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Investor Presentation
October 2017
Table of Contents
2
Strengthening Credit Profile
Sustained Strengthening of the Philippines’ Credit Profile
Metric 2013 * 2014 2015 2016 2017
Credit Ratings
• Fitch BBB-/stable BBB-/stable BBB-/positive BBB-/positive BBB-/positive
• Moody’s Baa3/positive Baa2/stable Baa2/stable Baa2/stable Baa2/stable
• S&P BBB-/stable BBB/stable BBB/stable BBB/stable BBB/stable
Real GDP Growth Rate (%) 7.1 6.1 6.1 6.9 6.4 (Jan-Jun)
8,302
GDP Per Capita** (USD), PPP Concept 6,546 6,952 7,333 7,886
(Annualized)
9,943
GNI Per Capita** (USD), PPP Concept 7,953 8,425 8,870 9,408
(Annualized)
Inflation Rate (2006 = 100) (%) 3.0 4.1 1.4 1.8 3.1 (Jan-Sep)
National Government Interest Payments
18.8 16.8 14.7 13.9 13.9 (Jan-Aug)
(as % of Revenues)
Fiscal Balance (as % of GDP) -1.4 -0.6 -0.9 -2.4 -2.1 (Jan-Jun)
Tax Revenue (as % of GDP) 13.3 13.6 13.6 13.7 14.2 (Jan-Jun)
General Government Debt (as % of GDP) 39.2 36.4 36.2 34.6 NA
Gross International Reserves (USD billion) 83.2 79.5 80.7 80.7 81.7 (end-Aug)
‒ Import Cover (months) 11.6 9.9 9.9 8.9 8.6 (end-Aug)
Overseas Filipinos’ Cash Remittances (USD billion) 23.0 24.6 25.6 26.9p/ 16.1 (Jan-Jul)
Foreign Direct Investments (USD billion) 3.7 5.7 5.6r/ 8.0r/ 3.6 (Jan-Jun)
Current Account (as % of GDP) 4.2 3.8 2.5r/ -0.3r/ -0.2 (Jan-Jun)
External Debt (as % of GDP) 28.9 27.3 26.5 24.5r/ 23.5 (Jan-Jun)
* ROP achieved investment grade status in 2013, followed by series of upgrades from S&P, Fitch and
Moody’s
** At current prices
p/ preliminary
r/ revised
NA not available 4
Source: BSP’s Selected Economic and Financial Indicators, DOF, BTr
Favorable Macroeconomic Trends
Philippines is Expected to Remain as One of the Fastest Growing Economies in Asia
2.0
1.0
0.0
India Philippines China Vietnam Indonesia Malaysia Thailand
(BBB-/Baa3/BBB-) (BBB/Baa2/BBB-) (A+/A1/A+) (BB-/B1/BB-) (BBB-/Baa3/BBB-) (A-/A3/A-) (BBB+/Baa1/BBB+)
Rating: S&P/Moody’s/Fitch
Source: PSA; International Monetary Fund (IMF) WEO October 2017; Bloomberg L.P.; BSP SPEI for Q1-Q2 2017 GDP Growth Rates 6
Economic Rebalancing Towards a More Broad-Based Growth
Consumption and services as major drivers of growth
GDP breakdown by component
Contribution to growth: demand (%) 7.0 Contribution to growth: supply side (%)
6.9 7.0
6.1 6.9
6.9 6.3
6.3 6.1 6.4
5.7 6.4
4.5 4.0
3.0 1.4 2.7
2.8 0.2 0.9
0.7 0.7 0.8 0.5 4.5 4.2 4.5
0.4 0.3 3.7
0.3 4.0 4.4 4.8 5.0 4.0 3.8
2.5 3.3 3.9
-0.3 -0.6 2.8
-1.3 2.8
-3.1
-4.5
-6.6
1.8 2.3
2.4 2.8 2.8
1.2 2.2
0.7
0.2 0.4 0.1 0.0 0.5
-0.1 -0.3
1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017 1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017
Agriculture Industry Services
Consumption Government Investment Net Exports
10 9.5
9 2.5
8 2.1
2.0
7 6.4 2.0
6
1.5
5 4.2
4 3.7
1.0
3
0.5
2 0.5
1
0.0
0 0.0
1989-1992 1993-2001 2002-2009 2010-2017Q2 1989-1992 1993-2001 2002-2009 2010-2017Q2
4.6
5.5 4.2 4.1
3.1
2.9
3.8 1.4 1.8
3.2
3.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Sep '17
1.5
Poland 1.4 CPI volatility GDP volatility
Colombia 1.7
1.5
Philippines 1.6
1.6
Uruguay 2.9
1.9
0.8
Mexico 2.0
1.4
Spain 2.2
Thailand 1.8
2.2
1.0
Peru 2.2
2.1
Panama 2.4
Kazakhstan 3.2
3.1
3.1
Iceland 3.7
10
Source: IMF World Economic Outlook, April 2017
ROP Expects Continued Robust Growth in the Medium-Term
The Philippine economy is now growing on higher growth plane with increasing contribution from the manufacturing
sector along with robust infrastructure investment, and solid services sector
2017 2018
2015 Actual 2016 Actual
Projections/3
11.5 11.6
9.9 9.9 8.9 8.6
11.6
10.4
75.3 10.6
9.2 83.8 83.2 10.0
62.4 79.5 80.7 8.3
6.7 80.7 81.7
6.4 6.9
6.3
5.1
4.6 44.2 5.0 5.0
37.6
33.8
23.0
18.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aug
Thai Baht Chinese Philippine Malaysian Indonesia Japanese Korean Won
2017
FX reserves Import cover Renminbi Peso Ringgit Rupiah Yen
Sustained decline in external debt-to-GDP ratio underscores the health of external finances
External debt (USD bn) and external debt/GDP (%)
73.6 75.6 80.0 78.5 77.7 77.5 74.8
61.6 72.5
66.5 65.2 64.7
61.4
59.7
50.2
44.5
37.6 38.4 36.9 33.7 32.0 28.9 27.3 26.5 24.5 23.5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 end-Q2 2017
External Debt External Debt Ratio
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jul Jan-Jul 2010 2011 2012 2013 2014 2015 2016 2017P
2016 2017
Arrivals Receipts
Sources: BSP, IBPAP 14
Current Account Developments Consistent with Economic Expansion
Philippine economy’s expansion remains at an accelerated pace resulting in high rate of growth of goods imports
Over time, as investments enhance the economy’s potential capacity and support needed infrastructure development, goods
exports are expected to increase, eventually alleviating the trade gap
OF remittances (lhs) Current Account Balance (rhs) Mat/Acc. for mftr. of elec. eqpt. Chemicals
50.0 Iron & steel Mineral fuels & lubricant
20000
8000 11.8
15.9 15.0
10.0 10.3
0 6000 3.2
-
-20000 (1.4) (1.2)
4000 (4.5)
(10.0)
-40000
2000
-60000 (20.0)
-80000
0
(30.0)
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
-100000 -2000
2005 2007 2009 2011 2013 2015 Jan-Jun
2017
2008
2011
2016r
2017r
2006
2007
2009
2010
2012
2013
2014
2015
Note: Based on last done deal transaction (closing price)
Source: BSP
17
Sound and Stable Financial System
Sound Banking System Effectively Funds Productive Sectors
Solid Asset Growth Improved Quality of Loan Portfolio
Total Asset and Deposit Levels (PHP bn) +14.7% YOY Total Loan Portfolio (PHP bn) and NPL coverage ratio (%)
growth in 9,000 10
16,000 deposits
9
14,248 8,000
13,591
14,000 8
7,000
12,000 8,010 7
6,000
7,612 6
10,000 11,093 5,000
10,507 5
8,000 4,000
4
6,000 3,000
3
4,000 2,000 2
1.9 2.0
2,000 1,000 1
0 0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jul-17 2005 2007 2009 2011 2013 2015 Jul-2017
Assets (in PHP bn) Deposits (in PHP bn) Loans outstanding (in PHP bn, LHS) NPL, Gross ratio
Actual
FY2017
FY2018 2
Jan-Jul Jan-Jul Jan-Jul Jan-Jun Adjusted 1
FY2016
2017 2016 2017 2017
YoY
% of % of % of
PHP bn Growth % of GDP PHP bn PHP bn PHP bn
GDP GDP GDP
(%)
Total Revenues 1,371.0 1,271.2 7.8 15.6 2,196.0 15.2 2,426.9 15.3 2,840.5 16.3
Tax Revenues 1,243.6 1,132.9 9.8 14.2 1,980.4 13.7 2,258.3 14.2 2,671.7 15.3
Bureau of Internal
986.1 900.9 9.5 11.3 1,567.2 10.8 1,782.8 n.a. 2,005.0 n.a.
Revenues
Bureau of Customs 245.3 221.5 10.7 2.8 396.4 2.7 459.6 n.a. 637.1 n.a.
Non-Tax Revenues 127.4 138.3 (7.9) 1.4 215.4 1.5 166.5 1.0 166.8 1.0
Bureau of the Treasury 61.2 72.8 (15.9) 0.7 101.7 0.7 n.a. n.a. n.a. n.a.
Privatization 0.3 0.5 (48.8) 0.0 0.7 0.0 2.0 0.0 2.0 0.0
Expenditure 1,576.0 1,442.2 9.3 17.7 2,549.3 17.6 2,909.0 18.3 3,364.1 19.3
Surplus/(Deficit) (205.0) (171.0) 19.9 (2.1) (353.4) (2.4) (482.1) (3.0) 523.6 (3.0)
Primary
(8.8) 22.7 138.6 0.0 (49.0) (0.3) n.a. n.a. n.a. n.a
Surplus/(Deficit)
Note: Some values may not sum up to exact figure due to rounding
1 Medium Term Fiscal program, Development Budget Coordination Committee (DBCC) approved on June 9, 2017
2 Budget of Expenditures and Sources of Financing FY 2018 submitted to Congress on July 24, 2017
5
-1.0 -0.2 -0.9 -0.6 -0.9
-2.0 -2.3 -1.4 -2.4 -2.1
0 -2.6 -3.7 -3.5
-5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun 2017
NG Revenues/GDP NG Expenditures/GDP NG Deficit/GDP Gen. Gov. Revenues/GDP
12.4
12.2 12.1
2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun 2017
1567.2
14.5 15.0
1443.3
1200
1334.8
14.0 14.0 14.5
1216.7
1000 13.4
14.0
1057.9
986.1
800
924.1
396.4
369.3
367.5
843.0
13.5
822.6
304.9
289.9
600
265.1
259.2
750.3
245.3
220.3
210.3
400 13.0
200 12.5
0 12.0
2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun Jan-July
BIR Revenues BOC Revenues Revenue-to-GDP 2017 2017
Source: DBM
*Adjusted level of infrastructure outlays based on Budget of Expenditure and Sources of Financing (BESF) 2018 and includes other infrastructure lodged in other agencies 25
1Infrastructure expenditure of the National Government, inclusive of infrastructure subsidies to Government Corporations and infra transfers to Local Government Units
National Government Financing 2015 - 2018
Strong bias for domestic sources of financing to minimize FX risks
Source: Budget of Expenditures and Sources of Financing (BESF) FY 2018 , Bureau of the Treasury, Department of Budget and Management
26
Fiscal Deficit is Increasingly being Funded from Domestic Sources
Ample domestic liquidity allows ROP to source majority of its financing
Steady decline in the Republic’s interest service burden needs from domestic market minimizing FX risks
Interest payments / NG revenue (%) and Interest payments / NG expenditure (%) Total debt breakdown (%)
36.7
31.7
48 44
44 41 42 36 35
31.1 43 44 42 34
29.7 24.8 24.4 33 35 35
23.6
22.6
64 66 67 65 65 65
20.5 20.4
18.8 56 59 57 56 58 58
23.3 52 56
21.4 16.8
19.6 14.7 13.9 14.7 13.9
19.3
17.9 17.6 17.2
16.2
13.9 13.4 12.5
11.9
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Aug Jan-Aug
2016 2017
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 End-
Interest Payments/Revenue Interest Payments/Expenditure Jun
External Domestic 2017
Long-dated debt profile reduces refinancing risk
Domestic debt breakdown (%) External debt breakdown (%)
29
41
54 100 100 100 100 100 100 100 100
96
90
26 70
78 79
79 82
30 83
20 14 12 90 14
19 10 10 6 10
10 8 9 7 7 5 8 4
2005 2010 2011 2012 2013 2014 2015 2016 End-Jun 2003 2005 2010 2011 2012 2013 2014 2015 2016 End-Jun
2017 2017
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Unless otherwise stated, graphs pertain to National Government (NG) debt
Sources: BTr, DOF 27
Fairer, Simpler and More Efficient Tax System
Proposed tax reform packages to broaden the tax base, generate revenues and fund investments
Priority Legislative Measures
The Comprehensive Tax Reform Package (CTRP) aims for a simpler, more equitable and efficient tax system with a goal of lowering the
tax rate and at the same time broadening the tax base, resulting to net positive gains in government revenues
Lower personal income and corporate tax rate to be competitive with the region to boost spending power of wage earners and
encourage more investments
Update: House Bill No. 5636 for Package 1 of CTRP or the Tax Reform for Acceleration and Inclusion Act (TRAIN) was approved by the
House of Representatives on May 31, 2017; Senate Bill No. 1592 or TRAIN is now pending in Senate for second reading
Package 1: Tax Reform Salient features:
for Acceleration and Lowering of Personal income tax (PIT) rates except for those belonging in the highest income brackets
Inclusion Act, but indexed to cumulative Consumer Price Index (CPI) every three years;
House Bill 5636 A flat rate of 6% for the estate and donor’s taxes;
Broadening the tax base by removing special laws on VAT exemptions but retaining exemptions for senior
citizens and persons with disabilities;
Revenue impact of
Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020 but with no indexation to
HB 5636 with inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike;
complementary A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases;
measures Excise tax of PHP10 per liter on sugar sweetened beverages;
2018 – PHP133.8bn Earmarking of the proceeds from the fuel excise tax increase for social protection programs
2019 – PHP233.6bn Tax administration reforms such as the fuel marking and monitoring system to curb oil smuggling, the use
of electronic receipts, and the mandatory connection of the point-of-sale (POS) system of all
2020 – PHP272.9bn establishments to the BIR, and the relaxation of bank secrecy laws for investigating and combating tax
2021 – PHP253.0bn fraud
2022 – PHP269.9bn Complementary measures are motor vehicle user’s charge and proposed estate tax amnesty
The government plans to ramp up infrastructure investments to reach PHP8-9tn (or USD160bn to USD170bn) in the next 5 years
Infrastructure investment is projected to reach 7.3% of GDP by 2022
A quarter of the 2017 national budget or PHP858.1bn*, equivalent to 5.4%* of GDP has been allocated to jump start the infrastructure buildup
30
Spending Big on Public Infrastructure
Rapid administrative response for infrastructure development
High impact projects envisioned to increase the The NEDA Board, which is
economy’s productive capacity, create jobs, increase chaired by the President,
incomes, and strengthen the investment climate make has approved 30
up the boldest and most ambitious infrastructure infrastructure programs
development plan for the Philippines worth at least and projects as of
USD79.7bn* September 2017*
*Includes 75 Infrastructure Flagship Projects and other infrastructure projects listed in the Build Build Build Portal; Excludes DOTr’s Maritime Safety Capability Project; 24 projects without estimated cost yet
Source links: NEDA Board Approved Projects (Duterte Administration), http://www.neda.gov.ph/wp-content/uploads/2017/07/ICC-NB-Approved-Projects-as-of-17Jul2017-Duterte-Admin.pdf; Infrastructure
Flagship Projects, http://www.neda.gov.ph/wp-content/uploads/2017/07/Infrastructure-Flagship-Projects-as-of-June-27-2017.pdf; http://www.build.gov.ph/Home/Project#; NEDA ODA Pipeline of Programs
and Projects as of June 30, 2017 31
Investor Relations Office
Investor Relations Office
Promoting excellence in investor relations. Enhancing sovereign value
Strengthening the Investor Community 16 Years and Beyond
With stable macroeconomic fundamentals, the Philippines remains as one of the
The effective implementation of the Government’s economic program and its most viable economies for investments in the emerging market.
success depends on regular two-way dialogue between economic policy makers
The IRO is proud to have played a role in communicating the successes of the
and the investment community.
Government’s reform program in the last sixteen years and is committed to
The Investor Relations Office (IRO) was established in July 2001 to strengthen continuing its efforts to promote the Philippine economy.
the country’s relations with investors and other stakeholders by promoting
active channels of information flow and dialogue between economic policy Serving Philippine and International Stakeholders
makers and investors.
The IRO provides services to a wide range of stakeholders – the Government’s
Based in the Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), the economic agencies, financial institutions, credit rating agencies, bilateral and
IRO has a dedicated staff comprised of trained economists and communication multilateral organizations, domestic and foreign investors, the diplomatic corps,
specialists who work with colleagues in the BSP and the economic agencies to business people, the media and the general public. All services to its stakeholders
implement a wide-ranging program of investor relations activities. are underpinned by a set of fundamental principles: transparency, accessibility,
timeliness, consistency and feedback.
As the Government has implemented its economic reform program over the
years, the IRO’s program of investor outreach has helped to ensure that The IRO adopts a multi-pronged approach to serving its stakeholders through:
investor decisions benefit from a comprehensive understanding of the progress
• Dissemination of key economic and financial information about economic policy
in reforms and what they mean for the economic fundamentals of the
objectives and performance
Philippines.
• Seeking market feedback on current and proposed policy measures
In turn, the Government’s economic reform program has made the economy • Providing feedback to economic policy-makers about investor sentiment
relatively more resilient amid the global financial and economic crisis. • Facilitating candid and constructive dialogue between policy-makers and
investors
33
Investor Relations Office
Promoting the Philippine economy at home and abroad
The IRO undertakes a range of initiatives to build awareness among domestic and international investment audiences around the Government’s economic
reform program, promote specific investment opportunities in the Philippines and facilitate information exchange and dialogue between key economic policy
decision-makers in the Government and domestic/international investors. These initiatives include:
• Regular Economic Briefings to update the business community, media and industry organizations on the country’s economic performance
• Investor Roadshows to bring the Government’s resilient economic performance record, commitment to sound economic management and responsible
reform to members of the international financial community
• Media Briefings to raise awareness of the Government’s progress in economic reforms and plans for ongoing reforms
• Government Policy Roadshows to increase the business community’s understanding of government policy measures to generate support for the policy
implementation process
• Investor Teleconferences to provide timely updates on key economic performance indicators
• E-mail service to keep investors and other investors abreast of data releases on a regular basis
• An English Language website, www.iro.ph, to provide a wide range of easily accessible information about the Philippines’ economic performance and the
government’s economic policies
Contact Information
For further information about the Investor Relations
Office, or about the Philippine economy, please
contact:
Editha L. Martin
Investor Relations Office
Budget and Bangko Sentral ng Pilipinas
Bangko Sentral ng Finance Secretary Economic Planning Transportation Trade and Industry
Management
Pilipinas Governor Secretary Secretary Secretary A. Mabini St. cor. P. Ocampo St.
Carlos Dominguez Secretary
Nestor Espenilla, Jr. Arthur Tugade Ramon Lopez
Malate Manila, Philippines 1004
Ernesto Pernia Benjamin Diokno
Tel: (632) 708-7487 / (632) 303-1581
Email: emartin@bsp.gov.ph
Fax: (632) 708-7489
Website: www.iro.ph
Tourism Secretary Agriculture Secretary Energy Secretary Public Works and Highways
Emmanuel Piñol Alfonso Cusi Secretary
Wanda Teo 34
Mark Villar
Republic of the Philippines
Investor Presentation
October 2017