The Republic of the Philippines - Good Governance is Good Economics

55
October 2013 Good Governance is Good Economics The Republic of the Philippines

description

 

Transcript of The Republic of the Philippines - Good Governance is Good Economics

Page 1: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

October 2013

Good Governance is Good Economics

The Republic of the Philippines

Page 2: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Table of Contents

2

I. Executive Summary.................................................................. 3

II. Institutionalizing Good Governance…………………………….. 8

III. Robust Improvements in Economic and Financial Metrics

- Healthy, Sustained and Inclusive Growth……………………………

- Rapidly Strengthening Public Finances and Debt Dynamics……..

- Supportive and Stable Monetary Conditions and Healthy Banking

Sector……………………………………………………………….......

- Strong External Position………………………………………………

15

19

27

36

IV. Improving Investment Climate…………………………………… 40

V. Mindanao - Peace Leading towards Progress……………....... 45

VI. Outlook…………………………………………………………….. 50

Page 3: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

I. Executive Summary

Contents

3

Page 4: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Executive Summary

Pushing forward on all fronts

Rapid and Resilient

Economic Growth

Improving Governance

and Effective

Policymaking

Stronger Fiscal and

Government Finances

Progress in Investments

and Infrastructure

Development

Steep change in economic

growth with a 6.8% increase in

GDP in 2012, and 7.6% in

1H2013

Broad-based quality of growth

with increases across

consumption, public spending,

and investments

Upward revisions of 2013

growth forecast for the

Philippines by World Bank

from 6.2% to 7%; ADB from

6% to 7%

The Philippine economy is on

track to meet the Philippine

Development Plan average

growth target of 7- 8% for the

medium term

Focus on improved governance

is paying off with notable

improvements in the ROP’s

ranking in 3rd party indicators

Passage of sin tax and

reproductive health laws, etc.

demonstrate improved

government effectiveness and

firm commitment to implement

difficult reforms

Three years into office, the

Aquino Administration’s net

satisfactory rating remains in

the very good territory at

+66%*

ROP has run a primary surplus

since 2011

Aug 2013 fiscal surplus of

PhP 21.9 bn reflects the Republic’s

ability to raise revenues amid robust,

strategic and high-impact spending. .

Jan-Aug 2013 deficit of Php82.6 bn

is within the Q1-Q3 program

Jan-Aug 2013 revenue grew 12%

yoy to Php1,139.2bn indicative of

continued revenue buoyancy along

with accelerated spending growth

of 13% yoy to Php1,221.8bn

Much improved debt dynamics with

declining NG debt ratio of 49.5% of

GDP as of 1H2013, longer

maturities and increased share of

PHP-denominated debt

ROP is now a net external creditor

with foreign exchange reserves

exceeding gross external debt

The portion of the budget that is

spent on interest servicing will

decline to 15.5% of total budget in

2014 from 17.1% in 2012 and a

high of 31.6% in 2005 and 33.2% in

1988

Investors beginning to take note

of improving investment climate

and governance in the ROP

Infrastructure development is

accelerating with private and

public construction increasing

22.1% in the 1H 2013

Budgetary allocation for public

infrastructure increased by

17.7% in 2013

Philippines posted the highest

FDI growth rate of 54% in

ASEAN in 2012

BOI-PEZA approved

investments increased 36.6% to

Php285.6bn in 1H 2013, led by

electricity, gas, steam & air

conditioning supply (55.9%)

followed by real estate activities

(22.2%)

4 *2nd Quarter 2013 SWS Survey

Page 5: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below Recent Economic Performance Reflects ROP’s Strong Economic Base

Strong economic growth in 2012 thru 1H2013 has been

broad-based in nature and supported by all components of

GDP

Private consumption is robust and remains a major

contributor to GDP growth, highlighting healthy

consumer confidence in the economy

Capital formation increased significantly at the end of

2012 and the 1H2013, particularly in the construction

sector, as investment and infrastructure development

began to take off

2Q2013 growth of 7.5% yoy outperformed market

consensus of 7.2% yoy. The growth trend demonstrates the

nation’s robust growth momentum

Philippine National Statistical Coordination Board (NSCB)

Sharp increase in economic growth

Strong Economic Fundamentals to position the economy to adjust smoothly to effects of QE tapering and

slow down in regional growth

On 23 September 2013, the IMF mission led by Rachel van Elkan noted that the Philippines is “expected to remain strong at 6.75% in 2013

and 6% in 2014

In the first half of 2013, growth of 7.6% was underpinned by dynamic private and public demand such as robust consumption and

investment

On the impact of Fed’s prospective tapering of asset purchase, IMF states that “when tapering does eventually begin, the Philippines’

strong fundamentals—including strong current account receipts, its net creditor status, steady reductions in public debt, and low foreign

participation in government securities markets—position the economy to adjust smoothly to the accompanying capital flow reversal and

slow down in regional growth.”

Contribution to GDP Growth, in percentage points

2012 1H2013

GROSS DOMESTIC PRODUCT 6.8 7.6

By Origin

1. Agri., Hunting, Forestry and Fishing 0.3 0.2

Agriculture and Forestry 0.3 0.1

Fishing 0.0 0.1

2. Industry 2.2 3.4

Mining and Quarrying 0.0 (0.0)

Manufacturing 1.2 2.2

Construction 0.8 1.1

Electricity, Gas and Water Supply 0.2 0.1

3. Services 4.3 4.1

Transport, Comm., Storage 0.6 0.3

Trade & Repair of Motor Vehicles, Motorcycles, Personal and

Household Goods 1.3 1.0

Financial Intermediation 0.5 1.0

Real Estate, Renting and Business Activities 0.8 0.8

Public Administration and Defense; Compulsory Social Security 0.3 0.3

Other Services 0.8 0.7

5

Executive Summary

Page 6: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Executive Summary

Government financial strength continues to improve

6

Source: Moody’s

ROP’s debt stock has shown consistent improvement in recent years

and the government has several tools to manage amortization

As of 2012 the Bond Sinking Fund amounted to

Php825bn

The debt amortization schedule is front-loaded with domestic

debt, which the government has been able to easily refinance

owing to deep, captive domestic markets

General government consolidated figures are now published

and available publicly. GG figures significantly benefit ROP

in view of offsetting of intragovernmental holdings

ROP’s Debt Story Reflects Prudent Fiscal Management

General Government Consolidated Debt Adjustment

GG Debt vs. National Debt (as % to GDP)

Foreign Currency Debt Exposure Has Been Reduced

Amortization Schedule is Manageable

GG Debt vs. National Debt (in Php bn)

0

50

100

150

200

250

300

350

400

450

500

H2 2

01

2

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038-…

External Domestic

46.6

40.7 40

42

44

46

48

50

52

54

56

2009 2010 2011 2012 2013F 2014F

3 June Moody's Data (Nat'l Govt Debt)

25 July Moody's Data (Gen Govt Debt)

GG Debt as % to GDP

16.7

21.8

0

10

20

30

40

50

60

70

80

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Q1

20

13

Foreign Domestic

Page 7: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below 2005 vs. 2012

2005 2012 Change

Sovereign Credit Ratings

Fitch Ratings BB BBB- (Mar 2013)

Standard and Poor’s BB- BBB- (May 2013)

Moody’s Investors Service B1 Baa3 (Oct 2013)

GDP Growth Rate 4.8 6.8

GDP Per Capita1 (USD), PPP concept 3,061 4,431

GNI Per Capita1 (USD), PPP concept 3,855 5,834

National Government Interest (% of Revenue) 36.7 20.4

Fiscal Balance (% of GDP) (2.6) (2.3)

General Government Debt (% of GDP) 59.2 40.6

Gross International Reserves (US$ billions) 18.5 83.8

OFW Remittances (US$ billions) 10.7 21.4

Gross External Debt (% of CAR) 89.9 65.3

Import Cover (months) 3.8 12.0

Current Account (% of GDP) 1.9 2.8

Source: Bangko Sentral ng Pilipinas (BSP), National Economic and Development Authority (NEDA), Department of Finance (DOF)

1/ At current prices

ROP Achieves Investment Grade from Fitch, S&P and Moody's

Improved credit metrics across the board over the past 7 years

7

Page 8: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

II. Institutionalizing Good Governance

Contents

8

Page 9: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Pipeline Developmental Reforms and Programs Accelerating reforms to achieve sustainable and inclusive growth

2013 and Beyond

2013 and Beyond:

Amendments to the Build Operate

Transfer Law or RA 7718

2013 and Beyond:

Amendments to the Anti-Money

Laundering Act

2013 and Beyond:

Amendments to the

Bangko Sentral ng Pilipinas Charter

2013 and Beyond:

Customs Modernization and

Tariff Act (CMTA)

2013 and Beyond:

Full implementation of the

Government Integrated Financial

Management Information Systems

(GIFMIS) in 2013

2013 and Beyond:

Rationalization

of Fiscal Incentives Law

2013 and Beyond:

Site or Location for National

Government Infrastructure Projects

and For Other Purposes

2013 and Beyond:

Removal of Investment Restrictions

in Specific Laws cited in the

Foreign Investment Negative List

(FINL)

2013 and Beyond:

Amendments to RA8974 or the Act to

Facilitate the Acquisition of Right-of-

Way

2013 and Beyond:

Rationalization of the Mining Fiscal

Regime

2013 and Beyond:

Amendments to the Cabotage Law

2013 and Beyond:

Tax Incentives Management

and Transparency Act

9

January 2014:

Implementation of Basel

III

Page 10: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Real progress being made in helping the poor

Net Satisfaction with the National Administration on

Helping the Poor (%), December 1993-June 2013

Administration has strong national mandate and viewed

as sincere in fighting graft and corruption

Net Satisfaction with the National Administration on

Eradicating Graft and Corruption (%), March 1987-June 2013

C.AQUINO RAMOS ESTRADA ARROYO B.AQUINO

Widespread Support of the Aquino Administration

Strong mandate by the public to improve governance

The Aquino Administration attains record-high very good net satisfaction rating

Net Satisfaction with General Performance of the National Administration (%), February 1989-June 2013

10 Source: The 2013 SWS Survey Review, 23 September 2013, Social Weather Station National Surveys

Net figures (% Satisfied minus % Dissatisfied) correctly rounded.

-60

-40

-20

0

20

40

60

80

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

+66

Page 11: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

ROP has shown improvements in governance and competitiveness indicators

• Zero Based Budgeting to improve expenditure management

• Pocket Open Skies to support tourism potential

• Peace Agreement to unleash Mindanao’s potential

• Sin Tax Law to further strengthen the fiscal position

• Reproductive Health Act to improve family health planning

• Judicial Reform to enhance the regulatory environment and ensure level playing field

Strong political will to pursue

and implement

difficult reforms

Results are Significant - Good Governance is Winning Out

The sustained high trust ratings of the President provide the impetus to drive the governance reform agenda. The

reforms that the Republic have been implementing in past years are already bearing fruit as confirmed by improved

rankings of the country from third party assessors

11

Third Party Report Latest Previous Change

Transparency International

2012 Corruption Perception

Index 105/179 129/183 up 24

World Bank

2013 Worldwide Governance

Indicators’

Government Effectiveness*

58 57 up 1

IMD

2013 World Competitiveness

Report 38/60 43/59 up 5

Heritage Foundation

2013 Economic Freedom

Index 97/177 107/179 up 10

Thomson Reuters/INSEAD

Asia Business Sentiment

Survey**

(Q3 2013 vs Q2 2013)

100 94 up 6

Grant Thornton

2013 Global Dynamism Index 21/60 46/50 up 25

* Percentile Ranking

* * % of Respondents with positive outlook on the Philippines

Page 12: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

A Structurally More Competitive Nation Improvements in competitiveness to support long-term growth prospects

Global Competitiveness Rankings 2010 - 2011 2013 -2014

Overall Rank 85 26 59

Institutions 125 46 79

Infrastructure 104 8 96

Macroeconomic Environment 68 28 40

Health and Primary Education 90 -6 96

Higher Education and Training 73 6 67

Goods Market Efficiency 97 15 82

Financial Market Development 75 27 48

Labor Market Efficiency 111 11 100

Technological Readiness 95 18 77

Market Size 37 4 33

Business Sophistication 60 11 49

Innovation 111 42 69

The Philippines has improved by 26 spots in

the WEF Global Competitiveness Rankings

since 2010

Ranking of #59 (out of 148 countries) places

the ROP in the upper 40% percentile rank

Sub-rankings in Institutions,

Macroeconomic Environment and Financial

Market Development have in particular

improved dramatically, improving 46, 28,

and 27 places, respectively

Improving governance and the

economy have been key areas of focus

for the Aquino Administration

Supports the notion that good

governance is indeed good economics

and the two are inextricably linked

Proof that ROP is making real progress

in improving governance and

institutions

Consistent improvements for the Republic in the World Economic Forum Global Competitiveness Rankings

Source: World Economic Forum Global Competitiveness Rankings

12

Page 13: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Progress Made in Reaching Development Plan Targets 2011-16 Philippine Development Plan goals now closer to reality

Notable progress being made in the ROP’s five major guide posts for the PDP

Target1 Progress

Rapid, Inclusive and

Sustained Economic

Growth

Average GDP growth of 7- 8%

Increase investment/GDP to 22% by 2016

Improved government finances with reduced

fiscal deficit-to-GDP ratio to 2.0% by 2016

Step-up change in GDP growth in 1H2013 to 7.6% yoy

Preliminary BSP study estimates potential output is now 6-7%

Significant uptick in public investment in 1H2013 with construction

and fixed capital formation growing in double-digits

Investment /GDP ratio of 20.5%* in 1H2013

Anti-Corruption and

Transparent,

Accountable

Government

Poverty Reduction

and Empowerment of

the Poor

Just and Lasting

Peace and the Rule

of Law

Integrity of the

Environment and

Climate Change

Mitigation

Improve institutions and governance

Increase government transparency and

public access to information

Improve public’s trust in the government

Ensure equitable and inclusive growth

Reduce poverty incidence to 16.6%

Effective social protection and strengthen

social safety nets for the poor

Reach negotiated settlement to all armed

conflicts

Increased internal stability

Improve the Philippines ability to adapt and

mitigate climate change and capacity to deal

with natural disasters

Improve air quality and water quality

Closer performance monitoring of agencies with Account

Management Teams deployed to 9 major departments in 2013

Open Data initiatives, including Freedom of Information Bill

(under discussion) to provide wider access to data

Bottoms-up Budgeting prioritizing the Local Poverty Reduction

Action Plans of the poorest municipalities

Sin tax revenues to help enroll the poor in universal healthcare

Conditional cash transfer program to the poor to benefit 3.8

million households in 2013

Breakthrough peace settlement agreement reached with Moro

Islamic Liberation Front (MILF)

Stable political environment with the Administration sustaining

a net satisfaction rating of +66% as of Q2 2013 SWS Survey

Philippines’ disaster preparedness lauded by the UNISDR2 and EU

Progress made in mainstreaming climate change adaptation and mitigation

initiatives in agriculture

Launched Project NOAH which provides more accurate, integrated, and

responsive disaster prevention and mitigation system, especially in high-

risk areas throughout the Philippines.

1 Based on Philippine Development Plan 2011-2016 2 United Nations Office for Disaster Risk Reduction

13

*current prices

Page 14: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Passage of Landmark Sin Tax Law Sin tax to improve general health outcomes and boost government revenues

Key Provisions

Passage of the Sin Tax

Republic Act No. 10351 (“sin tax law ”) was approved by the legislature and finally signed into law in December 2012 after being first introduced over

15 years ago in 1997

Introduces higher taxes on tobacco and alcohol product based on a revised tiering system and will gradually increase over the next several years

Sin tax is expected to generate an additional Php248.5 bn revenues in the first 5 years from 2013 to 2017 of which Php34 bn is expected to be

realized in 2013

An estimated 69% of sin tax collections is expected to come from tobacco products in the first year

Highlights the Strength and Resolve of

the Aquino Administration

Passage of the sin tax after being

held-up for 15 years demonstrates the

strength of this Administration’s

mandate and ability to push through

tough legislation

Provides additional impetus and

momentum to push through other

tough legislation

Significant Additional Revenue

Generation

Aligned with Objective of Equitable

and Inclusive Economic Growth

Majority of incremental revenues will

be earmarked for health programs,

including enrolling the poor into the

universal healthcare program and

upgrading of hospitals and other

healthcare facilities

Projected Incremental Revenues (Php bn)

2013 33.96

2014 42.82

2015 50.63

2016 56.86

2017 64.18

2013-2017* 248.49

“Today, we are again making history: for the past 15 years, we have been trying to reform the tax structure of

imposing excise tax on tobacco and alcohol products. After 15 long years, we have finally succeeded.”

President Aquino, December 20, 2012

14 * May not add up due to rounding

Page 15: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

III. Robust Improvements in Economic and Financial Metrics

- Healthy, Sustained and Inclusive Growth

Contents

15

Page 16: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Broad-based growth highlights overall health of the economy

Strong performance across all components of GDP underscore overall strength and resilience of the economy

Real GDP Growth by Expenditure Component (% contribution to growth)

Philippine National Statistical Coordination Board (NSCB)

Decade of rapid and sustained economic growth is set to continue

Sharp Increase in Economic Growth

2Q2013 growth of 7.5% yoy outperformed market consensus of 7.2%

yoy. This brought 1H2013 GDP growth to 7.6%. The growth trend

demonstrates the nation’s ability to grow in spite of external pressures.

The IMF expects the Philippines to grow 6.75% and 6% in 2013 and

2014, respectively and maintain growth at 5.5% in the medium term

Philippines growth is increasingly broad based with particular strength

coming from the services and the resurgence of the industry sector led by

construction and manufacturing. The government’s focus on promoting

investment and infrastructure coupled with the nation’s favorable

demographics will help propel economic growth in the long term

Real GDP Growth (% yoy)

16

2.9 3.6

5.0

6.7

4.8 5.2

6.6

4.2

1.1

7.6

3.6

6.8

7.6

0

1

2

3

4

5

6

7

8

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H2013

Average:

4.8%

1.0 1.6 0.5 1.4

8.4 8.9

7.3 6.1 4.6

3.2

3.0 3.8

6.5

6.3 7.3 7.1

7.7

7.5

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2009Q1

Q2 Q3 Q4 2010Q1

Q2 Q3 Q4 2011Q1

Q2 Q3 Q4 2012Q1

Q2 Q3 Q4 2013Q1

Q2

Private Consumption Govt. Consumption Fixed Capital Net Exports GDP Growth

Page 17: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Sheltered from External Trade Shocks ROP is well-positioned to withstand a slowdown in global demand

Europe and China exports account for only a small portion of the total

Exports by Destination (USD bn)

The Republic remains less trade and export dependent than most countries in Asia and therefore less exposed to the lower consumption and slower

growth experienced in much of Europe, a slowing China and the rest of the world

In addition to being less trade dependent, exports to both China and Europe account for only a small portion of total exports for the ROP, further

insulating the economy from growth uncertainties emanating from those two regions

Despite European exports declining marginally in 2012, the total volumes of exports have actually increased highlighting its resiliency

Source: NSO

17

7.10 8.9 8.80 8.7 8.10 7.6 6.40 5.9 4.2 4.1

4.10 4.6 5.70 5.5 2.9 5.7 6.1 6.2

4.3 4.1

41.3

47.4 50.5

49.1 38.3

51.5 48.3

60

26.8 26.7

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2005 2006 2007 2008 2009 2010 2011 2012 Jan-Aug2012

Jan-Aug2013

Others China Europe

Page 18: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

The Philippines is expected to reach the World Bank’s Upper Middle Income threshold in 2016

GDP per Capita Projections (USD)

Rising Employment and Wealth Create Inclusive Growth Economic growth is generating opportunities for all

Chart

source file

name:

\\10.65.128.44\wkgrps\Supra

& Sovereign\General (non-

pvt

info)\Philippines\2013\Rating

Visits 2013\Fitch Visit - Feb

2013\Tom\RoP Master Excel

2012 Jan 24.xlsx

Sheet: 23

18

Compared to Regional Baa3 Peers, Philippines Wealth Levels are Comparable

GDP per Capita (USD; 2013)

Source: National Economic and Development Authority (NEDA), IMF WEO

2,909.7

3,254.0

3,621.4

4,032.2

2800

3000

3200

3400

3600

3800

4000

4200

2013P 2014P 2015P 2016P

World Bank’s Upper Middle Income Threshold: US$4,035

Page 19: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

III. Robust Improvements in Economic and Financial Metrics - Rapidly Strengthening Public Finances and Debt Dynamics

Contents

19

Page 20: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Ability

to Meet Debt

Obligations

2

3 4

1

Automatic

Appropriation

for Public Debt

Service

Sound Debt

Management

Strategy

Strengthening

Fiscal

Framework

Bond Sinking

Fund

The Republic’s ability to meet its debt obligations has been strengthened even further due to improving macroeconomic fundamentals

Sound debt management strategy has reduced rollover risks and increased debt carrying capacity

Improving fiscal metrics make this ability ever stronger

Government financing is shifting towards being domestically funded and denominated in Peso

The national government’s willingness to service its debt

obligations is enshrined in the legal system

Bond Sinking Fund which necessitates consistent cash allocations to ensure debt servicing of maturing principal

– Presidential Decree 1177 or the Budget Reform Decree of 1977 which provides for the automatic appropriation of principal and interest payments on public debt

Rapidly Strengthening Public Finances and Debt Dynamics Strong framework in place to guarantee ability to meet debt obligations

20

Page 21: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

The Bond Sinking Fund was established in 1954 for

the sole purpose of holding funds for the retirement

of local currency bonds issued by the Government of

the Philippines

Payments to the Bond Sinking Fund are structured by

making annual payments to gradually retire the debt,

rather than make a single payment at maturity

Any investment returns are reinvested into the Bond

Sinking Fund balance

The Asset Management Service (AMS), an office in

the Bureau of the Treasury, ensures matching of fund

maturities to that of debt issues that are being

provisioned for

The AMS manages the maturity profile and ensures

that there is always complete alignment with debt

issues

Bond Issued

AMS calculates annual payment required

to cover principal payment

Annual contribution made over the life

of the bond until retirement

Bond Sinking Fund is reflective of the Republic’s prudent management of public debt

Bond Sinking Fund Enhancing Debt Management Improving public finances and debt management

21

Page 22: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below Better governance bearing fruit as fiscal finances continue to strengthen

Sources: Bureau of the Treasury (BTr), Department of Budget and Management (DBM)

*Note: Some values may not sum up to exact figure due to rounding off

Improved Fiscal Metrics Across the ROP Creating a sustainable fiscal revenue and spending path

Firm administrative measures (i.e. RATE, RATS and RIPS) have resulted in higher tax revenue s and manageable deficits

Tax elasticity of BIR collection increased to 1.7 in 2012 from 0.8 in 2004, indicating effective tax administrative measures

1H 2013 revenue and tax effort of 15.3% and 13.6%, respectively exceeded the program for the year on stronger tax compliance

Jan-Aug 2013 fiscal deficit of Php82.6bn is 42.8% lower than Q1-Q3 program of Php144.5bn reflecting the Republic’s ability to raise

revenues along with a more focused, faster and higher spending

Jan-Aug 2013 spending of Php1,221.8bn is nearly 61.6% of total disbursement program for the year.

Aug 2013 revenue of Php155.1bn is 20% higher than Aug 2012 with BIR, BOC and BTr revenue growth of 22% (Php118.1bn), 15%

(Php26.1bn) and 15% (Php3.4bn), respectively

(in Billion Pesos)

Jan-Aug 2013 Jan-Aug 2012 % Growth

2012 v. 2013

FY 2013 2012

Actual Actual Adjusted Program Actual

Total Revenues 1,139.2 1,013.6 12.4 1,745.9 1,534.9

% of GDP - - - 14.7 14.5

Tax Revenues 1,021.2 901.4 13.3 1,607.9 1,361.1

% of GDP - - - 13.5 12.9

BIR 811.9 701.4 15.7 1,253.7 1,057.9

BOC 198.9 190.4 4.5 340.0 289.9

Other Offices 10.4 9.5 9.5 14.2 13.3

Non-Tax Revenues 117.9 112.2 5.1 136.0 165.5

% of GDP - - - 1.1 1.6

o.w. BTr Income 60.9 60.9 0 57.7 84.1

Others incl. Fees & Charges 56.8 51.3 10.7 78.3 81.3

Privatization .3 0 0 2.0 8.3

Expenditure 1,221.8 1,084.7 12.6 1,983.9 1,777.8

% of GDP - - - 16.7 16.8

Surplus/(Deficit) (82.6) (71.1) 16.2 (238.0) (242.8)

% of GDP - (2.0) (2.3)

22

Page 23: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Improved Efficiency in Revenues and Expenditures

Fiscal consolidation on track despite accelerated spending

Source: BTr

Chart

source file

name:

\\10.65.128.44\wkgrps\Supra

& Sovereign\General (non-

pvt

info)\Philippines\2013\Rating

Visits 2013\Fitch Visit - Feb

2013\Tom\RoP Master Excel

2012 Jan 24.xlsx

Sheet: 32

Expenditures disbursed more efficiently helping to

drive the development agenda

Expenditures (Php mn)

Firm tax administration pushes revenues higher

Revenues (Php mn)

23

Government’s continued effort to implement measures to

facilitate budget execution and program/project implementation

has resulted to ramped up spending

Total disbursements for January to August reached P1,221.8

billion, 13% higher than comparable disbursements in 2012.

Relentless tax campaign has resulted in greater taxpayer compliance

Revenue collection continues to gain strength growing by 12.6% and

12.9% in 2011 and 2012, respectively from 7.6% and -6.6% in 2010

and 2009, respectively

Collection continues to gain traction as a result of improved collection

efforts from both BIR and BOC

103,172

110,170

126,357

155,100

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

147,810

211,670

242,102

133,200

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011 2012 2013

Page 24: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

The Administration’s focus on fiscal reforms has permanently increased the revenue base and over the medium term will

bolster the government’s ability to service external and domestic debt obligations

Revenue growth is expected to continuously outpace nominal GDP growth, thereby increasing revenue buoyancy

Through a combination of liability management exercises and fiscal reforms, the cost of existing debt stock has been lowered

while simultaneously increasing government’s revenue take

The result will be a significant decline in debt servicing cost over the coming years

Increased Flexibility to Service Obligations

Ensuring long-term debt sustainability

Source: 2014 BESF, DBM

Note: A- Adjusted; Pr- Proposed; P- Projections

Projections, subject to revision based on changes in macroeconomic assumptions and other factors

Improving revenue buoyancy due to rapid revenue

growth

Revenue and GDP Growth (% yoy)

Growing revenue base will improve debt servicing

ability

Revenue / GDP Projections (%)

12.6 12.9 13.7

15.6

18.4 17.8

7.8 8.8

12.6 11.8 11.3 11.3

6

8

10

12

14

16

18

20

2011 2012 2013A 2014Pr 2015P 2016P

Revenue Growth Nominal GDP Growth

14.0

14.5 14.7

15.1

16.1

16.9

12.0

13.0

14.0

15.0

16.0

17.0

18.0

2011 2012 2013A 2014Pr 2015P 2016P

24

Page 25: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

10 4

90 96 100 100 100 100

0102030405060708090

100

2003 2005 2010 2011 2012

Long-term: >10yrs

Medium-term: 1yr to 10yr

Short-term: <1yr

Increasing reliance on domestic financing sources

Source: DBCC as of Feb 2013, BTr

Share of external debt to national government debt

has been gradually declining over the years

National Government Debt Breakdown (% of total)

Domestic debt mix has become longer dated

Domestic Debt Breakdown (% of total)

External debt is all long-dated with maturity profiles

exceeding 10 years

External Debt Breakdown (% of total)

ROP Funding Becoming Increasingly Domestic

Actual Program Revised Actual

2012 2012 2013 Jan-Aug

2013

Total Net Financing (PHP mn)

242,827 279,106 238,028 250,071

Gross External Borrowings

156,621 181,435 104,340 27,000

Gross Domestic Borowings

798,527 535,074 630,691 419,281

Budgetary Change in Cash

295,345 54,234 61,817 167,460

Financing Mix (%) Foreign 16 25 14 6

Domestic 84 75 86 94

Jan-Jul

2013

25

51 52 56 56 59 57 56 58 58 64 64

49 48 44 44 41 43 44 42 42 36 36

0

10

20

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jan-Jul

2013External Domestic

32 25

19 10 8 9

34 31

26 20 14 12

35 44

54

70 78 79

0102030405060708090

100

2008 2009 2010 2011 2012 Jan-Jul2013

Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr

Page 26: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Fiscal Reforms and Programs for 2013 and Beyond

Focus to ensure that positive momentum in government finances continue

Update on Key Fiscal Policy Reforms

Fiscal Incentives Rationalization

Intended to remove redundant incentives to reduce fiscal costs and ensure incentives will only be given to those who need them

Review of the Fiscal Regime of the Mining Sector

New mineral agreements are suspended until legislation rationalizing existing revenue sharing schemes mechanisms has been implemented

Tax Incentives Management and Transparency Act

Aims to foster transparency and accountability in granting fiscal incentives

Focus on leveraging technology in 2013 to improve effectiveness of major public finance departments

Bureau of Internal

Revenue

Re-engineering of business processes

Electronic Letter of Authority Monitoring System (eLAMS)

Electronic Certificate Authorizing Registration (eCAR)

On-line System for Transfer Tax Transactions (OSSTTT)

Electronic Tax Information Systems (eTIS) Project

Collection Reconciliation System

Expansion of ISO Certification to other districts

Procurement, Payment and Distribution Monitoring System

Re-registration of Taxpayers through Taxpayer

Registration Information Update (TRIU) Project

Centralization of Data Processing to regional offices

Mobile Revenue Collection Officers System (MRCOS)

Bureau of

Customs

Cleansing of the List of Accredited Importers and Consignees by the Interim Customs Accreditation and Registration

unit (ICARE)

Integrate National Single Window (NSW) with Electronic to Mobile System (E2M) and Other Government Agencies

automated permit/licensing systems

The Codification of Customs Memorandum Orders (CMOs) and Customs Administrative Orders (CAOs)

Implementation of cargo electronic tracking via Global Positioning Satellite systems

The Customs Modernization and Tariff Bill

Intensive utilization of the Post Entry Audit Group (PEAG)

Strengthening the Valuation Reference Information System

Source: DOF, BIR and BOC

26

Page 27: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

III. Robust Improvements in Economic and Financial Metrics

- Supportive and Stable Monetary Conditions and Healthy Banking Sector

Contents

27

Page 28: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

0%

2%

4%

6%

8%

10%

12%

14%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

M3 (LHS) Bank lending rates (RHS) Reverse repurchase rate (RHS)

<

Sound and Stable Inflation Environment Refinements in inflation targeting mechanism have allowed BSP to tame inflation and meet

the target for four consecutive years

Firm control over inflation has proven the effectiveness and credibility of monetary policy

Headline Inflation (%)

Chart

source file

name:

\\10.65.128.44\wkgrps\Supra

& Sovereign\General (non-

pvt

info)\Philippines\2013\Rating

Visits 2013\Fitch Visit - Feb

2013\Tom\RoP Master Excel

2012 Jan 24.xlsx

Sheet: 37

Monetary policy remains supportive of healthy economic growth

Money Supply and Interest Rates (Php bn, %)

Source: BSP

August 2013: P6,028,250

Jan-August 2013: 5.81%

August 2013: 3.50%

Global inflationary

cycle

0.0%

5.0%

10.0%

15.0%

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Headline Lower bound of target Upper bound of target<

September 2013 - 2.7%

28

Page 29: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Movement broadly in line with regional currencies

USD/PHP Exchange Rate

Peso remains one of the most stable currencies compared

to peers

1 Month Volatility

Peso Performance Supports Macroeconomic Stability Effective monetary policy contributes to low PHP volatility

Chart source

File name: s00017A_2013

RoP Ratings

(source)_as_ss.xlsx

Sheet: TBU

29 Sources: BSP, Bloomberg as of 21 October 2013

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Oct-

98

Oct-

99

Oct-

00

Oct-

01

Oct-

02

Oct-

03

Oct-

04

Oct-

05

Oct-

06

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

Oct-

13

Philippine Peso Brazilian RealIndonesian Rupiah South African RandTurkish Lira Thai Baht

21 Oct 2013 43.22

38

39

40

41

42

43

44

45

46

Jun

-11

Au

g-1

1

Oct-

11

Dec-1

1

Fe

b-1

2

Ap

r-12

Jun

-12

Au

g-1

2

Oct-

12

Dec-1

2

Fe

b-1

3

Ap

r-13

Jun

-13

Au

g-1

3

Oct-

13

Page 30: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

100

114.50 111.5

65

197

40

80

120

160

200

240

280

320

Jan-13 Feb-13Mar-13 Apr-13 May-13

Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

PHILIP THAI MALAYS KOREA INDON

c c c c c c c c c c c c c c c c

114

80

90

100

110

120

130

140

150

160

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

Philippines Indonesia Malaysia ThailandJapan UK US (S&P)

3.062

6.354

4.821

4.61

2.6032

3.674

0

1

2

3

4

5

6

7

8

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

Philippines 2021 Sri Lanka 2022 Vietnam 2020

Indonesia 2023 US Generic 10Y Malaysia 2021 Sukuk

ROP’s CDS spreads trade tighter than Thailand and Malaysia

Sovereign 5Y CDS Spreads (bps)

Strong Fundamentals Provide Buffer Against Market Volatility Yields have risen less than peers while CDS levels continue to trade tightly

Normal correction in equities after record rise in 1H 2013

2013 Rebased Stock Exchange Performance (Jan 2013 = 100)

Chart source

Sheet:

Yields have outperformed peers due to strong onshore bid

Government Bond Yields (%)

Relatively high P/E ratio shows confidence in Philippines

Price to Earnings Ratio (x)

Sources: Bloomberg as of 21 October 2013; current P/E ratio is price divided by trailing 12 months earnings

Yield (%)

21-Oct 1-Jan change (bps)

Philippines 3.06 2.27 80

Sri Lanka 6.35 4.84 151

Vietnam 4.82 4.29 54

Indonesia 4.61 3.28 133

Malaysia 3.67 2.62 105

Generic UST 10Y 2.60 1.76 84

CDS spread (bps)

21-Oct 1-Jan change (bps)

Philippines 100 106 -6

Indonesia 197 136 61

Thailand 115 95 20

Malaysia 112 78 34

Korea 65 68 -3

30

19.4 18.9

15.8 16.9

18.1 16.9 16.2

15.0

0

5

10

15

20

25

Philippines Indonesia Thailand Malaysia

Current (21-Oct-13) FY 2012Phil Indon Malay Thai Japan UK S&P

Hi 127 121 107 118 150 116 120

Low 99 92 100 92 120 102 110

Last 114 106 107 104 141 113 122

Peak-Trough 28 29 7 26 31 14 10

Page 31: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Macroprudential Measures Introduced as Safeguards

Stability

SDA

Investment

Restrictions

Further

Liberalization

of FX

Policies

Enhanced

Governance

Standards for

Banks

Increased FX

Capital

Charges

Increased

Monitoring of

Bank Real

Estate

Exposure

Policymakers in the Philippines have been proactive in managing risks and have

introduced several prudent macro-prudential measures over the past year as

additional safeguards to protect against potentially destabilizing “hot money” flows

and to strengthen the financial sector

Raising Capital Charges on NDFs

– Imposed higher capital charges on bank holdings of non-deliverable forwards

(NDFs) from 10% to 15%

Restrictions on Investments in Special Deposit Accounts

– Imposed strict restrictions on foreign funds flowing into the central bank’s

Special Deposit Accounts

– Reduces unstable fund flows and promotes the stability of the Peso

Increased Monitoring of Bank Real Estate Exposure

– Provided a more comprehensive measure of a bank’s real estate exposure to

include loans as well as related investments in debt and equity securities

– Consistent with sound risk management practices as bank real estate

exposure will be referenced against its adjusted capital

Enhancing Corporate Governance

– Revised existing regulations on corporate governance in line with

international best practices such as the “Principles for Enhancing Corporate

Governance” issued by the Basel Committee on Banking Supervision,

strengthened

Further Liberalization of FX Policies

– To keep FX policies responsive to current economic conditions, new rules on

FX transactions were adopted which includes among others increased limits

for OTC FX purchase

BSP remains ahead of the curve in protecting the economy from potential threats

Prudent and forward-thinking policymaking to preserve stability

31

Page 32: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

5%

7%

9%

11%

13%

15%

17%

19%

2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q2013

CAR, solo CAR, consolidated

130.1

50

70

90

110

130

150

2005 2006 2007 2008 2009 2010 2011 2012 June2013

NPL Coverage Ratio of U/KBs (%)

3,344

2.7

0

4

8

12

16

20

0

1,000

2,000

3,000

4,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jun2013

Loans outstanding of U/KBs (net of RRPs)…NPL ratio (RHS) (%)

Banks are continuing to fortify their balance sheets with

increased capitalization, well above international norms

Capital Adequacy Ratio of U/KBs (%)

Unlike much of the world today, the Philippines’ banking system

remains healthy and exudes health across all relevant financial

metrics.

The banking system continues to improve its asset quality, with the

universal and commercial banks’ NPL ratio settling at 2.7% as of 1H

2013, while fortifying bank balance sheet through increased

capitalization and high loan-loss reserves

Banks remain funded predominately through domestic deposits and

not through wholesale channels, reducing liquidity and funding risk and

minimizing potential contagion from the lingering uncertainty in the

Euro-zone

Healthy Banking System - Key IG Credential

ROP exhibits an exceptionally healthy and resilient banking system

Asset quality of the universal and commercial banks remains

extremely strong with an NPL of ratio of only 2.7%

Gross Loans (PHP bn) and NPL Ratios (%)

BSP Regulatory Requirement: 10%

International Standard: 8%

Prudent NPL coverage ratios will ensure that the banking

system is well–prepared for any unforeseen shocks

NPL Coverage Ratio of U/KBs (%)

32

Source: Bangko Sentral ng Pilipinas

18.9%

17.8%

Page 33: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Banking System Poses Minimal Risk

Relatively smaller banking system limits potential contingent liabilities

Potential contingent liabilities of the banking sector is

smaller than peers given relatively smaller size

Domestic Credit to Private Sector (% of GDP)1

Strong deposit base supports banking sector funding

Gross Loans-to-Deposits Ratio (%)

Banking sector remains well-funded through domestic deposits – prudent and conservative underwriting standards and credit have kept system

loans-to-deposit ratio low at 73.5%

Reduces the probability of banks seeking emergency funding from the sovereign in times of stress

Minimal risk of credit-fueled asset bubbles that threaten many other Asian nations with high growth rates

Banking system assets remain small relative to the total size of the economy compared to major peers - even in the extremely unlikely scenario

that a banking system crisis were to occur, potential government contingent liabilities for the ROP would still be lower than for peers

Source: BSP, World Bank 1Based on 2012 World Bank data

72.771.8

68.269.2

68

66.6

62.6

68.4

73.5

56

58

60

62

64

66

68

70

72

74

76

2004 2005 2006 2007 2008 2009 2010 2011 2012

Loans-to-Deposit Ratio

147.9

133.7

118.2

148.0

33.4

34.9

0 50 100 150 200

Thailand

China

Malaysia

Korea

Philippines

Indonesia

33

Page 34: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Real Estate Exposure Risks are Muted

Moderate banking sector exposure to real estate mitigates price risks

Demand Continues to Outstrip Supply

Higher Real Estate Loan Levels Are Manageable

Real estate loans (REL) of universal, commercial banks and thrift banks

was 17.9% of the total loan portfolio as of end March 2013. This

exposure is within the BSP’s regulatory limitations which caps RELs at

20% of total loans.

In line with its proactive approach to ensure financial stability, the BSP

expanded its reporting system on real estate exposure (REE) of banks

which now also includes banks’ investments in debt & equity securities

as well as social housing. REE as of end March 2013 remains

manageable at 21.4% of total loan portfolio, slightly higher than the

20.8% ratio as of end 2012.

The latest data on real estate exposure of banks reflect the health of the

banking sector vis-à-vis the real estate sector. The REE report noted:

The non-performing real estate loans (NPREL) ratio remains

stable at only 3.5% as of March 2013 data

Internal simulations on credit impairment using March 2013 data

indicated that the industry’s CAR will remain well above the 10%

regulatory minimum even with a simulated 50% write down in

REEs.

In a comment to media, Moody’s Financial Institutions Analyst Jean-

Francois Tremblay commented in May 2013 on banks’ exposure to the

housing sector.

He noted that exposure figures were affected by the inclusion of

the low-cost and socialized housing segments that “tend[s] to be

less susceptible to speculation”

He further commented that “trends in [prudential measures]

have remained within reasonable limits,” making reference to

“factors such as demand and supply, underwriting standards,

loan-to-value ratios and the leverage of households and firms”

Demand Continues to Meet Supply in the High-Cost Sector

Metro Manila Condo Market

Units per

Year

No. of

Years Total Units

Current Housing Backlog 3,919,566

New Housing Need

2012-2030

345,941 18 6,226,940

Housing Production

Capacity

200,000 18 (3,600,000)

Backlog by 2030 6,546,506

Housing data shows that demand for new housing remains high, a

trend that will continue through the long term

Source: Colliers International 1Q 2013 Market Overview

Source: Subdivision and Housing Developers Association and Housing & Urban Development Coordinating Council

34

26,692 25,514 24,998

19,285 21,267

19,757 22,182

26,757 26,103 26,432

0

5,000

10,000

15,000

20,000

25,000

30,000

2H10 1H11 2H11 1H12 2H12

New Launches Take -up

Page 35: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Real Estate Exposure Risks are Muted

The real estate sector remains in balance

Price Increases are Justifiable in Real Terms

Secondary Market Condo Prices

Market Indicators Do Not Suggest Overheating

Residential Vacancy Rates (Makati CBD)

Source: Colliers International 2Q 2013 Market Overview

Vacancy Rates Remain Low, Demonstrating Demand is Sufficient to Meet Growing Supply

Office Vacancy Rates (Makati CBD)

Increased supply in the real estate market reflects increased

housing demand in line with growth and investment opportunities,

especially in Manila

Real estate price increases are moderate and do not resemble

the overheating witnessed prior to the Asian Financial Crisis. In

real terms, price increases are quite modest

Increasing supply is being absorbed by the market, as evidenced

by high levels of real estate pre-sales and consistent, low

vacancy rates in both the commercial and residential sectors

35

0

4

8

12

16

Premium Grade A

Grade B & Below All Grades

02468

101214161820

LuxuryOthersAll Grades

Page 36: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

III. Robust Improvements in Economic and Financial Metrics

- Strong External Position

Contents

36

Page 37: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Source: BSP, National Statistical Coordination Board (NSCB)

Robust External Profile – A Key Sovereign Strength

Structurally strong balance of payments bolsters external finances

The Philippines enjoys a structurally positive BOP

Balance of Payments (Components, USD mn)

ROP’s current account continues to be in surplus supported by robust remittances from overseas Filipino workers (“OFWs”), substantial BPO

revenues and increasing tourism receipts

BOP surplus sustained at US$3.8 bn as of end-Sep 2013

While exports remain relatively subdued due to the global economic environment, the Philippines nonetheless posted a 7.6% yoy growth of total

exports in 2012, highlighting relative resiliency of exports despite the global uncertainty

In 2012, FDIs grew 54% to US$2.8 bn from US$1.8 bn in 2011, the sharpest rise among ASEAN countries

-202 810 115 -280

2,410 3,769

8,557

89

6,421

14,308

-5,000

0

5,000

10,000

15,000

20,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Capital and Financial Accounts

Current Account

Net Unclassified Items

Balance of Payments

BOP Statistics beginning in 2011 are based on IMF’s BPM6 BOP Statistics for 2001 to 2010 are based on IMF’s BPM5

37

11,400

9,236

1,316 2,577

2011 2012 1H 2012 1H 2013 p/

Financial Account

Capital Account

Current Account

Net Unclassified Items

Overall BOP Position

Page 38: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

The Republic currently enjoys a healthy

level of international reserves of USD 83.5

billion as of end-September 2013, enough to

cover 11.9 months of total imports

Since 2010, ROP’s FX reserves have

exceeded its gross external debt

Strong reserve buildup is a prudent measure

to guard against external shocks and

underscores the ability of ROP to pay back

any foreign currency denominated debt

Source: BSP

Import Cover = Number of months of average imports of goods and payment of services and income that can be financed by reserves.

International reserves provide strong buffers to any BOP problems

ROP is effectively protected against any balance of payment shocks through

adequate international reserves

FX Reserves (USD bn) and Months of Import Cover

17.1 16.218.5

23.0

33.837.6

44.2

62.4

75.3

83.8 83.5

4.0x 3.6x 3.8x

4.2x

5.8x 6.0x

8.7x

9.5x

12.1x 11.9x 11.9x

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sep-13

FX reserves (lhs) Import co ver (rhs)

Robust External Profile – A Key Sovereign Strength

38

Page 39: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Strong and stable rise in remittances over the years

Overseas Filipinos’ Remittances (USD bn)

Current Account in Surplus Despite External Challenges

Strong structural support provided by remittances, tourism, and BPO

BPO – a strong driver of employment and revenues

BPO Employment and Revenues (in USD bn)

Tourism is a key area of national growth

International Visitor Receipts (USD bn)

Source: BSP, Department of Tourism , Information Technology and Business Processing Association of the Philippines

2.53.0

3.8

1.2 1.3

4.9

6.4

8.3

10.8

0

2

4

6

8

10

12

2010 2011 2012 Q1 2012 Q1 2013 2013P 2014P 2015P 2016P

1.5 2.4

3.2

4.8 6.1

7.1

8.9

11.0

13.4

0

2

4

6

8

10

12

14

16

-

100

200

300

400

500

600

700

800

900

2004 2005 2006 2007 2008 2009 2010 2011 2012

Revenues (in USD bn) RHS Employment ('000) LHS

39

8.6

10.7

12.8 14.5

16.4 17.3

18.8 20.1

21.4

13.7 14.5

0.0

5.0

10.0

15.0

20.0

25.0

Page 40: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

IV. Improving Investment Climate

Contents

Page 41: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below Investment level is slowly but surely trending higher

Investment Levels and Investment / GDP (%)

* Based on General Appropriations Act (GAA)

Source: NEDA, BESF DBM, Department of Trade and Industry (DTI)

Infrastructure development remains a key national priority. Capital

outlays to GDP ratio is targeted to reach 5.2% by 2016.

DPWH 2013 budget for capital outlays is Php144.3 bn*. Capital

outlays as ratio to GDP is expected to reach 3.1% in 2013 under the

GAA.

Public spending will remain at the forefront of infrastructure

development – the 2013 budget’s allocation for public infrastructure

is 17.7% larger than 2012

Importantly, the Department of Public Works and Highways

(DPWH) has been designated as the principal infrastructure

agency and will be held responsible for timely implementation of

infrastructure projects – this appointment will accelerate the

completion of projects in addition to creating an expert agency to

warehouse knowledge and best practices for procurement

processes, project standards, and cost structures

Continued increase in foreign investment inflows into the PH

BOI-PEZA Approved Investments

Improving Investment Climate

National focus on making the ROP an enhanced investment destination

Combined investments registered with the Board of Investments (BOI)

and the Philippine Economic Zone Authority (PEZA) during the first half

of 2013 rose 36.6% to Php285.6 bn from Php209.1 bn in the same period

last year. Meanwhile, investments approved by PEZA for the January to

June 2013 period amounted to Php83.7 bn, posting a 91.9 % growth from

the Php43.6 bn in the same period last year.

The investments are expected to generate 70,936 jobs once these

projects go into full commercial operation. Out of these anticipated jobs,

PEZA expects higher jobs generation of 51,872 given the fact that its

projects are mostly labor intensive manufacturing ventures geared for the

exports market.

Improving Investment Climate

National focus on making the ROP an enhanced investment destination

Improving Investment Climate

National focus on making the ROP an enhanced investment destination

41

918 945

802 798

985 899

1,184 1,207 1,168

612

21.5 21.1

17.0 15.9

18.8 17.0

20.8 20.4 18.5

18.5

0.0

5.0

10.0

15.0

20.0

25.0

-

200

400

600

800

1,000

1,200

1,400

2004 2005 2006 2007 2008 2009 2010 2011 2012 1H2013

Gross Capital Formation (constant) Capital Formation as % of GDP (constant)

Year Value

(Php

Bn)

Amount of

Approved

Foreign

Investments

% Share of

Foreign

Investments

% Growth

in Foreign

Investments

2011 657.27 218.91 33.31%

2012 672.30 282.45 42.01% 29.03%

H1 2012 209.13 38.49 18.40%

H1 2013 285.59 91.91 32.18% 138.79%

An upward trend in the number of registered Regional Operating

Headquarters (ROHQ)/Regional Headquarters (RHQ)

No. of Registered ROHQs/RHQs and its Growth (%)

Notable foreign investments in 2012 and 2013 include Del Monte

Corporation’s (USA) US$60mn in Maguindanao for its 3,000-hectare

banana plantation, Holcim’s additional investment of US$400-US$450mn

for a new cement plant

Year Number of Registered

ROHQs/RHQs

% Growth

2010 20

2011 25 25%

2012 37 48%

Page 42: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

2011-2013 Tourism Infrastructure Program

(Php bn)

Infrastructure Development a Key Priority to Improve

Competitiveness Sustaining the growth momentum through systematic and coordinated pipeline development

DPWH Strategic Convergence Program Partner with other concerned agencies to harmonize

national infrastructure development strategies

Tourism Convergence Program:

• Infrastructure support to designated strategic Tourism

Destinations

• A total amount of Php25.34 bn was released from FY 2011-FY

2013 for the initial 202 identified tourism infrastructure projects

• Of the Php25.34 bn, Php16.44bn were funded under the DOT-

DPWH Convergence Program, while the remaining Php8.90 bn

were releases from other DPWH programs. An additional

amount of Php14.25 bn is included in the proposed DPWH FY

2014 Budget

Convergence for Agriculture Infrastructure:

• Construct Farm to Market Roads to access food production and

processing sites

• Water impounding projects to optimize water resources for

irrigation and flood management

Flood Management Program:

• Implement priority projects under the Flood Management Master

Plan for Metro Manila and Surrounding areas

• Clear waterways of Metro Manila and address drainage capacity

constraints

Integrated Transport System:

• Support for access to major airports, seaports and RORO ports

• Infrastructure support in preparation for APEC 2015 by improving

access to designated airports, convention sites, tourism

destinations

2007-2014 DPWH Investment Program

(Php bn)

PDAF (Pork Barrel)

3.25

8.81

13.28

0.0

5.0

10.0

15.0

20.0

2011 2012 2013

Php25.34 bn (FY 2011-FY 2013)

42

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

2005 2007 2008 2009 2010 2011 2012 2013 2014

Php184.9 bn

Page 43: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Infrastructure Development a Key Priority to Improve

Competitiveness Keen investor support will complement government’s infrastructure development program

Project Name Est. Cost

(USDmn)

NLEx-SLEx Connector Road 594.42

Cavite and Laguna Side Expressway 827.44

Central Luzon Link Expressway, Phase I 347.44

Project Est. Cost

(USDmn)

Integrated Luzon Railway TBD

Line 2 East Extension 223.26

MRT 3 Capacity Expansion 104.65

Line 1 Cavite Extension 1,376.70

MRT 7 Phase I 1,546.51

Mactan-Cebu Int’l Airport 395.35

Puerto Princesa Airport Expansion Project 103.72

New Bohol Airport Development Project 166.05

Bicol International Airport Project 111.63

Makati – Manila – Pasay – Parañaque Mass

Transit System TBD

Project Name Est. Cost

(USDmn)

Tarlac-Pangasinan-La Union Expressway 269.53

Daang Hari-SLEx Link 46.74

Southern Tagalog Arterial Road (STAR), Lipa City

– Batangas City, Phase II

53.95

NAIA Expressway 360.93

High Standard Highway Network in Metro Manila & its

200 km sphere

NEDA Approved: 91.20 km

Ongoing: 119.39 km

Proposed Mass Transit Systems & Airports

Project Name Est. Cost

(USDmn)

C-6 Expressway and Global Link (South Section) 1,036.98

C-6 Extension (Flood Control Dike Expressway 985.58

Calamba-Los Baňos Expressway 241.40

Pipeline / Proposed: 117.82 km

43

Page 44: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Revitalizing mining to promote economic development

and social growth Resource rich sector to attract investments

Mining will bring in significant revenue for the government

MPSA: Mining Production Sharing Agreement

The Philippines has 5.56 million

hectares of land with mineral

potential that is available for

applications

Metallic: 3.96mm ha

Non-metallic: 1.60mm ha

The Philippines has substantial mineral capacity

Heat Map of Philippines

Mineral Potential

A June 2012 IMF study noted that the mining sector

will provide ~$1bn revenue per year under the current

largely employed MPSA tax regime

Action to Date: EO 79 passed in July 2012

demonstrates the government’s commitment to action

within the mining sector and paves the way for further

action

Planned Legislation: Rationalization of the Mining

Fiscal Regime is one of the nine key initiatives the

government will prioritize once the 16th Congress

begins in late July. At a cabinet meeting on July 15

Secretary Purisima stated the government’s intention

to prioritize this legislation

44

Metallic

Non-metallic

Page 45: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

V. Mindanao - Peace Leading towards Progress

Contents

45

Page 46: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Room for ARMM to grow with Mindanao

Per Capita Gross Regional Domestic Product

current Php prices (2012)

Mindanao: Background and Key Facts

Major agricultural contributor with strong potential for accelerated growth

Source: Mindanao Development Authority; NEDA

Mindanao: The 2nd largest island in the Philippines

Source: Mindanao Development Authority; NEDA

Mindanao: 104,530 sq km

Northern Luzon: 104,668 sq km

2012 Gross Regional Domestic

Product in current prices:

Php1,565.4 bn, approximately

15% of Philippines GDP

2012 GRDP at 2000 constant

prices Php 911.3 bn, 14% share

to Philippines GDP

Mindanao supplies over 35% of

the country’s food output

Population: 22.8m, 23.8% of

Philippines

Consists of 6 regions, 26

provinces, 33 cities

Largest city is Davao

(population 1.45m)

Mindanao is a major source of

globally competitive agri-based

products such as canned

sardines, pineapple, oil palm,

seaweed, tuna and banana

Mineral deposits valued at

USD312bn (c. 40% of the

country’s total USD840bn)

2012 ARMM Mindanao Metro

Manila Philippines

GRDP growth

(constant)

1.2 8.2 7.3 6.8

GRDP, Php bn

(current)

93.3 1,565.4 3,830.8 10,564.9

GDP per

capita, Php

27,819 68,659 312,137 110,314

Population (m) 3.35 22.80 12.27 95.8

Labor force

April 2013 (m)

1.3 8.4 5.0 40.9

Unemployment

Apr 2013 (%)

3.3 5.7 10.4 7.5

46

61,324

91,654

91,312

69,663

48,954

27,819

- 50,000 100,000

Zamboanga Peninsula

Northern Mindanao

Davao Region

SOCKSARGEN

CARAGA

ARMM

Page 47: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Mindanao: From Conflict to Peace and Prosperity

Ushering in peace after over four decades of conflict

Background to the conflict in the southern Philippines

Islam spread to Mindanao in the 13th century and the Spanish called the population “Moros” after the Moors in Spain Historically, Moro and native Lumad populations were politically and economically excluded, leading to poverty and unrest Insurgent groups formed in the late 1960s, and violence ensued.

Formation of

MNLF with goal of

fighting for an

independent Moro

nation.

Violence ensued…

In hopes of achieving peace,

President Corazon Aquino

RA 6734 providing for the

creation of the Autonomous

Region in Muslim

Mindanao (ARMM)

Violence continues, and

President Joseph

Estrada’s “All Out War”

strategy leads to the

displacement of more

than 930,000 people

The MOA-AD was

drafted and later

deemed

unconstitutional by

the Supreme Court.

Negotiations broke

down with the MILF

October 15 2012 to present The

Framework Agreement on the

Bangsamoro (FAB) is signed by

Atty. Marvic Leonen and

Mohaguier Iqbal, Chairs of the

government and MILF panels

respectively

Annex on Transitional

Arrangements and Modalities

(TAM) have been signed

Timeline to peace

The Organization of

Islamic Conference was

invited to facilitate the

negotiations leading to the

signing of Tripoli

Agreement, however it

does not stop the fighting

President Gloria

Arroyo ratified the

plebiscite of RA 9054

expanding the

ARMM, this proved

unsatisfactory to both

MNLF and MILF.

President Benigno

Aquino and MILF

begin peace

negotiations

President Fidel Ramos signed

a peace agreement with the

MNLF. The Final Peace

Agreement led to the

establishment of the SPCPD*

and the election of MNLF Chair

Nur Misuari as Governor of the

ARMM.

1968 1976 1989 1996 2000 2001 2008 2011 2012

Moro Islamic Liberation Front (MILF) Formed in 1984 after Salamat Hashim split from MNLF to form the country’s

largest Muslim rebel group

The MILF initially aimed for independence from the Republic, but pursued peace negotiations and in 2010 abandoned quest for independence, current negotiations are for genuine autonomy

Moro National Liberation Front (MNLF) Founded by Nurallaj Misuari (b. 1942) in 1971 to fight for

independence from the Philippine state. The MNLF was a united front and a strong insurgent group

A peace agreement was signed in 1996, but Misuari led an uprising in 2001 and since then, the MNLF has become weak and divided; recently staged attacks in Zamboanga; but conflict has been resolved; rehabilitation of affected areas ongoing

Two main Moro insurgent groups

* SPCPD – Southern Philippines Council for Peace and Development

Source: Mindanao Development Authority; NEDA;

1987

The Jeddah Accord

was signed by the

Philippine

government and the

MNLF to continue

implementation of a

regional autonomy

47

2013

FAB Annexes on

Transitional

Arrangements and

Modalities and Wealth

Sharing were signed

in April and July,

respectively

Page 48: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Mindanao is Integral to the Philippines economy

Established peace and investment will pave the way for further growth

Mindanao’s stable growth paves the way for a bright future

Gross Regional Domestic Product Growth Rate 2002-2012

(constant prices, in percent)

Agriculture dominates, but industry and services have

witnessed rapid growth in recent years

GRDP Composition by Sector (constant, Php mn)

Industry and services sectors have grown steadily accounting for 31%

and 44% of GRDP, respectively in 2012

Mindanao’s share to total government budget

Regional Share of Budget (%) The government has prioritized infrastructure spending for the whole of

Mindanao over spending on other regions

Source: Mindanao Development Authority; NEDA

Source: Mindanao Development Authority; NEDA

Source: Mindanao Development Authority; NEDA

Sector 2008 2009 2010 2011 2012 2013

NCR 4.1 3.7 3.4 3.6 6.6 6.5

Luzon 16.3 16.9 15.7 16.3 19.4 20.1

Visayas 7.9 8.1 7.6 7.7 9.2 9.6

Mindanao 10.1 10.7 9.6 10.0 12.5 12.7

Mindanao GDP Share n.a.1 14.5 14.2 14.1 n.a.2 n.a.2

48

225,650 226,468 229,968

235,301 248,726 281,888

348,811 367,396 399,475

-

200,000

400,000

600,000

800,000

1,000,000

2010 2011 2012

Services Industry AFF

5.4

4.3

6.0

4.3

5.3

7.2

4.0 3.7

4.7 4.2

8.2

3.6

5.0

6.7

4.8

5.2

6.6

4.2

1.1

7.6

3.6

6.8

0

1

2

3

4

5

6

7

8

9

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GRDP, Mindanao GDP, Philippines

Page 49: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

9,769

8,437

8,299

10,040

8,000 8,500 9,000 9,500 10,000 10,500 11,000

Mindanao

Visayas

Luzon

NCR

10,990

9,689

9,478

10,761

8,000 8,500 9,000 9,500 10,000 10,500 11,000

Mindanao

Visayas

Luzon

NCR

2013 Regionalized

Budget

(Php bn)

Population (mm) Allocation Per Capita

Amount (Php) Rank

Total 996.23 99.24 10,038

NCR 131.22 12.19 10,761 2

Luzon 410.47 43.31 9,478 4

Visayas 194.88 20.11 9,689 3

Mindanao 259.66 23.63 10,990 1

Regional Per Capita Budget Allocation (FY 2012)

(in Php)

Regional Per Capita Budget Allocation (FY 2013)

(in Php)

Source: DBM

Mindanao to Receive Largest Per Capita Budget Allocation

Focus on developing Mindanao reflected in the 2013 budgetary allocations

49

Page 50: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

VI. Outlook

Contents

50

Page 51: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

Healthy macroeconomic fundamentals expected to continue this year

2013-2016 Macroeconomic Parameters

ROP expects another year of robust growth in 2013

Source: 2014 BESF (Proposed), Department of Budget and Management

2012 2013 Projections

Actual Adjusted 2014 2015 2016

GNI Growth (%) 6.5 5.9-6.9 6.2-7.2 6.6-7.5 7.0-8.0

Real GDP Growth (%) 6.8 6.0-7.0 6.5-7.5 7.0-8.0 7.5-8.0

Inflation (%) 3.2 3.0 – 5.0 3.0-5.0 2.0-4.0 2.0-4.0

364-Day T-bill Rate (%) 2.0 1.0-3.0 2.0-4.0 2.0-4.0 2.0-4.0

Exchange Rate (Php/USD) 42.25 41-43 41-43 41-43 41-43

Imports Growth (%) 11.3 13.0 14.0 14.0 14.0

Exports Growth (%) 20.9 11.0 14.0 16.0 16.0

Dubai Oil Price (USD/barrel) 109.08 90-110 90-110 90-110 90-110

51

Page 52: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

2013-2014 Fiscal Program

Increasing revenues by 15.6% in 2014 to realize fiscal consolidation goals

Particulars

Levels Percent of GDP Growth

2013 2014 2013 2014 2013-2014

Program Proposed

Revenues 1,745.90 2,018.10 14.7 15.1 15.6

Tax 1,607.90 1,879.90 13.5 14.1 16.9

BIR 1,253.70 1,456.30 10.5 10.9 16.2

BOC 340 408.1 2.9 3.1 20.0

Non-Tax 136 136.1 1.1 1.0 0.1

BTR Income 57.7 56.2 0.5 0.4 (2.6)

Privatization 2.0 2.0 0 0 -

Disbursements 1,983.90 2,284.30 16.7 17.1 15.1

Current Operating Exp. 1,558.50 1,736.50 13.1 13 11.4

Interest Payments 332.2 352.7 2.8 2.6 6.2

Capital Outlays (CO) 410.9 522.9 3.4 3.9 27.3

Infrastructure 299.4 418.2 2.5 3.1 39.7

Net Lending 14.5 25.0 0.1 0.2 72.1

Surplus/(Deficit) (238.0) (266.2) (2.0) (2.0) 11.9

Memo Item: GDP 11,914.50 13,336.70

Source: 2014 BESF (Proposed), Department of Budget and Management 52

Page 53: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

699.4

842.8

0

200

400

600

800

1000

2013 2014Pr

Social Services

Empowerment Budget Priorities

Social spending and public investments to promote inclusive growth

Social Services continue to be the largest component of the

budget to ensure equitable and inclusive growth

Social Services Outlay in the 2013 and 2014 Budgets (Php bn)

Source: Budget Expenditures and Sources of Financing, Department of Budget Management (DBM), Presidential Communications Development and Strategic

Planning Office (PCDSPO)

20.5%

GAA

(Php bn)

Proposed

(Php bn)

Percent Share

of Total

Budget

Change

2013-2014

2013 2014 2013 2014 Amount Percent

Social Services 699.4 842.8 34.9 37.2 143.4 20.5

Economic

Services 509.2 590.2 25.4 26.0 81.0 15.9

General Public

Services 347.3 364.5 17.3 16.1 17.2 5.0

Debt Service 333.9 352.7 16.6 15.5 18.8 5.6

Defense 89.5 92.9 4.5 4.1 3.3 3.7

Net Lending 26.5 25.0 1.3 1.1 (1.6) (5.8)

Total 2,005.9 2,268.0 100.0 100.0 262.1 13.1

Conditional cash transfer program is a helping hand to Filipino families through cash grants for the health and education of

children and the health of expecting mothers. The more than USD 1bn budget for 2013 is expected to benefit 3.8 mn

households

The National Health Insurance Program makes universal health insurance coverage a reality. Philhealth provides around

40 mn of the poorest Filipino households full coverage of expenses for medical procedures, including maternity and newborn

care packages and treatment of selected catastrophic diseases. For 2014, 14.7 million poor, near poor families will receive

health insurance coverage

The K TO 12 Program is raising the standard of Filipino education. Adding two more years to the basic education curriculum

puts it at par with the education cycles around the world. Through programs like the Training for Work Scholarships, skills

learned by students will meet the demands of the labor market, encouraging innovation and industry, and ultimately opening

more doors of possibility for our nation

53

Page 54: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

Pls Do Not

DELETE Chart

Source Box below

2014 Proposed Budget for Inclusive Development

Tighter prioritization of the P2.268 trillion proposed budget for greater impact

Social Service 34.9%

Economic Service 25.4%

Debt Service 16.6%

Gen. Public Service 17.3%

Defense 4.5%

Social Service 37.2%

Economic Service

26%

Debt Service 15.5%

Gen. Public Service 16.1%

Defense 4.1%

2013 2014

Increasing share in the budget for Social Services sector to ensure inclusive growth

Budget by Sector, Share to Total Budget (in percent)

The 2014 proposed budget reflects the “voice and voice” for citizens – through the involvement of communities and local

governments in crafting the Budget

Increased outlay in 2014 will go to investments in Infrastructure, in Good Governance and Anti-Corruption, in Building Human

Capabilities especially of the poor, through quality education, public healthcare and housing, and in Climate Change

Adaptation Measures – all fundamental requirements for the country’s competitiveness and development

54

Page 55: The Republic of the Philippines - Good Governance is Good Economics

51

51

153

192

0

0

251

222

5

0

176

80

October 2013

Good Governance is Good Economics

The Republic of the Philippines