.9 2.4 2.2 2.2 2.1 1.9 1.7 1.8 1.6 1.2 1.2 1.3 1.6 2.2 2.4 2.2 2.1


20152 0 1 1Year-on-Year Change (in percent)

2016

20132 0 1 1

2 0 1 1 2013

2013

2016

2016

2015

2015

2014

2014

2014

Quarter-on-Quarter Change (in percent)

2 0 1 2

2 0 1 2

2 0 1 2

4a CONSUMER PRICE INDEX IN METRO MANILAfor periods indicated(2006=100)Quarterly Average





of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 113.8 118.0 116.8 116.1 118.5 117.4 117.0 119.0 117.8 115.2 118.2 119.6 122.9 122.8 121.6 115.8 109.0 111.2 108.7 107.7 104.6 107.6 107.5 109.7 112.9COMMUNICATION 93.6 93.4 93.3 93.2 93.1 93.7 93.9 93.9 93.9 93.9 93.9 93.9 94.1 94.1 94.1 94.1 94.1 94.2 94.3 94.3 94.3 94.4 94.4 94.4 94.8RECREATION AND CULTURE 107.5 107.4 107.3 107.3 110.2 111.1 112.5 112.5 113.1 114.1 114.8 114.8 115.9 116.7 117.6 117.9 118.5 119.1 119.9 120.3 120.6 122.3 124.2 124.4 125.1EDUCATION 130.6 132.2 135.5 135.5 135.5 137.0 140.0 140.0 140.0 142.1 146.2 146.2 146.2 149.0 154.5 154.5 154.5 157.3 163.0 163.0 163.0 164.4 167.3 167.3 167.3RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 114.8 115.9 116.3 116.5 119.5 119.9 120.7 120.7 120.9 121.1 121.2 121.3 121.8 122.7 123.1 123.1 123.3 123.3 123.6 123.6 124.0 124.8 125.0 125.2 125.8


ALL ITEMS 1.6 1.2 0.2 0.7 0.7 0.7 1.5 -0.2 0.2 0.1 0.6 1.0 1.1 0.9 0.8 -0.3 0.5 0.0 0.2 0.2 -0.1 0.5 0.8 1.0 1.1FOOD AND NON-ALCHOLIC BEVERAGES 1.3 0.2 -0.1 1.8 -1.0 0.3 2.5 -0.1 -0.2 -0.1 1.3 2.3 1.2 1.4 2.7 0.3 0.0 -0.8 1.4 1.2 0.1 0.7 1.7 2.8 1.1

FOOD ITEMS 1.4 0.2 -0.1 2.0 -1.1 0.2 2.6 -0.1 -0.3 -0.1 1.4 2.5 1.3 1.5 2.8 0.3 -0.1 -0.9 1.5 1.3 0.1 0.7 1.8 2.9 1.1ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 1.1 1.1 0.2 0.3 0.8 1.7 1.4 1.9 10.9 3.1 0.8 0.5 3.2 0.9 0.4 0.5 0.8 0.5 0.3 0.1 1.4 1.5 1.7 0.6 2.8NON-FOOD 1.9 1.6 0.3 0.3 1.4 0.8 1.2 -0.2 0.2 0.1 0.2 0.5 1.0 0.6 0.0 -0.6 0.7 0.3 -0.3 -0.4 -0.2 0.4 0.3 0.2 1.1CLOTHING AND FOOTWEAR 0.7 0.2 1.9 0.1 1.5 2.8 2.5 0.5 0.5 0.9 0.2 0.2 2.0 1.0 1.0 0.7 1.1 0.4 0.8 0.1 0.4 1.3 0.9 0.3 1.0HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 2.3 2.2 0.1 0.6 1.5 0.9 1.3 -0.9 0.1 0.0 -0.4 1.0 1.0 0.6 -1.0 -1.4 0.6 0.2 -1.5 -1.0 -0.4 0.1 0.0 -0.1 1.7

of which: ELECTRICITY, GAS AND OTHER FUELS 2.8 4.4 0.1 1.9 1.5 1.3 3.0 -3.7 -1.2 -0.4 -1.7 3.4 2.9 0.5 -4.3 -5.2 -3.0 -1.2 -9.0 -4.4 -1.3 -0.3 -0.5 -0.8 8.0FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.3 0.1 0.1 0.1 0.3 1.2 3.2 1.3 1.1 0.2 0.0 0.2 2.1 0.8 0.7 0.5 0.1 0.1 0.1 0.0 0.2 0.2 0.8 0.5 0.4HEALTH 1.4 0.2 1.4 0.2 0.8 0.6 1.2 0.2 1.4 0.1 1.3 0.1 2.3 0.5 2.1 0.1 1.2 0.1 1.1 0.0 0.2 0.5 0.3 0.3 1.1TRANSPORT 3.4 3.2 -0.3 -0.3 1.1 -0.4 -0.5 0.4 -0.1 -0.6 0.6 0.4 0.9 0.0 0.0 -1.6 2.5 0.6 -0.4 0.2 -0.8 -0.1 0.0 1.3 1.9

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 6.1 3.7 -1.0 -0.6 2.1 -0.9 -0.3 1.7 -1.0 -2.2 2.6 1.2 2.8 -0.1 -1.0 -4.8 -5.9 2.0 -2.2 -0.9 -2.9 2.9 -0.1 2.0 2.9COMMUNICATION -0.2 -0.2 -0.1 -0.1 -0.1 0.6 0.2 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.4RECREATION AND CULTURE 0.1 -0.1 -0.1 0.0 2.7 0.8 1.3 0.0 0.5 0.9 0.6 0.0 1.0 0.7 0.8 0.3 0.5 0.5 0.7 0.3 0.2 1.4 1.6 0.2 0.6EDUCATION 0.0 1.2 2.5 0.0 0.0 1.1 2.2 0.0 0.0 1.5 2.9 0.0 0.0 1.9 3.7 0.0 0.0 1.8 3.6 0.0 0.0 0.9 1.8 0.0 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 1.6 1.0 0.3 0.2 2.6 0.3 0.7 0.0 0.2 0.2 0.1 0.1 0.4 0.7 0.3 0.0 0.2 0.0 0.2 0.0 0.3 0.6 0.2 0.2 0.5



FOOD ITEMS 5.3 6.0 4.7 3.5 0.9 1.0 3.7 1.6 2.4 2.0 0.8 3.4 5.1 6.8 8.3 6.0 4.6 2.1 0.8 1.7 1.9 3.6 3.9 5.7 6.7ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 2.3 2.9 2.8 2.8 2.4 3.0 4.3 5.9 16.5 18.1 17.4 15.8 7.8 5.5 5.1 5.1 2.6 2.2 2.1 1.7 2.3 3.3 4.8 5.4 6.8NON-FOOD 3.9 3.5 3.6 4.1 3.6 2.8 3.7 3.1 1.9 1.2 0.2 1.0 1.7 2.3 2.1 1.0 0.7 0.4 0.1 0.3 -0.6 -0.5 0.2 0.7 2.0CLOTHING AND FOOTWEAR 3.5 2.9 3.3 2.9 3.7 6.5 7.1 7.5 6.5 4.5 2.2 1.8 3.4 3.4 4.2 4.7 3.8 3.1 2.9 2.3 1.6 2.6 2.7 3.0 3.6HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 4.9 3.3 3.8 5.3 4.5 3.1 4.4 2.8 1.4 0.5 -1.2 0.6 1.6 2.3 1.6 -0.7 -1.1 -1.5 -2.0 -1.6 -2.7 -2.8 -1.3 -0.4 1.7

of which: ELECTRICITY, GAS AND OTHER FUELS 9.9 0.0 2.3 9.5 8.1 4.9 8.0 2.0 -0.8 -2.5 -6.9 0.1 4.2 5.1 2.2 -6.3 -11.6 -13.1 -17.3 -16.6 -15.1 -14.4 -6.4 -2.9 6.3FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.2 1.1 0.8 0.5 0.5 1.7 4.8 6.0 6.9 5.9 2.6 1.6 2.7 3.2 4.0 4.2 2.1 1.4 0.7 0.2 0.4 0.6 1.3 1.8 2.0HEALTH 4.1 4.1 3.3 3.2 2.6 3.0 2.8 2.8 3.5 3.0 3.1 3.0 3.9 4.2 5.1 5.1 4.0 3.6 2.5 2.4 1.4 1.8 1.0 1.2 2.1TRANSPORT 4.1 6.9 7.2 6.1 3.7 0.1 -0.2 0.5 -0.6 -0.8 0.4 0.3 1.2 1.9 1.2 -0.8 0.8 1.4 1.0 2.8 -0.4 -1.1 -0.7 0.4 3.1

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 9.0 10.5 11.3 8.2 4.1 -0.5 0.2 2.5 -0.6 -1.9 1.0 0.5 4.3 6.6 2.9 -3.2 -11.3 -9.4 -10.6 -7.0 -4.0 -3.2 -1.1 1.9 7.9COMMUNICATION -0.1 -0.3 -0.6 -0.6 -0.5 0.3 0.6 0.8 0.9 0.2 0.0 0.0 0.2 0.2 0.2 0.2 0.0 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.5RECREATION AND CULTURE 1.6 0.7 0.1 -0.1 2.5 3.4 4.8 4.8 2.6 2.7 2.0 2.0 2.5 2.3 2.4 2.7 2.2 2.1 2.0 2.0 1.8 2.7 3.6 3.4 3.7EDUCATION 3.7 3.7 3.8 3.8 3.8 3.6 3.3 3.3 3.3 3.7 4.4 4.4 4.4 4.9 5.7 5.7 5.7 5.6 5.5 5.5 5.5 4.5 2.6 2.6 2.6RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 2.8 3.7 3.0 3.1 4.1 3.5 3.8 3.6 1.2 1.0 0.4 0.5 0.7 1.3 1.6 1.5 1.2 0.5 0.4 0.4 0.6 1.2 1.1 1.3 1.5


2 0 1 22 0 1 1

2 0 1 1Quarter-on-Quarter Change (in percent)

2 0 1 2

2 0 1 2


2016

2013

2013

2013

2016

2016

2015

2015

2014

2014

2014

4b CONSUMER PRICE INDEX IN AREAS OUTSIDE METRO MANILAfor periods indicated(2006=100)Quarterly Average





OPERATION OF PERSONAL TRANSPORT EQUIPMENT 124.7 130.1 129.1 129.0 131.4 132.7 130.0 131.5 132.8 132.2 135.5 135.3 138.3 139.0 138.2 132.8 124.2 127.3 125.3 124.3 121.6 124.6 124.4 126.0 129.4COMMUNICATION 92.0 92.0 92.0 91.8 91.8 91.9 92.0 92.0 92.1 92.0 92.1 92.0 92.1 92.1 92.0 92.0 91.9 91.9 91.9 91.9 91.9 92.0 92.0 92.0 92.0RECREATION AND CULTURE 105.2 106.2 107.1 107.4 107.7 108.7 109.2 109.4 109.8 110.8 112.1 112.3 112.6 112.8 113.2 113.4 113.6 113.7 114.0 114.2 114.5 115.0 115.2 115.4 115.8EDUCATION 125.7 127.7 131.9 132.0 132.1 134.2 138.3 138.3 138.3 140.4 144.9 144.9 144.9 147.1 152.0 152.0 152.0 153.5 156.6 156.7 156.7 157.5 159.1 159.2 159.2RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 119.2 120.3 121.4 122.1 122.5 124.3 125.2 125.8 126.8 128.0 128.7 129.4 130.2 130.8 131.2 131.9 132.4 132.7 133.2 134.2 135.0 136.1 137.0 137.5 138.1


ALL ITEMS 2.1 1.4 0.6 0.7 0.4 1.4 1.1 0.2 0.8 0.8 1.0 1.2 1.4 0.9 1.3 0.1 0.2 0.1 0.2 0.5 0.5 0.5 0.6 0.9 1.0FOOD AND NON-ALCHOLIC BEVERAGES 2.9 0.8 0.4 0.9 0.1 0.8 1.3 0.4 0.3 0.3 1.4 2.1 1.8 1.4 2.5 0.6 0.3 -0.2 0.4 0.8 0.6 0.3 0.9 1.2 0.9

FOOD ITEMS 3.0 0.8 0.4 0.9 0.0 0.7 1.4 0.3 0.3 0.3 1.5 2.1 1.9 1.4 2.6 0.6 0.3 -0.2 0.4 0.8 0.6 0.3 0.9 1.3 1.0ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 2.5 2.2 1.4 0.7 1.0 2.2 0.9 0.6 23.2 6.9 1.0 0.6 1.2 0.9 0.6 1.1 1.6 0.8 0.4 1.4 2.6 1.3 0.8 1.7 2.0NON-FOOD 1.5 1.9 1.0 0.4 0.7 1.9 0.7 0.1 0.5 0.8 0.7 0.5 1.0 0.5 0.4 -0.3 -0.1 0.5 -0.1 0.2 0.2 0.7 0.5 0.5 1.0CLOTHING AND FOOTWEAR 1.0 1.4 1.0 0.8 0.6 2.1 1.0 0.4 0.8 1.1 0.9 0.5 1.1 0.8 0.7 0.5 0.9 0.4 0.3 0.6 0.7 0.6 0.7 0.5 0.6HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 2.0 2.5 0.6 0.5 1.3 2.6 0.9 -0.3 0.3 0.9 0.4 1.1 1.5 0.4 -0.2 -0.9 -0.5 0.7 -0.9 -0.3 0.2 0.7 0.3 0.6 1.7

of which: ELECTRICITY, GAS AND OTHER FUELS 4.6 5.2 0.5 1.0 2.6 2.0 0.5 -1.0 -0.1 0.7 0.0 2.4 3.3 -0.1 -1.7 -2.8 -3.5 1.2 -2.6 -1.7 -1.5 1.2 -0.4 1.2 3.8FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.9 1.1 0.7 0.4 0.6 2.2 0.9 0.6 0.5 1.0 0.6 0.5 0.7 0.5 0.5 0.4 0.8 0.5 0.3 0.5 0.6 0.7 0.7 0.5 0.5HEALTH 0.8 1.0 0.9 0.5 0.4 1.7 1.0 0.4 0.5 1.0 0.5 0.5 1.1 0.7 0.7 0.4 0.4 0.3 0.3 0.6 0.9 0.8 0.9 0.4 0.7TRANSPORT 2.8 2.8 0.6 0.2 0.8 1.2 -0.7 0.3 0.5 -0.1 0.5 0.0 0.5 0.2 0.3 -0.8 -0.8 0.9 -0.2 0.5 -0.7 0.6 -0.2 1.2 0.8

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 6.0 4.3 -0.8 -0.1 1.9 1.0 -2.0 1.2 1.0 -0.5 2.5 -0.1 2.2 0.5 -0.6 -3.9 -6.5 2.5 -1.6 -0.8 -2.2 2.5 -0.2 1.3 2.7COMMUNICATION -0.1 0.0 0.0 -0.2 0.0 0.1 0.1 0.0 0.1 -0.1 0.1 -0.1 0.1 0.0 -0.1 0.0 -0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0RECREATION AND CULTURE 0.3 1.0 0.8 0.3 0.3 0.9 0.5 0.2 0.4 0.9 1.2 0.2 0.3 0.2 0.4 0.2 0.2 0.1 0.3 0.2 0.3 0.4 0.2 0.2 0.3EDUCATION 0.1 1.6 3.3 0.1 0.1 1.6 3.1 0.0 0.0 1.5 3.2 0.0 0.0 1.5 3.3 0.0 0.0 1.0 2.0 0.1 0.0 0.5 1.0 0.1 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 0.8 0.9 0.9 0.6 0.3 1.5 0.7 0.5 0.8 0.9 0.5 0.5 0.6 0.5 0.3 0.5 0.4 0.2 0.4 0.8 0.6 0.8 0.7 0.4 0.4



FOOD ITEMS 6.0 6.4 5.5 5.2 2.2 2.1 3.1 2.5 2.8 2.3 2.4 4.2 6.0 7.2 8.4 6.7 5.0 3.3 1.1 1.3 1.6 2.1 2.6 3.1 3.6ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 4.1 5.9 6.8 6.9 5.3 5.4 4.9 4.8 27.8 33.7 33.8 33.7 9.9 3.7 3.3 3.7 4.2 4.1 3.9 4.3 5.3 5.8 6.2 6.5 5.9NON-FOOD 3.6 4.4 4.9 4.8 4.0 4.0 3.7 3.4 3.2 2.1 2.1 2.5 3.1 2.7 2.4 1.5 0.5 0.5 0.1 0.6 0.9 1.1 1.6 1.9 2.6CLOTHING AND FOOTWEAR 3.1 3.9 4.2 4.3 3.8 4.5 4.5 4.1 4.3 3.3 3.2 3.4 3.7 3.3 3.1 3.0 2.8 2.5 2.1 2.3 2.0 2.2 2.6 2.5 2.5HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 4.8 5.5 5.7 5.7 5.0 5.0 5.3 4.5 3.5 1.7 1.2 2.7 3.9 3.4 2.8 0.8 -1.2 -0.9 -1.6 -1.0 -0.3 -0.3 0.9 1.8 3.3

of which: ELECTRICITY, GAS AND OTHER FUELS 10.7 11.2 11.3 11.7 9.7 6.3 6.3 4.1 1.3 0.0 -0.5 3.0 6.5 5.6 3.8 -1.5 -8.0 -6.7 -7.6 -6.6 -4.6 -4.6 -2.4 0.5 5.9FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.5 2.9 3.2 3.1 2.8 4.0 4.2 4.4 4.2 2.9 2.6 2.5 2.7 2.2 2.2 2.1 2.3 2.3 2.1 2.1 1.9 2.0 2.5 2.6 2.5HEALTH 2.8 3.2 3.3 3.2 2.8 3.5 3.6 3.5 3.7 3.0 2.5 2.6 3.1 2.7 2.9 2.9 2.2 1.9 1.5 1.6 2.0 2.6 3.1 3.0 2.8TRANSPORT 4.2 6.5 6.8 6.5 4.5 2.8 1.6 1.6 1.3 0.0 1.2 0.9 1.0 1.3 1.1 0.2 -1.1 -0.4 -0.9 0.5 0.5 0.2 0.3 1.0 2.5

of which: OPERATION OF PERSONAL TRANSPORT EQUIPMENT 8.3 11.3 11.2 9.7 5.4 2.0 0.7 1.9 1.1 -0.4 4.2 2.9 4.1 5.1 2.0 -1.8 -10.2 -8.4 -9.3 -6.4 -2.1 -2.1 -0.7 1.4 6.4COMMUNICATION -0.1 -0.2 -0.2 -0.3 -0.2 -0.1 0.0 0.2 0.3 0.1 0.1 0.0 0.0 0.1 -0.1 0.0 -0.2 -0.2 -0.1 -0.1 0.0 0.1 0.1 0.1 0.1RECREATION AND CULTURE 0.9 1.5 2.1 2.4 2.4 2.4 2.0 1.9 1.9 1.9 2.7 2.7 2.6 1.8 1.0 1.0 0.9 0.8 0.7 0.7 0.8 1.1 1.1 1.1 1.1EDUCATION 4.5 4.8 5.5 5.1 5.1 5.1 4.9 4.8 4.7 4.6 4.8 4.8 4.8 4.8 4.9 4.9 4.9 4.4 3.0 3.1 3.1 2.6 1.6 1.6 1.6RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 2.2 2.3 3.1 3.3 2.8 3.3 3.1 3.0 3.5 3.0 2.8 2.9 2.7 2.2 1.9 1.9 1.7 1.5 1.5 1.7 2.0 2.6 2.9 2.5 2.3


2013

2013

2016

2016

2015

2015

2014

2014

2014

Quarter-on-Quarter Change (in percent)

2 0 1 2

2 0 1 2

2 0 1 2 20132 0 1 1

2 0 1 1


2016

5 MONETARY INDICATORS (DCS CONCEPT: SRF-Based) 1

as of periods indicated

2017

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 r

A. Liquidity

1. M4 (2+7) 9,016.9 9,126.2 9,334.3 9,888.7 10,031.8 10,254.7 10,459.2 11,214.6 11,279.0

2. M3 : Broad Money Liabilities (3+6) 7,650.0 7,755.4 7,851.4 8,429.9 8,542.0 8,728.1 8,860.7 9,506.0 9,535.5% to GDP 59.8 59.8 59.9 63.3 63.0 63.0 62.6 65.6 64.5

3. M2 (4+5) 7,344.3 7,434.5 7,510.8 8,067.3 8,219.0 8,412.6 8,525.7 9,140.4 9,189.6% to GDP 57.4 57.3 57.3 60.6 60.6 60.7 60.2 63.1 62.2

4. M1: Currency Outside Depository Corporations and Transferable Deposits (Narrow Money ) 2,312.1 2,379.2 2,453.3 2,667.6 2,712.4 2,794.2 2,858.8 3,069.5 3,113.0% to GDP 18.1 18.3 18.7 20.0 20.0 20.2 20.2 21.2 21.1

Currency Outside Depository Corporations (Currency in Circulation) 658.9 653.8 670.0 791.4 766.3 776.9 795.6 921.0 887.7 Transferable Deposits (Demand Deposits) 1,653.2 1,725.4 1,783.3 1,876.2 1,946.1 2,017.3 2,063.2 2,148.5 2,225.3

5. Other deposits included in broad money 5,032.2 5,055.3 5,057.5 5,399.7 5,506.6 5,618.4 5,666.9 6,071.0 6,076.6 Savings Deposits 3,209.8 3,269.9 3,357.5 3,586.9 3,702.9 3,824.2 3,898.5 4,100.8 4,084.2 Time Deposits 1,822.4 1,785.4 1,700.0 1,812.8 1,803.7 1,794.1 1,768.4 1,970.2 1,992.4

6. Securities Other Than Shares Included in Broad Money (Deposit Substitutes) 305.6 320.9 340.7 362.7 323.0 315.5 335.0 365.5 345.9

7. Transferable & Other Deposits in Foreign Currency (FCDU Deposits-Residents) 1,366.9 1,370.8 1,482.8 1,458.8 1,489.8 1,526.7 1,598.6 1,708.6 1,743.5

8. Liabilities Excluded from Broad-Money (Other Liabilities) 1,856.1 1,860.1 2,015.3 1,971.1 2,144.4 2,374.9 2,642.8 2,294.3 2,496.7

B. Domestic Claims 6,997.4 7,114.6 7,387.2 7,861.0 8,075.9 8,332.2 8,608.4 9,199.9 9,397.81. Net Claims on Central Government 1,096.9 1,124.5 1,209.0 1,261.7 1,447.1 1,414.7 1,490.5 1,603.0 1,663.6

Claims on Central Government 1,862.6 1,926.4 2,019.0 1,992.6 2,066.8 2,043.1 2,108.8 2,097.0 2,205.2Less: Liabilities to Central Government 765.7 801.9 810.0 730.9 619.7 628.4 618.3 494.0 541.6

2. Claims on Other Sectors 5,900.4 5,990.1 6,178.2 6,599.3 6,628.8 6,917.5 7,117.9 7,596.8 7,734.3Claims on Other Financial Corporations 628.2 628.8 667.9 680.5 689.9 722.7 724.0 770.8 792.1Claims on State and Local Government 70.5 70.6 74.0 76.6 77.8 80.5 81.9 82.8 82.5Claims on Public Nonfinancial Corporations 271.9 274.2 281.4 278.0 282.1 286.8 277.2 256.8 257.4Claims on Private Sector 4,929.9 5,016.5 5,154.9 5,564.2 5,578.9 5,827.5 6,034.8 6,486.4 6,602.3

C. Net Foreign Assets 3,875.6 3,871.7 3,962.4 3,998.8 4,100.3 4,297.4 4,493.7 4,309.0 4,377.81. Bangko Sentral ng Pilipinas 3,556.8 3,598.5 3,731.8 3,762.8 3,778.5 3,970.4 4,136.4 3,946.6 3,992.3

Claims on Non-residents 3,627.5 3,671.8 3,806.9 3,837.3 3,852.5 4,045.5 4,214.3 4,023.8 4,071.3 Less: Liabilities to Non-residents 70.8 73.2 75.0 74.4 74.0 75.1 77.9 77.2 79.0

2. Other Depository Corporations 318.9 273.2 230.5 235.9 321.8 327.0 357.3 362.4 385.5Claims on Non-residents 964.1 951.0 985.1 1,023.9 1,070.9 1,108.2 1,134.4 1,211.6 1,229.3Less: Liabilities to Non-residents 645.3 677.7 754.5 787.9 749.1 781.2 777.2 849.3 843.7

1 Based on the Standardized Report Forms (SRFs), a unified framework for reporting monetary and financial statistics to the International Monetary Fund.r Revised

Note : Details may not add up to totals due to rounding.Source : Bangko Sentral ng Pilipinas

LEVELS (in billion pesos)2015 2016

6 SELECTED DOMESTIC INTEREST RATESfor periods indicated; in percent per annum

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

3.2 4.1 4.4 4.7 3.6 2 1.7 0.6 1 1.1 1.5 2 2.5Interbank Call Loans 2.0147 2.0618 2.3356 2.5384 2.5266 2.5225 2.5241 2.5291 2.5289 2.5293 2.5247 2.5074 2.5354 -2.0853 -2.3382 -2.3644 -1.0616 0.5266 0.8225 1.9241 1.5291 1.4289 1.0293 0.5247 0.0074 2.5354Savings Deposits 0.5370 0.6270 0.6460 0.7070 0.7170 0.6720 0.7210 0.7270 0.7370 0.7140 0.7290 0.6990 0.6890 -3.5630 -3.7730 -4.0540 -2.8930 -1.2830 -1.0280 0.12100 -0.2730 -0.3630 -0.7860 -1.2710 -1.8010 0.6890Time Deposits (All Maturities) 0.9740 0.9870 1.0480 1.3470 1.3760 1.5220 1.4720 1.6290 1.6120 1.5210 1.4450 1.5770 1.6880 -3.1260 -3.4130 -3.6520 -2.2530 -0.6240 -0.1780 0.8720 0.6290 0.5120 0.0210 -0.5550 -0.9230 1.6880

Lending Rates

6.7287 6.8083 6.8860 6.7818 6.8698 6.9390 6.9376 6.7607 6.8407 6.7760 6.6280 6.4397 6.5050 2.6287 2.4083 2.1860 3.1818 4.8698 5.2390 6.3376 5.7607 5.7407 5.2760 4.6280 3.9397 6.50504.3688 4.3417 4.3861 4.4397 4.5031 4.5183 4.5025 4.3579 4.4055 4.4067 4.2788 4.1097 4.2013 0.2688 -0.0583 -0.3139 0.8397 2.5031 2.8183 3.9025 3.3579 3.3055 2.9067 2.2788 1.6097 4.20135.5000 5.4780 5.5350 5.5820 5.4240 5.5150 5.6250 5.7390 5.6310 5.6240 5.6840 5.6290 5.5410 1.4000 1.0780 0.8350 1.9820 3.4240 3.8150 5.0250 4.7390 4.5310 4.1240 3.6840 3.1290 5.5410

Bangko Sentral Rates 3

… … … … … … … … … .. .. .. .. … … … … … … … … … .. .. .. ..3.5000 3.5000 3.7500 4.0000 4.0000 4.0000 4.0000 4.0000 4.0000 3.4902 3.0000 3.0000 3.0000 -0.6000 -0.9000 -0.9500 0.4000 2.0000 2.3000 3.4000 3.0000 2.9000 1.9902 1.0000 0.5000 3.0000

… … … … … … … … … 2.5000 2.5000 2.5000 2.5000 … … … … … … … … … 1.0000 0.5000 0.0000 2.5000

7-Day … … … … … … … … … 2.5000 2.5000 2.7882 3.0160 … … … … … … … … … 1.0000 0.5000 0.2882 3.016028-Day … … … … … … … … … 2.5000 2.5129 2.9071 3.3812 … … … … … … … … … 1.0000 0.5129 0.4071 3.3812

Rate on Government Securities Treasury Bills, All Maturities 1.2880 1.5000 1.5000 1.5720 1.6910 2.0780 1.9980 1.7440 1.6130 1.6990 1.5050 1.5630 2.3640 -2.8120 -2.9000 -3.2000 -2.0280 -0.3090 0.3780 1.3980 0.7440 0.5130 0.1990 -0.4950 -0.9370 2.3640

1.0650 1.2740 1.2580 1.2860 1.4690 1.9400 1.8610 1.7100 1.5550 1.5970 1.4160 1.4400 2.1790 -3.0350 -3.1260 -3.4420 -2.3140 -0.5310 0.2400 1.2610 0.7100 0.4550 0.0970 -0.5840 -1.0600 2.17901.4000 1.5890 1.5820 1.7000 1.7290 2.2070 2.0140 1.6970 1.5800 1.6540 1.4520 1.6890 2.3800 -2.7000 -2.8110 -3.1180 -1.9000 -0.2710 0.5070 1.4140 0.6970 0.4800 0.1540 -0.5480 -0.8110 2.38001.5400 1.8630 1.8090 1.8250 1.9480 2.2630 2.2000 1.8970 1.7230 1.8570 1.6790 1.8800 2.7100 -2.5600 -2.5370 -2.8910 -1.7750 -0.0520 0.5630 1.6000 0.8970 0.6230 0.3570 -0.3210 -0.6200 2.7100

Government Securities in the Secondary Market 4 3.9 4.4 4.4 2.7 2.4 1.2 0.4 1.5 1.1 1.9 2.3 2.63-Month 1.6917 1.3229 1.7104 2.5409 2.2714 2.0765 1.6817 2.6667 1.7650 1.7567 1.5857 2.0755 2.9696 -2.2083 -3.0771 -2.6896 -0.1591 -0.1286 0.8765 1.2817 1.1667 0.6650 -0.1433 -0.7143 -0.5245 2.96966-Month 2.0367 1.4938 1.9479 2.6432 2.5795 2.1980 1.7967 2.9183 1.8950 1.5949 1.2931 2.9464 2.4222 -1.8633 -2.9062 -2.4521 -0.0568 0.1795 0.9980 1.3967 1.4183 0.7950 -0.3051 -1.0069 0.3464 2.42221-Year 2.3125 1.8917 2.1729 2.6955 2.6886 2.4297 2.5467 2.3710 1.7313 2.1671 2.0107 2.4520 2.6708 -1.5875 -2.5083 -2.2271 -0.0045 0.2886 1.2297 2.1467 0.8710 0.6313 0.2671 -0.2893 -0.1480 2.67082-Year 2.7563 2.8542 2.9813 3.0568 3.1959 2.6999 2.6143 3.9847 3.4700 2.3877 2.2855 3.8676 3.2500 -1.1437 -1.5458 -1.4187 0.3568 0.7959 1.4999 2.2143 2.4847 2.3700 0.4877 -0.0145 1.2676 3.25003-Year 3.1650 2.8917 3.3833 3.4500 3.4136 3.0281 3.1016 3.6625 3.6900 3.0660 3.2925 3.5170 4.0988 -0.7350 -1.5083 -1.0167 0.7500 1.0136 1.8281 2.7016 2.1625 2.5900 1.1660 0.9925 0.9170 4.09884-Year 3.3917 3.1750 3.5083 3.5705 3.5864 3.7717 3.7263 3.8750 3.2332 3.3067 2.8798 3.8814 4.2500 -0.5083 -1.2250 -0.8917 0.8705 1.1864 2.5717 3.3263 2.3750 2.1332 1.4067 0.5798 1.2814 4.25005-Year 3.7479 3.9812 4.2146 3.6795 3.8273 3.8900 3.4923 3.9250 3.4583 2.8997 3.6321 4.7426 4.2577 -0.1521 -0.4188 -0.1854 0.9795 1.4273 2.6900 3.0923 2.4250 2.3583 0.9997 1.3321 2.1426 4.25777-Year 3.8615 4.0292 4.1229 4.1475 3.8932 3.7189 4.1617 4.5853 4.2283 2.9197 3.4483 4.8857 5.0625 -0.0385 -0.3708 -0.2771 1.4475 1.4932 2.5189 3.7617 3.0853 3.1283 1.0197 1.1483 2.2857 5.062510-Year 4.4562 4.1667 4.3475 4.3705 4.0614 4.3550 3.7995 4.1000 4.6900 4.2183 3.6455 4.6281 5.0554 0.5562 -0.2333 -0.0525 1.6705 1.6614 3.1550 3.3995 2.6000 3.5900 2.3183 1.3455 2.0281 5.055420-Year 5.3938 5.3750 5.3125 5.1727 4.9850 4.6511 5.1350 5.5217 5.2317 4.2415 4.6482 5.3771 5.0302 1.4938 0.9750 0.9125 2.4727 2.5850 3.4511 4.7350 4.0217 4.1317 2.3415 2.3482 2.7771 5.030225-Year 5.6354 5.4329 5.3750 4.9500 4.7659 .. 4.7280 4.8916 .. .. .. .. .. 1.7354 1.0329 0.9750 2.2500 2.3659 .. 4.3280 3.3916 .. .. .. .. ..

1 Nominal interest rate less inflation rate2 Refers to the weighted average interest rate of reporting commercial banks' interest incomes on their outstanding peso-denominated loans3 Beginning 3 June 2016, the BSP shifted its monetary operations to an interest rate corridor (IRC) system. The repurchase (RP) and Special Deposit Account (SDA) windows were replaced by standing overnight lending and overnight deposit facilities, respectively.

The reverse repurchase (RRP) facility was modified to a purely overnight RRP. In addition, the term deposit facility (TDF) will serve as the main tool for absorbing liquidity. Starting 3 June 2016, the interest rates for these facilities were set as follows: 3.5 percent in the OLF(a reduction from 6.0 percent); 3.0 percent in the overnight RRP rate (an adjustment from 4.0 percent); and 2.5 percent in the ODF (no change from the previous SDA rate). The OLF and ODF will serve as the upper bound and lower bound, respectively, of the IRC system.

4 End of Period; (For Q1 2013 to Q1 2015, data refers to PDST-F while for Q2 2015 to present, it refers to PDST-R2)p Preliminaryr Revised

- Not Available .. No Transaction/No Quotation/No Issue ... Blank

Source: Bangko Sentral ng Pilipinas

20152014

91-Day182-Day

All Maturities 2

2016201520142016 2017REAL INTEREST RATES 1NOMINAL INTEREST RATES

2017

HighLow

364-Day

Overnight Lending Facility (OLF)Overnight RRPOvernight Deposit Facility (ODF)Term Deposit Auction Facility (TDF)

7 NUMBER OF FINANCIAL INSTITUTIONS 1


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 r Q2 r Q3 r Q4 p

T o t a l 28,065 28,094 28,128 28,232 28,331 28,319 28,293 28,471 27,502 27,657 27,889 28,392 Head Offices 6,943 6,888 6,840 6,735 6,721 6,685 6,625 6,576 6,329 6,297 6,280 6,252 Branches/Agencies 21,122 21,206 21,288 21,497 21,610 21,634 21,668 21,895 21,173 21,360 21,609 22,140

Banks 10,020 10,120 10,207 10,361 10,456 10,528 10,538 10,756 10,849 10,936 11,024 11,178 Head Offices 667 664 652 648 646 638 634 632 622 618 613 602 Branches/Agencies 9,353 9,456 9,555 9,713 9,810 9,890 9,904 10,124 10,227 10,318 10,411 10,576

Universal and Commercial Banks 5,514 5,583 5,738 5,833 5,901 5,946 5,946 6,060 6,094 6,133 6,147 6,237 Head Offices 36 36 36 36 36 36 36 40 41 41 41 42 Branches/Agencies 5,478 5,547 5,702 5,797 5,865 5,910 5,910 6,020 6,053 6,092 6,106 6,195

Thrift Banks 1,856 1,878 1,873 1,920 1,927 2,013 1,999 2,086 2,130 2,124 2,180 2,176 Head Offices 70 70 69 69 69 70 69 68 66 64 64 60 Branches/Agencies 1,786 1,808 1,804 1,851 1,858 1,943 1,930 2,018 2,064 2,060 2,116 2,116

Savings and Mortgage Banks 1,219 1,242 1,248 1,280 1,317 1,386 1,356 1,517 1,545 1,548 1,562 1,585 Head Offices 28 28 28 28 28 29 28 28 27 26 26 25 Branches/Agencies 1,191 1,214 1,220 1,252 1,289 1,357 1,328 1,489 1,518 1,522 1,536 1,560

Private Development Banks 437 432 440 444 408 416 417 338 355 363 404 402 Head Offices 19 19 19 19 19 19 19 18 18 18 19 18 Branches/Agencies 418 413 421 425 389 397 398 320 337 345 385 384

Stock Savings and Loan Assns. 171 175 154 165 171 180 195 200 199 182 184 183 Head Offices 19 19 18 18 18 18 18 18 17 16 16 15 Branches/Agencies 152 156 136 147 153 162 177 182 182 166 168 168

Microfinance Banks 29 29 31 31 31 31 31 31 31 31 30 6 Head Offices 4 4 4 4 4 4 4 4 4 4 3 2 Branches/Agencies 25 25 27 27 27 27 27 27 27 27 27 4

Rural Banks 2,650 2,659 2,596 2,608 2,628 2,569 2,593 2,610 2,625 2,679 2,697 2,765 Head Offices 561 558 547 543 541 532 529 524 515 513 508 500 Branches/Agencies 2,089 2,101 2,049 2,065 2,087 2,037 2,064 2,086 2,110 2,166 2,189 2,265

Non-Banks r 18,045 17,974 17,921 17,871 17,875 17,791 17,755 17,715 16,653 16,721 16,865 17,214 Head Offices r 6,276 6,224 6,188 6,087 6,075 6,047 5,991 5,944 5,707 5,679 5,667 5,650 Branches/Agencies r 11,769 11,750 11,733 11,784 11,800 11,744 11,764 11,771 10,946 11,042 11,198 11,564

Investment Houses 26 25 25 25 25 25 25 25 26 26 26 25 Head Offices 16 15 15 15 15 15 15 15 16 16 16 15 Branches/Agencies 10 10 10 10 10 10 10 10 10 10 10 10

Finance Companies 88 88 88 88 88 88 110 110 118 118 127 129 Head Offices 20 20 20 20 20 20 22 22 22 22 22 22 Branches/Agencies 68 68 68 68 68 68 88 88 96 96 105 107

ABB Forex Corporations - - - - - - 5 5 5 5 5 5 Head Offices - - - - - - 5 5 5 5 5 5 Branches/Agencies - - - - - - - - - - - -

Investment Companies 3 3 2 2 2 2 2 2 2 2 2 1 Head Offices 3 3 2 2 2 2 2 2 2 2 2 1 Branches/Agencies - - - - - - - - - - - -

Securities Dealers/Brokers 13 13 13 13 13 13 13 13 13 13 13 12 Head Offices 13 13 13 13 13 13 13 13 13 13 13 12 Branches/Agencies - - - - - - - - - - - -

Pawnshops 17,584 17,513 17,461 17,422 17,426 17,340 17,278 17,238 16,170 16,237 16,372 16,723 Head Offices 6,022 5,971 5,936 5,847 5,835 5,807 5,745 5,698 5,460 5,432 5,420 5,407 Branches/Agencies 11,562 11,542 11,525 11,575 11,591 11,533 11,533 11,540 10,710 10,805 10,952 11,316

Lending Investors 1 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - - -

Non-Stock Savings and Loan Assns. 198 199 199 199 199 201 200 200 199 200 200 199 Head Offices 71 71 71 71 71 71 70 70 69 69 69 68 Branches/Agencies 127 128 128 128 128 130 130 130 130 131 131 131

Private Insurance Companies 2 r 110 110 110 99 99 99 99 99 97 97 97 97 Head Offices r 108 108 108 96 96 96 96 96 97 97 97 97 Branches/Agencies r 2 2 2 3 3 3 3 3 - - - -

Government Non-Banks 4 4 4 4 4 4 4 4 4 4 4 4 Head Offices 4 4 4 4 4 4 4 4 4 4 4 4 Branches/Agencies - - - - - - - - - - - -

Venture Capital Corporations - - - - - - - - - - - - Head Offices - - - - - - - - - - - -Branches/Agencies - - - - - - - - - - - -

Credit Card Companies 3 3 3 3 3 3 3 3 3 3 3 3 Head Offices 3 3 3 3 3 3 3 3 3 3 3 3 Branches/Agencies - - - - - - - - - - - -

Other Non-Bank with QBF 1 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - - -

Electronic Money Issuer 4 4 4 4 4 4 4 4 4 4 4 4 Head Offices 4 4 4 4 4 4 4 4 4 4 4 4 Branches/Agencies - - - - - - - - - - - -

Remittance Agent 1 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - - -

Credit Granting Entities 9 9 9 9 9 9 9 9 9 9 9 9 Head Offices 9 9 9 9 9 9 9 9 9 9 9 9 Branches/Agencies - - - - - - - - - - - -

1 Refers to the number of financial establishments which includes the head offices and branches; excludes the Bangko Sentral ng Pilipinas Starting Q4 2009, data include other banking offices per Circular 505 and 624 dated 22 December 2005 and 13 October 2008, respectively. (Other banking offices refer to any office or place of business in the Philippines other than the head office, branch or extension offfice, which primarily engages in banking activities other than the acceptance of deposits and/or servicing of withdrawals thru tellers or other authorized personnel.)2 Covers only the head offices and their foreign branches.p Preliminary_ zero or nil


2014 2015 2016

8 TOTAL RESOURCES OF THE PHILIPPINE FINANCIAL SYSTEM 1

as of periods indicatedin billion pesos

2017

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r Q1 p

T o t a l 9,522.0 9,797.5 9,981.4 10,633.4 10,772.5 11,285.1 11,820.7 12,814.6 13,032.3 13,339.7 13,488.3 14,446.6 14,322.0 14,453.5 14,779.2 15,381.7 15,559.2 15,963.8 16,212.2 17,136.2 17,333.4 Banks 7,456.0 7,663.3 7,877.5 8,369.0 8,434.7 8,925.1 9,454.8 10,292.8 10,465.2 10,612.2 10,751.0 11,546.2 11,374.2 11,502.7 11,863.2 12,406.3 12,529.9 12,865.9 13,114.3 13,914.2 14,111.4 Universal and Commercial Banks 6,668.0 6,877.6 7,054.3 7,486.6 7,547.6 7,995.5 8,505.4 9,300.4 9,412.5 9,545.6 9,658.0 10,398.4 10,238.9 10,327.9 10,670.8 11,159.2 11,254.8 11,578.5 11,810.5 12,560.5 12,730.2 Thrift Banks 608.6 606.2 622.4 681.5 679.3 739.8 764.6 809.1 825.0 848.7 866.6 916.2 899.3 964.7 979.6 1,034.1 1,055.1 1,064.0 1,080.4 1,122.0 1,149.5 Rural Banks 179.4 179.4 200.8 200.8 207.9 189.8 184.8 183.3 227.7 217.9 226.4 231.6 236.0 210.1 212.8 213.0 220.0 223.4 226.3 231.7 231.7 a

Non-Banks 2 2,065.9 2,134.3 2,103.9 2,264.4 2,337.8 2,359.9 2,365.9 2,521.8 2,567.1 2,727.5 2,737.3 2,900.3 2,947.8 2,950.7 2,916.0 2,975.4 3,029.4 3,098.1 3,114.2 3,222.0 3,222.0 a

1 Excludes the Bangko Sentral ng Pilipinas; amount includes allowance for probable losses.2 Includes Investment Houses, Finance Companies, Investment Companies, Securities Dealers/Brokers, Pawnshops, Lending Investors, Non Stocks Savings and Loan Associations, Credit Card Companies (which are under BSP supervision), and Private and Government Insurance Companies (i.e., SSS and GSIS).a As of end-September 2016p PreliminaryNotes: Data on Non-Banks are based on Consolidated Statement of Condition (CSOC).

Data on Rural Banks were based on CSOC up to March 2010. Data from April 2010 onwards are based on FRP. Details may not add up to total due to rounding off.Source: Bangko Sentral ng Pilipinas

2016

(3)

2015

Institutions

(1)(2)

2012 2013 2014

9 NON-PERFORMING LOANS (NPL), TOTAL LOANS AND LOAN LOSS PROVISIONS OF THE BANKING SYSTEM 1/

end-of-periodin billion pesos

Non-Performing Loans 2 Gross Non-Performing Loans 3 Net Non-Performing Loans 3 Total Loans Loan Loss Provisions

UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total

2006 117.410 20.550 9.045 147.005 2073.698 249.993 83.234 2406.925 97.031 10.138 3.820 110.9892007 97.634 20.231 9.841 127.706 2195.110 295.499 100.215 2590.824 91.123 9.560 3.587 104.2702008 88.191 20.107 9.563 117.861 2502.662 303.632 95.892 2902.186 88.201 10.774 3.636 102.6112009 80.912 23.396 10.157 114.465 2725.200 321.742 97.534 3144.476 90.898 12.097 3.952 106.947

2010Mar 81.382 25.189 9.363 115.934 2531.003 320.902 99.346 2951.251 91.982 12.702 4.380 109.064Jun 87.668 25.868 9.491 123.027 2682.230 326.275 100.778 3109.283 95.394 13.723 4.603 113.720Sep 83.141 28.177 9.417 120.735 2670.645 343.058 97.794 3111.497 97.379 14.500 4.533 116.412Dec 80.215 26.323 10.249 116.787 2802.041 359.484 103.695 3265.220 95.040 14.123 5.102 114.265

2011Mar 82.410 25.911 11.838 120.159 2759.938 354.660 117.155 3231.753 99.197 16.645 5.970 121.812Jun 74.143 22.746 12.198 109.087 3030.631 367.867 119.701 3518.199 93.548 13.420 6.113 113.081Sep 74.326 22.699 12.127 109.152 3021.051 364.469 121.659 3507.179 91.944 13.618 6.296 111.858Dec 71.938 21.953 12.263 106.154 3222.105 383.731 120.963 3726.799 90.903 12.946 6.176 110.025

2012Mar 106.354 26.090 13.940 146.384 18.918 11.550 7.470 37.938 3192.496 402.540 123.740 3718.776 124.968 18.170 7.690 150.828Jun 102.098 24.360 14.370 140.828 11.393 9.530 7.350 28.273 3388.091 432.990 124.870 3945.951 127.269 18.270 8.230 153.769Sep 103.420 25.830 14.800 144.050 13.224 11.340 7.060 31.624 3444.161 410.520 128.780 3983.461 128.598 18.560 9.000 156.158Dec 100.610 26.530 15.850 142.990 11.310 12.220 6.910 30.440 3650.760 449.260 128.580 4228.600 128.460 18.090 10.220 156.770

2013Mar 99.357 26.930 17.250 143.537 16.245 12.240 8.073 36.558 3625.043 439.240 129.473 4193.756 127.487 18.960 10.420 156.867Jun 100.912 27.840 15.910 144.662 14.569 12.320 7.420 34.309 3760.891 468.830 128.740 4358.461 131.291 20.130 9.750 161.171Sep 100.638 28.895 16.400 145.933 16.497 13.088 7.870 37.455 3922.085 490.705 126.790 4539.580 131.338 20.199 9.740 161.277Dec 90.509 27.729 17.306 135.544 8.050 12.291 8.250 28.591 4256.963 508.199 131.788 4896.950 130.440 20.107 10.327 160.874

2014Mar 93.323 27.057 18.114 138.494 9.939 13.146 8.800 31.885 4329.734 547.791 137.889 5015.414 131.790 18.771 10.612 161.173Jun 94.798 27.165 17.867 139.830 12.437 12.931 8.895 34.263 4513.288 562.850 132.888 5209.026 133.317 19.088 10.240 162.645Sep 96.181 26.049 16.476 138.706 14.129 11.572 8.257 33.958 4704.656 575.778 134.611 5415.045 133.708 19.375 9.486 162.569Dec 93.055 25.373 16.402 134.830 15.289 11.346 8.104 34.739 5117.884 576.057 138.436 5832.377 132.542 19.468 9.563 161.573

2015Mar 97.365 27.293 16.758 141.416 18.093 12.116 8.407 38.616 4991.914 600.981 139.144 5732.039 134.544 20.460 9.646 164.650Jun 94.122 29.954 14.254 138.330 15.356 14.141 6.501 35.998 5110.488 638.154 119.780 5868.422 134.924 21.456 8.910 165.290Sep 95.241 30.503 13.997 139.741 18.006 14.300 5.998 38.304 5244.589 668.457 121.416 6034.462 133.090 22.036 9.196 164.322Dec 91.598 31.199 13.706 136.503 21.672 14.692 5.513 41.877 5719.665 689.019 118.711 6527.395 129.220 23.045 9.381 161.646

2016 p

Mar 97.112 34.346 14.215 145.673 29.065 16.288 5.741 51.094 5659.766 728.258 122.708 6510.732 129.193 25.001 9.739 163.933Jun 98.198 36.158 14.473 148.829 30.689 17.388 5.576 53.653 5940.313 731.832 126.088 6798.233 130.708 25.617 10.178 166.503Sep 98.398 37.414 14.380 150.192 28.399 18.049 5.157 51.605 6144.623 745.564 128.012 7018.199 133.465 26.440 10.499 170.404Dec 93.801 36.654 13.703 144.158 21.264 17.340 4.679 43.283 6706.311 778.133 127.674 7612.118 135.699 26.775 10.353 172.827

2017 p

Mar 99.712 40.069 13.703 a 153.484 24.465 20.104 4.679 a 49.248 6751.129 792.147 127.674 a 7670.951 138.546 27.883 10.353 a 176.782

1 Data include banks under liquidation, foreign office transactions and interbank loans2 Starting Sept. 2002, for supervisory purposes, computation of NPL was based on BSP Circular No. 351 which defines total loans as gross of allowance for probable losses and interbank loans less loans classified as loss. This has been discontinued in 2013.

For comparability purposes, 2012 was revised based on the new definition (BSP Circular No. 772). 3 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned.

As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012.

a As of December 2016p Preliminary

Details may not add up due to rounding off.Source: Bangko Sentral ng Pilipinas

9 RATIOS OF NON-PERFORMING LOANS (NPL) AND LOAN LOSS PROVISIONS 1

TO TOTAL LOANS OF THE BANKING SYSTEMend-of-period, in percent

UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total

2006 5.662 8.220 10.867 6.108 4.679 4.055 4.589 4.6112007 4.448 6.846 9.820 4.929 4.151 3.235 3.579 4.0252008 3.524 6.622 9.973 4.061 3.524 3.548 3.792 3.5362009 2.969 7.272 10.414 3.640 3.335 3.760 4.052 3.401

2010Mar 3.215 7.849 9.425 3.928 3.634 3.958 4.409 3.696Jun 3.268 7.928 9.418 3.957 3.557 4.206 4.567 3.657Sep 3.113 8.213 9.629 3.880 3.646 4.227 4.635 3.741Dec 2.863 7.322 9.884 3.577 3.392 3.929 4.920 3.499

2011Mar 2.986 7.306 10.105 3.718 3.594 4.693 5.096 3.769Jun 2.446 6.183 10.190 3.101 3.087 3.648 5.107 3.214Sep 2.460 6.228 9.968 3.112 3.043 3.736 5.175 3.189Dec 2.233 5.721 10.138 2.848 2.821 3.374 5.106 2.952

2012Mar 3.331 6.481 11.266 3.936 0.593 2.869 6.037 1.020 3.914 4.514 6.215 4.056Jun 3.013 5.626 11.508 3.569 0.336 2.201 5.886 0.717 3.756 4.219 6.591 3.897Sep 3.003 6.292 11.492 3.616 0.384 2.762 5.482 0.794 3.734 4.521 6.989 3.920Dec 2.756 5.905 12.327 3.381 0.310 2.720 5.374 0.720 3.519 4.027 7.948 3.707

2013Mar 2.741 6.131 13.323 3.423 0.448 2.787 6.235 0.872 3.517 4.317 8.048 3.740Jun 2.683 5.938 12.358 3.319 0.387 2.628 5.764 0.787 3.491 4.294 7.573 3.698Sep 2.566 5.888 12.935 3.215 0.421 2.667 6.207 0.825 3.349 4.116 7.682 3.553Dec 2.126 5.456 13.132 2.768 0.189 2.419 6.260 0.584 3.064 3.957 7.836 3.285

2014Mar 2.155 4.939 13.137 2.761 0.230 2.400 6.382 0.636 3.044 3.427 7.696 3.214Jun 2.100 4.826 13.445 2.684 0.276 2.297 6.694 0.658 2.954 3.391 7.706 3.122Sep 2.044 4.524 12.240 2.561 0.300 2.010 6.134 0.627 2.842 3.365 7.047 3.002Dec 1.818 4.405 11.848 2.312 0.299 1.970 5.854 0.596 2.590 3.380 6.908 2.770

2015Mar 1.950 4.541 12.044 2.467 0.362 2.016 6.042 0.674 2.695 3.404 6.932 2.872Jun 1.842 4.694 11.900 2.357 0.300 2.216 5.427 0.613 2.640 3.362 7.439 2.817Oct 1.816 4.563 11.528 2.316 0.343 2.139 4.940 0.635 2.538 3.297 7.574 2.723Dec 1.601 4.528 11.546 2.091 0.379 2.132 4.644 0.642 2.259 3.345 7.902 2.476

2016 p

Mar 1.716 4.716 11.584 2.237 0.514 2.237 4.679 0.785 2.283 3.433 7.937 2.518Jun 1.653 4.941 11.478 2.189 0.517 2.376 4.422 0.789 2.200 3.500 8.072 2.449Sep 1.601 5.018 11.233 2.140 0.462 2.421 4.029 0.735 2.172 3.546 8.202 2.428Dec 1.399 4.711 10.733 1.894 0.317 2.228 3.665 0.569 2.023 3.441 8.109 2.270

2017 p

Mar 1.477 5.058 10.733 a 2.001 0.362 2.538 3.665 a 0.642 2.052 3.520 8.109 a 2.305

1 Data include banks under liquidation, foreign office transactions and interbank loans2 Starting Sept. 2002, for supervisory purposes, computation of NPL was based on BSP Circular No. 351 which defines total loans as gross of allowance for probable losses and interbank loans less loans classified as loss. This has been discontinued in 2013.

For comparability purposes, 2012 was revised based on the new definition (BSP Circular No. 772). 3 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned.

As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012.

a As of December 2016p Preliminary

Details may not add up due to rounding off.Source: Bangko Sentral ng Pilipinas

Loan Loss Provisions/Total Loans NPL/Total Loans 2 Gross NPL/Total Loans 3 Net NPL/Total Loans 3

10 STOCK MARKET TRANSACTIONS volume in million shares, value in million pesos

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Volume 150,587 68,804 191,792 82,078 97,625 135,028 118,017 91,601 140,555 Financials 978 1,238 1,154 725 741 1,012 1,906 1,450 1,495 Industrial 10,913 6,133 11,872 5,550 6,153 6,410 11,122 5,345 9,604 Holding Firms 10,844 6,076 25,300 13,115 8,600 11,584 9,081 7,749 29,926 Property 12,138 8,586 7,757 16,680 10,446 11,770 20,015 12,974 22,113 Services 21,263 9,370 8,628 10,202 17,038 17,876 31,139 20,533 29,621 Mining & Oil 94,056 37,160 136,929 35,490 54,421 85,693 44,046 42,982 47,549 SME (in thousand shares) 393,244 239,362 149,843 315,570 222,462 681,589 708,473 565,685 247,653 ETF1/ (in thousand shares) 1,893 2,235 1,715 1,220 2,964 1,008 943 987 656

Value 641,594 553,577 517,832 438,408 407,066 524,669 576,329 421,435 436,165 Financials 74,595 88,404 66,529 43,993 51,044 81,396 78,796 64,291 62,314 Industrial 145,948 143,103 150,323 91,553 90,691 88,097 130,479 92,713 95,489 Holding Firms 174,325 136,336 108,947 119,313 98,158 141,840 145,256 106,019 107,784 Property 103,447 75,621 77,548 104,550 74,676 93,801 103,546 75,656 73,843 Services 111,491 85,432 94,494 67,320 74,501 94,777 96,593 64,268 76,891 Mining & Oil 27,328 21,899 17,914 8,583 15,738 17,146 16,669 15,622 17,704 SME (in thousand pesos) 4,226,414 2,498,500 1,876,456 2,957,202 1,927,800 7,488,170 4,868,616 2,748,376 2,061,918 ETF1/ (in thousand pesos) 234,748 282,800 200,392 139,155 331,093 123,996 120,654 116,416 78,599

Composite Index (end of period) 7940.49 7564.50 6893.98 6952.08 7262.30 7796.25 7629.73 6840.64 7311.72

Sum of details may not add up to totals due to rounding.

1/ Starting 2 December 2013, trading of an Exchange Traded Fund commenced. ETF is an open-end investment company that trades its shares in the stock exchangeSource : Philippine Stock Exchange

200720162015

11 PHILIPPINES: BALANCE OF PAYMENTSin million US dollars

2017 p Growth (%)Q1 Q2 Q3 Q4 Q1 Q1 2017 p

Current Account 730 141 763 -1032 -318 -143.7(Totals as percent of GNI) 0.9 0.2 0.9 -1.0 -0.4(Totals as percent of GDP) 1.1 0.2 1.0 -1.2 -0.4Export 26499 27622 29051 26834 29065 9.7Import 25770 27481 28288 27867 29384 14.0

Goods, Services, and Primary Income -5179 -6071 -5594 -7517 -6786 -31.0Export 20411 21231 22512 20193 22397 9.7Import 25590 27302 28106 27710 29184 14.0

Goods and Services -5820 -6767 -6129 -8238 -7464 -28.2(Totals as percent of GNI) -6.9 -7.3 -6.9 -8.3 -8.6(Totals as percent of GDP) -8.4 -8.7 -8.3 -9.9 -10.4Export 18024 18860 20088 17830 19953 10.7Import 23844 25627 26217 26068 27418 15.0

Goods -7816 -8347 -7943 -9973 -9839 -25.9(Totals as percent of GNI) -9.2 -8.9 -8.9 -10.0 -11.3(Totals as percent of GDP) -11.3 -10.7 -10.7 -11.9 -13.8Credit: Exports 10183 10709 11933 10619 11617 14.1Debit: Imports 17999 19057 19876 20592 21456 19.2

Services 1995 1580 1814 1735 2374 19.0Credit: Exports 7841 8151 8155 7211 8336 6.3Debit: Imports 5845 6570 6341 5476 5962 2.0

Primary Income 642 696 535 721 678 5.7Credit: Receipts 2387 2371 2424 2363 2444 2.4Debit: Payments 1745 1675 1889 1641 1766 1.2

Secondary Income 5908 6212 6357 6485 6468 9.5Credit: Receipts 6088 6390 6540 6642 6668 9.5Debit: Payments 180 179 183 157 200 11.2

Capital Account 24 26 28 24 9 -62.0Credit: Receipts 28 30 32 28 43 56.8Debit: Payments 3 4 4 4 34 965.9

Financial Account 955 -910 849 54 579 -39.4Net Acquisition of Financial Assets 1686 2279 1446 1653 1301 -22.8Net Incurrence of Liabilities 730 3189 596 1599 721 -1.2

Direct Investment -1049 -969 -387 -1829 -1142 -8.9Net Acquisition of Financial Assets 288 1878 1280 253 417 45.1Net Incurrence of Liabilities 1337 2847 1667 2082 1560 16.6

Portfolio Investment 1446 880 -634 -309 3205 121.7Net Acquisition of Financial Assets 488 1247 -198 -418 564 15.5Net Incurrence of Liabilities -958 367 436 -109 -2641 -175.8

Financial Derivatives -3 59 -11 -78 -183 -6560.7Net Acquisition of Financial Assets -155 -210 -191 -145 -272 -75.8Net Incurrence of Liabilities -152 -270 -180 -67 -90 41.2

Other Investment 562 -880 1882 2269 -1301 -331.6Net Acquisition of Financial Assets 1065 -636 555 1962 592 -44.4Net Incurrence of Liabilities 503 244 -1327 -307 1892 276.1

NET UNCLASSIFIED ITEMS -8 -233 1073 -1006 -106 -1193.2

OVERALL BOP POSITION -210 843 1014 -2068 -994 -374.2(Totals as percent of GNI) -0.2 0.9 1.1 -2.1 -1.1(Totals as percent of GDP) -0.3 1.1 1.4 -2.5 -1.4

Debit: Change in Reserve Assets -199 833 1025 -2079 -983 -394.3Credit: Change in Reserve Liabilities 11 -11 11 -10 11 1.9

Details may not add up to total due to rounding.p Preliminary. Rounds off to zero

Technical Notes:1. Balance of Payments Statistics are based on the IMF's Balance of Payments and International Investment Position Manual, 6th Edition.2. Financial Account, including Reserve Assets, is calculated as sum of net acquisitions of financial assets less net incurrence of liabilities.3. Balances in the current and capital accounts are derived by deducting debit entries from credit entries.4. Balances in the financial account are derived by deducting net incurrence of liabilities from net acquisition of financial assets.5. Negative values of Net Acquisition of Financial Assets indicate withdrawal/disposal of financial assets; negative values of Net

Incurrence of Liabilities indicate repayment of liabilities.6. Overall BOP position is calculated as the change in the country's net international reserves (NIR), less non-economic transactions (revaluation

and gold monetization/demonetization). Alternatively, it can be derived by adding the current and capital account balances less financial account plus net unclassified items.

7. Net unclassified items is an offsetting account to the overstatement or understatement in either receipts or payments of the recorded BOP components vis-à-vis the overall BOP position.

8. Data on Deposit-taking corporations, except the central bank consist of transactions of commercial and thrift banks and offshore banking units (OBUs).


2016

12 INTERNATIONAL RESERVES as of periods indicated in million US dollars

2017

Mar Jun Sep Dec Mar

Gross International Reserves 82,977 85,284 86,139 80,692 80,894

Gold 7,765 8,336 8,307 7,259 7,888 SDRs 1,193 1,184 1,182 1,138 1,149 Foreign Investments 71,379 73,295 73,850 68,290 67,677 Foreign Exchange 2,217 2,020 2,342 3,563 3,735 Reserve Position in the Fund 424 449 458 442 446

Net International Reserves 82,964 85,282 86,126 80,689 80,881

Details may not add up to total due to roundingSource: Bangko Sentral ng Pilipinas

2 0 1 6

13 EXCHANGE RATES OF THE PESOpesos per unit of foreign currencyperiod averages

2013 42.4462 0.4356 56.3942 66.4139 41.0195 33.9347 5.4725 13.4839 1.3832 0.0041 1.4305 0.0388 6.9048 11.3184 11.5567Jan 40.7295 0.4580 54.1270 65.0893 42.7556 33.1823 5.2537 13.4143 1.3549 0.0042 1.4011 0.0382 6.5456 10.8608 11.0893Feb 40.6723 0.4372 54.3618 63.0701 41.9596 32.8469 5.2446 13.1338 1.3647 0.0042 1.3727 0.0374 6.5255 10.8455 11.0736Mar 40.7127 0.4293 52.8776 61.3734 41.9971 32.6803 5.2477 13.0966 1.3788 0.0042 1.3700 0.0370 6.5492 10.8564 11.0848Apr 41.1422 0.4221 53.5266 62.9378 42.7442 33.2313 5.2999 13.4866 1.4164 0.0042 1.3793 0.0367 6.6485 10.9711 11.2020May 41.2976 0.4092 53.5926 63.1389 40.9360 33.0769 5.3210 13.6880 1.3898 0.0042 1.3870 0.0372 6.7247 11.0124 11.2440Jun 42.9069 0.4406 56.6122 66.4568 40.5481 34.0634 5.5291 13.6649 1.3959 0.0044 1.4334 0.0378 6.9941 11.4413 11.6823Jul 43.3559 0.4350 56.7089 65.8438 39.7304 34.2142 5.5896 13.6030 1.3950 0.0043 1.4482 0.0385 7.0675 11.5609 11.8044Aug 43.8639 0.4484 58.4174 67.8155 39.5530 34.4837 5.6559 13.3993 1.3899 0.0042 1.4640 0.0393 7.1644 11.6961 11.9425Sep 43.8318 0.4420 58.5044 69.4375 40.6011 34.6960 5.6527 13.4795 1.3821 0.0039 1.4785 0.0404 7.1617 11.6874 11.9338Oct 43.1825 0.4415 58.8668 69.5227 41.0612 34.7164 5.5693 13.5813 1.3850 0.0038 1.4696 0.0405 7.0723 11.5148 11.7573Nov 43.5546 0.4357 58.7584 70.1141 40.6381 34.9239 5.6184 13.6441 1.3786 0.0038 1.4758 0.0410 7.1480 11.6137 11.8586Dec 44.1043 0.4276 60.3768 72.1669 39.7100 35.1010 5.6885 13.6152 1.3677 0.0037 1.4864 0.0418 7.2565 11.7602 12.0081




2017 49.9910 0.4401 53.2686 61.9521 37.8889 35.3106 6.4419 11.2478 1.4234 0.0037 1.6098 0.0434 7.2569 13.3323 13.6123Jan 49.7363 0.4328 52.8348 61.3425 37.0610 34.8096 6.4125 11.1581 1.4021 0.0037 1.5693 0.0421 7.2117 13.2644 13.5425Feb 49.9614 0.4422 53.2346 62.4591 38.2766 35.3290 6.4388 11.2515 1.4269 0.0037 1.6190 0.0438 7.2688 13.3243 13.6044Mar 50.2752 0.4454 53.7365 62.0548 38.3291 35.7930 6.4745 11.3337 1.4412 0.0038 1.6411 0.0444 7.2903 13.4083 13.6901


New Taiwan Dollar

South Korean Won

Indonesian Rupiah

Chinese Yuan Saudi Rial Emirati

DirhamThai BahtUS Dollar Japanese Yen Euro Pound

SterlingSingapore

DollarHongkong

DollarMalaysian

RinggitAustralian

Dollar

13a EXCHANGE RATES OF THE PESOunits of foreign currency per pesoperiod averages





2017 0.0200 2.2724 0.0188 0.0161 0.0264 0.0283 0.1552 0.0889 0.7026 267.1749 0.6214 23.0384 0.1378 0.0750 0.0735Jan 0.0201 2.3107 0.0189 0.0163 0.0270 0.0287 0.1559 0.0896 0.7132 270.2703 0.6372 23.7449 0.1387 0.0754 0.0738Feb 0.0200 2.2612 0.0188 0.0160 0.0261 0.0283 0.1553 0.0889 0.7008 268.0965 0.6177 22.8389 0.1376 0.0751 0.0735Mar 0.0199 2.2454 0.0186 0.0161 0.0261 0.0279 0.1545 0.0882 0.6939 263.1579 0.6093 22.5313 0.1372 0.0746 0.0730


US Dollar Japanese Yen Euro Thailand

BahtIndonesian

RupiahNew Taiwan

DollarPound

SterlingSingapore

DollarHongkong

Dollar Saudi Rial Emirati Dirham

Australian Dollar

Chinese Yuan

South Korean Won

Malaysian Ringgit

13b EFFECTIVE EXCHANGE RATE INDICES OF THE PESO1980 = 100period averages

Overall 1 Advanced 2 Developing 3 Overall Advanced Developing

2013 15.26 12.38 24.45 87.44 81.57 115.85Jan 15.53 12.43 25.14 91.17 84.88 120.98Feb 15.72 12.65 25.35 90.71 84.77 120.01Mar 15.82 12.82 25.37 90.76 84.87 120.03Apr 15.71 12.81 25.07 90.41 84.79 119.30May 15.75 12.96 24.97 90.39 85.15 118.89Jun 15.14 12.27 24.27 87.15 80.87 115.93Jul 15.08 12.29 24.09 85.75 80.37 113.22Aug 14.88 12.02 23.92 84.33 78.11 112.32Sep 14.89 12.07 23.89 84.35 78.23 112.25Oct 14.97 12.11 24.04 85.06 78.90 113.18Nov 14.94 12.15 23.90 85.09 79.45 112.66Dec 14.85 12.10 23.72 84.84 79.26 112.29




2017 14.52 11.90 23.10 88.41 85.33 114.28Jan 14.69 12.03 23.40 90.35 87.44 116.55Feb 14.49 11.88 23.05 88.07 85.08 113.76Mar 14.37 11.79 22.84 86.81 83.47 112.52

2 U.S., Japan, Euro Area, and Australia3 Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E.r Revised


Trading Partners Index Trading Partners Index

1 Australia, Euro Area, U.S., Japan, Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E.

N O M I N A L R E A L

14 TOTAL EXTERNAL DEBT 1/


in million US dollars

Medium & Medium & Trade Non-Trade Long- Term Trade Non-Trade Long- Term

Grand Total 2,087 12,440 60,237 74,763 a 3,050 12,011 58,744 73,805 a

Public Sector 801 36,669 b 37,470 648 37,012 b 37,660

Banks 801 3,119 3,921 648 3,455 4,103Bangko Sentral ng Pilipinas 1,292 c 1,292 1,309 c 1,309

Others 801 1,828 2,629 648 2,147 2,795

Non-Banks 33,549 33,549 33,556 33,556NG and Others 33,549 33,549 33,556 33,556

Private Sector 2,087 11,638 23,568 37,293 3,050 11,363 21,733 36,145

Banks 11,450 3,666 15,116 11,174 3,428 14,602

Foreign Bank Branches 4,012 166 4,178 d 4,758 266 5,025 d

Domestic Banks 7,438 3,500 10,938 6,416 3,161 9,577

Non-Banks 2,087 188 19,902 e 22,177 3,050 189 18,305 e 21,543

1 Covers debt owed to non-residents, with classification by borrower based on primary obligor per covering loan/rescheduling agreement/document.

Exclusions

a Residents' holdings of Philippine debt papers issued offshore;

Non-residents' holdings of peso-denominated debt securities

Inclusions

b Cumulative foreign exchange revaluation on US$-denominated

multi-currency loans from Asian Development Bank and World Bankc Accumulated SDR allocations from the IMFd "Due to Head Office/Branches Abroad" (DTHOBA) accounts of branches

and offshore banking units of foreign banks operating in the Philippines

which are considered by BSP as "quasi-equity"e Loans without BSP approval/registration which cannot be serviced

using foreign exchange from the banking system;

Obligations under capital lease arrangements


13,139

1,306

11,979

1,253

3,123 3,758

-43 -29

1,121 1,140

31 December 2016 31 March 2017

TotalShort-termShort-term

Total

31 December 2016 31 March 2017

16,529

5,506

17,026

4,588

15 SELECTED FOREIGN DEBT SERVICE INDICATORS

for periods indicatedin million US dollars

Q1 Q2 Q3 Q4 Q1

Debt Service Burden (DSB) 1 2292 1473 1422 1956 2389Principal 1572 954 711 1355 1688Interest 720 519 711 600 701

Export Shipments (XS) 2 10183 10709 11933 10619 11617

Exports of Goods and Receipts 24945 26084 27476 25223 27464from Services and Income (XGSI) 2, 3

Current Account Receipts (CAR) 2 26499 27622 29051 26834 29065

External Debt 77640 77721 76622 74763 73805

Gross Domestic Product (GDP) 69225 77767 74081 83566 71530

Gross National Income (GNI) 84648 93304 89393 99390 87036

Ratios (%) :

DSB to XS 22.51 13.75 11.92 18.42 20.56

DSB to XGSI 9.19 5.65 5.18 7.75 8.70

DSB to CAR 8.65 5.33 4.89 7.29 8.22

DSB to GNI 2.71 1.58 1.59 1.97 2.74

External Debt to GDP 26.47 26.19 25.41 24.52 24.05

External Debt to GNI 21.88 21.68 21.07 20.37 20.00

1 Debt service burden represents principal and interest payments after rescheduling. In accordance with the internationally-accepted concept, debt service burden consists of (a) Principal and interest payments on fixed MLT credits including IMF credits, loans covered bythe Paris Club and Commercial Banks rescheduling, and New Money Facilities; and (b) Interest payments on fixed and revolving short-term liabilities of banks and non-banks but excludes (i) Prepayments of future years' maturities of foreign loans and (ii) Principal payments onfixed and revolving ST liabilities of banks and non-banks.

2 Based on the accounting principle under the Balance of Payments and International Investment Position Manual, Sixth edition (BPM6)3 Includes cash remittances of overseas Filipino workers that were coursed through and reported by commercial banks which are reflected

under Compensation of Employees in the Primary Income account and workers' remittances in the Secondary Income account.p Preliminary

Source: BSP

2016 2017 p

16 SELECTED FOREIGN INTEREST RATESperiod averages; in percent

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

US Prime Rate 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2841 3.5000 3.5000 3.5000 3.5119 3.7935

US Discount Rate 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7935 1.0000 1.0000 1.0000 1.0492 1.2935

US Federal Funds Rate 0.1142 0.1649 0.1570 0.1722 0.1546 0.1140 0.0848 0.0802 0.0767 0.0780 0.0784 0.0930 0.0974 0.1151 0.1323 0.1574 0.3694 0.3831 0.3994 0.4491 0.6974

LIBOR (90 days) 0.5141 0.4663 0.4239 0.3170 0.2917 0.2750 0.2614 0.2413 0.2358 0.2282 0.2343 0.2363 0.2603 0.2794 0.3142 0.4085 0.6248 0.6433 0.7853 0.9208 1.0684

SIBOR (90 days)1 0.4375 0.4375 0.4120 0.4063 0.4063 0.4063 0.4063 0.4062 0.4033 0.4038 0.4055 0.4254 0.7503 0.8791 0.9613 1.0921 1.2369 1.0062 0.8807 0.9059 0.9529

1 SIBOR data refers to SIBOR rates (in Singapore $)

Source: Bloomberg, Asian Wall Street Journal, Reuters

2017 2014 2016 2013 2015 2012

17 BALANCE SHEET OF THE BANGKO SENTRAL NG PILIPINASas of periods indicated

Mar Jun Sep Dec Mar Jun Sep Dec u Mar p

Assets 4,134.4 4,180.5 4,296.4 4,309.9 4,405.5 4,591.3 4,760.7 4,559.1 4,612.74,134.4 4,180.5 4,296.4 4,309.9 4,405.5 4,591.3 4,760.7 4,559.1

International Reserves 3,581.1 3,622.1 3,753.7 3,782.4 3,798.6 3,991.3 4,158.0 3,998.0 4,044.1 Foreign Exchange Receivable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic Securities 223.0 223.1 223.4 222.6 224.0 224.2 224.8 223.2 224.5 Loans and Advances 85.1 85.3 85.7 85.5 163.5 154.5 151.7 151.1 151.2 Revaluation of International Reserves 35.9 36.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bank Premises and Other Fixed Assets 18.0 17.9 18.0 18.3 18.1 17.9 18.0 18.1 18.6 Derivative Instruments in a Gain/Loss (-) Position 1.3 0.4 0.2 0.0 0.0 1.5 1.6 0.0 0.2 Derivative Asset 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Assets 190.0 194.9 215.6 201.0 201.3 201.9 206.6 168.8 174.2

Liabilities 4,092.5 4,137.3 4,253.9 4,268.7 4,362.9 4,545.3 4,703.4 4,500.7 4,551.6

Currency Issue 809.7 798.6 817.3 1,005.2 930.5 931.4 942.1 1,124.2 1,046.1 Deposits 2,893.1 2,945.9 2,952.6 2,788.9 2,935.7 2,967.2 2,991.7 2,679.0 2,771.4 Reserve Deposits of Other Depository Corporations (ODCs) 1 1,277.7 1,324.4 1,373.3 1,456.2 1,427.0 1,393.5 1,559.4 1,631.6 1,686.7 Reserve Deposits of Other Financial Corporations (OFCs) 2 7.6 7.1 6.8 5.7 4.0 2.7 2.5 1.9 2.0 Overnight Deposit Facility 3 1,052.2 1,008.1 953.7 828.3 1,027.5 1,004.7 634.5 236.6 131.8 Term Deposit Facility 3 .. .. .. .. .. 90.1 330.1 529.2 576.6 Treasurer of the Philippines 4 478.6 528.0 544.1 426.8 336.3 332.2 318.1 136.9 227.6

Other Foreign Currency Deposits 0.0 0.0 0.0 0.0 0.5 0.1 0.1 0.1 0.1

Foreign Financial Institutions 43.7 44.4 39.3 39.3 108.7 111.1 111.1 111.1 111.1 Other Deposits 5 33.4 33.9 35.3 32.5 31.7 32.9 35.9 31.6 35.5

Foreign Loans Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Bonds Payable 22.8 22.6 23.9 23.6 23.5 23.5 24.8 24.9 25.7

Derivative Instruments in a Loss Position 0.0 0.0 0.0 0.1 1.8 0.0 0.0 0.0 0.1

Derivatives Liability 0.1 0.0 0.0 0.0 0.0 0.2 0.1 0.0 0.1

Allocation of SDRs 51.7 53.2 55.1 54.7 54.3 55.1 56.7 56.1 57.1

Revaluation of International Reserves 0.0 0.0 86.2 73.9 96.2 252.3 371.3 299.5 389.9 Reverse Repurchase Facility 3 304.8 306.3 308.5 311.7 309.8 305.0 305.0 305.1 249.7

Other Liabilities 10.2 10.8 10.1 10.6 10.9 10.5 11.6 11.9 11.5

Net Worth 41.9 43.2 42.5 41.2 42.6 46.0 57.3 58.4 61.1

Capital 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0

Surplus/Reserves -8.1 -6.8 -7.5 -8.8 -7.4 -4.0 7.3 8.4 11.1

Note: Details may not add up to total due to rounding off.1 ODCs are deposit generating institutions other than the BSP such as universal and commercial banks (UB/KBs), specialized government banks (SGBs), thrift banks (TBs), rural banks (RBs)

and non-banks with quasi-banking functions (NBQBs).2 OFCs are trust units of banks.3 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively,

and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system. Includes accrued interest payables.4 Includes foreign currency deposits.5 Mostly GOCC deposits.p Based on the tentative BSP Financial Statements (FS) as of end-March 2017. u Based on the unaudited pre-closing BSP FS as of end-December 2016.

p & u Figures may change once the end-2016 FS become final and audited.

.. No transaction


2017LEVELS (in billion pesos)

20162015

18 INCOME POSITION OF THE BANGKO SENTRAL NG PILIPINAS

2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 u FY u Q1 p

Revenues 15.299 16.083 11.806 13.477 56.665 13.167 20.533 23.422 12.085 69.207 12.557

Interest Income 8.454 9.735 10.226 10.777 39.192 11.495 11.503 11.698 11.288 45.984 13.140 International Reserves 6.111 7.333 7.639 8.058 29.141 8.824 9.026 9.342 10.553 37.745 10.801 Domestic Securities 0.941 1.021 1.147 1.240 4.349 1.052 1.023 0.967 0.926 3.968 1.016 Loans and Advances 0.424 0.417 0.438 0.418 1.697 0.438 0.501 0.417 -0.450 0.906 0.407 Others 0.978 0.964 1.002 1.061 4.005 1.181 0.953 0.972 0.259 3.365 0.916 Miscellaneous Income 6.672 5.584 1.184 2.442 15.882 1.263 9.037 11.522 0.741 22.563 -0.299 Net Income from Branches 0.173 0.764 0.396 0.258 1.591 0.409 -0.007 0.202 0.056 0.660 -0.284

Expenses 17.308 18.538 17.993 19.162 73.001 16.684 18.146 16.993 19.364 71.187 15.588

Interest Expenses 12.022 12.240 12.325 12.202 48.789 11.550 10.986 10.858 10.226 43.620 10.010 Legal Reserve Deposits of Banks 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 National Government Deposits 2.205 2.651 2.614 2.544 10.014 1.828 1.498 1.495 1.301 6.122 1.221 Reverse Repurchase Facility 1 3.033 3.083 3.140 3.133 12.389 3.148 2.874 2.339 2.338 10.699 2.060 Overnight Deposit Facility 1 6.291 6.003 6.233 5.803 24.330 6.064 6.010 5.096 2.781 19.951 0.998 Term Deposit Facility 1 .. .. .. .. .. .. 0.085 1.386 3.217 4.688 5.131 Loans Payable and Other Foreign Currency Deposits 0.487 0.494 0.326 0.706 2.013 0.500 0.506 0.532 0.577 2.115 0.587 Other Liabilities 0.006 0.009 0.012 0.016 0.043 0.010 0.013 0.010 0.012 0.045 0.013 Cost of Minting/Printing of Currency 1.940 1.711 1.585 2.949 8.185 1.284 2.362 1.775 3.819 9.240 1.523 Taxes and Licenses 0.355 0.225 0.252 0.256 1.088 0.364 0.251 0.259 0.175 1.049 0.424 Others 2.991 4.362 3.831 3.755 14.939 3.486 4.547 4.101 5.144 17.278 3.631

Net Income/(Loss) Before Gain/(Loss) on FXR Fluctuations and Income Tax Expense/(Benefit) -2.009 -2.455 -6.187 -5.685 -16.336 -3.517 2.387 6.429 -7.279 -1.980 -3.031

Gain/(Loss) on Foreign Exchange Rate Fluctuations 2 -1.176 3.496 5.333 3.897 11.550 3.673 0.878 4.145 10.413 19.109 4.695

Income Tax Expense/(Benefit) 0.000 0.000 0.002 -0.335 -0.333 0.000 0.000 0.002 0.104 0.106 0.000

Net Income/(Loss) After Tax -3.185 1.041 -0.856 -1.453 -4.453 0.156 3.265 10.572 3.030 17.023 1.664

Note: Details may not add up to total due to rounding.1 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively,

and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system.2 This represents realized gains or losses from fluctuations in FX rates arising from foreign currency-denominated transactions of the BSP, including: 1) rollover/re-investments of matured FX investments

with foreign financial institutions and FX-denominated government securities; 2) servicing of matured FX obligations of the BSP; and 3) maturity of derivatives instruments.p Based on the tentative BSP Financial Statements (FS) as of end-March 2017.u Based on the unaudited pre-closing BSP FS as of end-December 2016.

p & U Figures may change once the end-2016 FS become final and audited... No transaction


for periods indicated

20162015LEVELS (in billion pesos)

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