The Philippine’s Socio-economic

Performance, Outlook, Challenges, and Vision

National Economic and Development Authority

ILO Trade on Employment Workshop

6-7 October 2016
Socio-economic Performance
 The Philippines’ growth trajectory has been improving, with
17 years of uninterrupted expansion
GDP growth rates (in %, at constant prices)
10
6.2
4.5 2010-2015
8 2000-2009

6
2.8
2.0 1990-1999
4 1980-1989

0
1987

2008
1980
1981
1982
1983
1984
1985
1986

1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

2009
2010
2011
2012
2013
2014
2015
-2

-4

-6

-8

-10

3
Source: Philippine Statistics Authority (PSA)
Investment & industry are increasingly becoming major drivers of
GDP growth
6.9%
Demand Side 6.9% Supply Side
6.2%

Ave. growth

Average growth (%)

Average growth (%)

6.2% 4.5%

4.5%
2.8%
2.8%

1990-1999 2000-2009 2010-2015 S12016

Consumption
Government
Investment 1990-1999 2000-2009 2010-2015 S12016

Net Exports
Agriculture Industry Services
Statistical discrepancy

Source: PSA
 Growth accelerated in first half of 2016
First First
Second Quarter
Quarter Semester
PARTICULARS 2016 2015 2016 2016
GROSS NATIONAL INCOME 7.4 5.4 6.8 7.1
Net Primary Income 9.9 2.5 6.2 8.0
GROSS DOMESTIC PRODUCT 6.8 5.9 7.0 6.9
By Industrial Origin
Agri, Fishery and Forestry (4.4) (0.1) (2.1) (3.3)
Industry 9.0 6.1 6.9 7.9
o.w. Manufacturing 8.0 4.7 6.3 7.2
Services 7.6 6.7 8.4 8.0
By Expenditure
Household Final Consumption
7.0 6.4 7.3 7.2
Expenditure
Gov’t Final Consumption Expenditure 11.8 2.4 13.5 12.7
Capital Formation 26.6 21.4 27.6 27.1
o.w. Fixed Capital Formation 28.2 12.7 27.2 27.7
Exports 7.3 5.1 6.6 7.0
Imports 19.0 12.6 20.9 19.9
Source: PSA
 Inflation has been tame, while financial sector is stable…

Headline and Core Inflation, 2005- 2016* Real Interest Rate and Non-performing Loans, 2005- 2016

9 20

18
8
Core Inflation
16 15.8
7 Headline Inflation

14
6
12 NPL Ratio*
5 Real interest rates**
10
CAR
4
8
3
6
1.7
2
4
1.5 3.7
1 2 1.7

0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

* Average of Jan - Aug 2016 • as of Aug ’16 ** as of Jul’16

Source: PSA and Bangko Sentral ng Pilipinas (BSP)

 The country’s external position remains robust
Positive Current Acct. & Declining External Debt
80

60

40
26.2
20
0.5
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H 2016

External Debt to GDP ratio - LHS Current Account to GDP Ratio - RHS

Healthy International Reserves

100 85.8 12
80
11
60
40
10
20
10.0
0 9
2010 2011 2012 2013 2014 2015 end-Aug 2016
Gross International Reserves (US$ bn) - LHS Months of import cover - RHS

Source: BSP
 Supported by major drivers…

IT-BPO Revenues is Set to Overtake Remittances 28.9

24.6 25.8 25.0
21.4 23.0 22.0
18.8 20.1 18.9
16.4 17.3 16.1
12.8 14.4 13.2
11.0
8.9
6.1 7.1
3.4 4.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 F 2017 F
Cash Remittances (US$ bn) IT-BPO Revenues (US$ bn)

Buoyant International Tourism Receipts 5.4

4.7 4.8 4.8 5.0
4.3 4.4
3.9 3.8
3.5
3.0 2.7 3.0
2.5

2010 2011 2012 2013 2014 2015 Jan-Jun 2016

Receipts Arrivals

Source: Department of Tourism, IT and Business Process Association of the Philippines

Our stronger fiscal position has been recognized as evidenced by our
investment-grade sovereign credit rating
Fiscal side: • Modest fiscal deficit; Declining Public debt & interest payments; Increasing reliance on domestic financing
• Result: resilient fiscal sector
Share of expenditures allocated to interest payments Fiscal Position
35 20
29.7 13.6
30 15.5 11.8
25 15

20
13.9 12.6 10
15
10 5
5
0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 S1
2016 Fiscal Position Revenue Effort Tax Effort
Int. Payments to Disbursement Primary Exp to GDP (rhs)

National gov’t outstanding debt (% of GDP) National Government Borrowing Program (%)
74.4

6.1 16.0
16.4
35.4 34.4 34.8 27.9 28.9
42.4
41.2

93.9 84.0
83.6
64.6 65.6 65.2 72.1 71.1
57.6

2009 2010 2011 2012 2013 2014 2015 as of Jul 2016

2016 Proposed
Domestic Foreign
*Using the program 2016 GDP
 Growth-enhanced fiscal space has allowed major investments in
infrastructure with spending on infrastructure more than tripling...
Public infrastructure spending, Bn PhP and % of GDP
1000 6.0
5.4
900 5.2

5.0
800
4.3
700
4.0
600

500 2.7 2.7 860.6 3.0

756.4
400 2.0
575.7 2.0
300
346.3
200 306.9
215.7 1.0
100

0 0.0
2012 2013 2014 2015 2016 2017
Actual Obligations GAA NEP

Source: Department of Budget and Management-BESF 2017

…complemented by private investments in public infrastructure
Status of PPP Projects (as of 20 September 2016)

Amount
Projects by Status No. of Projects
(PHP bn)
Projects Under Implementation 13 292.32
Contract Awarded 11 185.59
Other projects under Implementation 2 106.73
PPP Pipeline 40 5,642.54
For Contract Signing 2 24.79
Projects under Procurement 12 338.28
For Approval of Relevant Government Bodies 5 241.26
For Evaluation of Concerned Agencies 2 5,034.00
Projects with Ongoing Studies 3 4.21
Projects Under Conceptualization/Development 16 NA
Total 53 5,934.86
Source: PPP Center
 Increased fiscal resources have also allowed greater public
investments in social services…
Spending on Social Services Per Capita, Constant Prices
4,000 8,000

3,519 6,761
3,500 7,000

5,777
3,000 2,843 6,000

2,500 5,000

3,842
2,000 4,000
1,764

1,426 1,484
1,500 2,644 1,372 2,679 3,000
1,247

1,000 888 2,000

762
685
417 482
500 359 1,000
160 148 126 173
38 56 77
0 0
2000-2004 2005-2009 2010-2015 2016 GAA 2017 Proposed
Education Health Social Security (incl. CCT) Housing Total Social Services (rhs)

Source: DBM, PSA-NSCB

Our vibrant economy is producing more and better jobs...
Unemployment and Underemployment rates (%) Employment Generated 2000- 2015 (‘000)
5000 65
23.0 8.5 4493

Wage and salary worker (% in total employment)

8.0 61.9
7.8 4500
22.0 8.0
22.6 7.3 7.4 7.5 7.4 4000 3782

Employment Generated ('000)

7.5 3448 60
7.0 7.0 7.1
Underemployment Rate

21.0
3500

Unemployment Rate
21.0 7.0
57.2
20.0 6.6
3000
20.1 6.3 6.5
20.0
19.0 2500 55
19.319.1 19.3 19.3 5.7 6.0
18.8 2000 51.9
18.0 18.418.5 5.5 50.3
17.9 1500
17.0 5.0 50
1000
16.0 4.5
500
15.0 4.0
0 45
2000-2004/a 2005-2009 2010-2015/c,d Apr-July 2016/e

Employment Generated ('000) Wage and salary worker (% in total employment)

Wage and salary worker (% in total employment)
Underemployment Rate (%) Unemployment Rate (%)
Notes:
a/ Starting 2006, population projection benchmark is based on the 2000 Population Census, hence 2006 employment generation can not be computed due to
break in the series
b/ Starting January 2012 Labor Force Survey (LFS), the codes for industry adopted the 2009 PSIC. Prior to this, codes for industry used the 1994 PSIC.
c/ Annualized data for 2014 refer to the average estimates for April, July and October survey rounds that exclude Leyte.
d/ Annualized data for 2015 refer to the average estimates of all 4 quarter rounds of LFS 2015 results, excluding Leyte. Employment generation refers to the
average of estimates for April, July and October survey rounds.
e/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013
MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC).
Source: PSA
Services and industry sectors remain to be the main contributor in
employment generation...
60 41
56.0
53.5 54.7
52.6 53.4
41

Total Philippine Employment (in millions)

50
40
Share in Total Employment (%)

40
40
39
32.2 31.1 30.5
29.2
30 39
25.9
38
20 18.1
15.3 15.6 16.0 16.2 38

37
10
37

0 36
2012 2013 2014a/ 2015b/ Apr-Jul 2016c/

AGRICULTURE INDUSTRY SERVICES TOTAL EMPLOYMENT

Notes:
a/ Annualized data for 2014 refer to the average estimates for April, July and October survey rounds that exclude Leyte.
b/ Annualized data for 2015 refer to the average estimates of all 4 quarter rounds of LFS 2015 results, excluding Leyte. Employment generation refers to the
average of estimates for April, July and October survey rounds.
c/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013
MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC).
d/ Starting January 2012 Labor Force Survey (LFS), the codes for industry adopted the 2009 PSIC. Prior to this, codes for industry used the 1994 PSIC.
Source: PSA
Specifically, employment in the Philippines is dominated by agriculture,
hunting & forestry;
22.8
wholesale & retail trade; construction; & manufacturing.
20.2
Share in Total Employment (%)

April-July 2016

8.5 8.6
7.5 6.9
5.2
4.3
3.1 3.4 3.1
0.9 1.3 1.2 0.8
0.5 0.3 0.2 0.5 0.5 0.0

Source: PSA
Notes:
a/Not comparable with previous rounds of LFS; break in the data series due to change sin the Master Sample Design. Starting April 2016, the LFS used the 2013
MS Design, the 2010 Census of Population and Housing(CPH)-based population projections and the 2012 Philippine Standard Occupation Classification (PSOC).
b/ Starting January 2012 Labor Force Survey (LFS), the codes for industry adopted the 2009 PSIC. Prior to this, codes for industry used the 1994 PSIC.
c/ Other Services Activities already includes Activities of Households as Employers; Undifferentiated Goods and Service-Producing Activities of Households for
Own Use.
 Gains in unemployment were broad-based geographically as most of
the regions had unemployment rates lower than the national
unemployment rate and Underemployment Rates, by Region: July 2016
Unemployment

Unemployment rate Target unemployment rate

35.0 Underemployment rate Target underemployment rate
30.0
25.0
20.0
15.0
10.0
5.0
0.0

PH NCR CAR I II III IV-A IV-B V VI VII VIII IX X XI XII Caraga ARMM NIR
Unemployment rate 5.4 6.5 5.0 5.4 3.5 6.2 7.6 4.3 4.0 5.3 5.1 4.5 4.8 6.1 4.3 3.5 4.5 2.9 4.0
Underemployment rate 17.3 9.3 24.6 17.2 8.9 13.9 10.7 26.6 25.4 17.6 14.3 31.0 20.3 32.2 15.4 29.0 26.2 7.7 18.6

Beginning April 2016, the PSA adopted the 2013 Master Sample for household surveys in the sampling design of the LFS. Thus,
April 2016 LFS figures are not comparable with previous data.
Source: PSA
Poverty reduction has improved but needs to accelerate further
Poverty Statistics, First Semester (%)
15.0 28.8 28.6 29.0

Poverty (% of population)
27.9
Subsistence (% of

14.0 14.2 28.0

population)

13.0 13.3 13.4

27.0
12.0 12.1
26.3 26.0
11.0
10.0 25.0
2006S1 2009S1 2012S1 2015S1
Subsistence (% of population) Poverty (% of population)

Poverty Statistics, Full Year (%)

Poverty (% of population)
12.5 27.0
26.5
Subsistence (% of

12.0 26.3 26.5

12.0
population)

11.5
26.0
11.0
10.9 25.5
10.5 25.2
10.0 10.4 25.0
9.5 24.5
2006 2009 2012
Subsistence (% of population) Poverty (% of population)
Source: PSA
Growth Outlook and Risks
 The Philippines is expected to remain one of the fastest growing
economies in Asia
GDP growth of selected Asian economies (%)

7.3 7.5 7.4 7.4

6.9 6.9
6.7 6.7 6.6 6.7
6.4
6.2 6.1 6.2
5.9
5.5
5.3
5.1 5.0
4.8 4.9 4.8
4.4
4.1
3.4 3.2
2.8 3.0

2.0 2.1 2.2

1.8

India Philippines China Vietnam Indonesia Malaysia Thailand Singapore

2015 1H 2016 2016F 2017F

Source: IMF-WEO April 2016, July 2016 Update, Article IV consultations for forecast values, and various government websites for actual values
The vibrant view on the Philippine economy is also shared by the
private sector Consensus Forecast (in %)

Institution 2016 2017 2018

ADB 6.0 6.1 -
Barclays 6.2 5.8 -
Citi 6.3 6.5 -
Fitch rating 5.9 6.0 -
Goldman Sachs 6.4 6.1 -
HSBC 6.3 6.3 -
IMF 6.0 6.2 6.3
Metrobank Research 6.3 - -
Moody’s 6.0 6.0 -
Nomura 6.3 6.0 -
Standard and Poor’s 6.1 6.3 6.2
Standard Chartered Bank 6.4 6.0 5.8
UNESCAP 6.4 - -
WB 6.4 6.2 6.2
Median 6.3 6.1 6.2
Mean 6.3 6.1 6.1

Source: Various sources, as of 17 August 2016

 Outlook and targets for 2016-2022

2014 2015 Projections1/

Indicators
Actual Actual
2016 2017 2018 2019 2020 2021 2022

Real GDP Growth Rate 6.2 5.9 6.0-7.0 6.5-7.5 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0

1/ Assumptions adopted by the Development Budget Coordination Committee (DBCC) on July 2016
 Medium-term fiscal outlook 2015 - 2019
4500 25
20.2
20.0 3,907
4000
3,517
18.2 18.6 20
3500 3,327
16.8 17.0
2,960 15.6
2,990 17.2
3000 15.8 2,646 15.5
2,482 15
2500 2,231 2,257
2,109
2000
10
1500

1000 5
2.7 3.0 3.0 3.0 581
478 527
500 389
0.9
122
0 0
2015 2016 2017 2018 2019
Actual Outlook Proposed Proposed Proposed

Revenue Disbursement Deficit Revenue-to-GDP Disbursement-to-GDP Deficit-to-GDP

Source: BESF 2017

Expected Drivers of Growth

Demand side
 Household consumption: remittance inflows, better employment prospects, strong
consumer confidence, low inflation, low interest rates
 Government spending: expansion of human development and social protection
programs (i.e. CCT, K-12, health, etc)
 Investment: public construction, including infrastructure and reconstruction; private
construction
 Exports of services: good prospects for Business Process Management (BPM) and
tourism
Supply side
 Lower petroleum prices
 Construction and infrastructure development
 Manufacturing resurgence
 Real estate, renting, and business activities in response to demand from the BPM
sector
 Tourism-related services
 Wholesale and retail trade
Risks to Growth

We remain vigilant and well- positioned against the downside risks to

growth

 Fragile growth in Japan and European Union

 Slowdown in large emerging economies, particularly China
 Asynchronous monetary policies in major developed economies
External  Uncertainties over “Brexit”
 Geopolitical tensions in the Middle East, extended period of low
oil prices
 Maritime dispute in the West Philippine Sea

 Logistics bottlenecks
Domestic  Delays in government infrastructure and reconstruction projects
 Weather shocks, potential La Nina
 Closure of mines
Opportunities

 Closer economic integration in the ASEAN region which would open up new
sources of capital and markets
 Peaceful and smooth transfer of power
 Commitment of new Administration to continue current policies and
programs, sustain reform momentum
 Resumption of peace talks with NDF, MILF, MNLF
Challenges
The nagging PUZZLE: fast GDP growth but slow reduction in poverty
incidence. Why?
• High growth relatively recent
phenomenon
• Growth has not been broadly shared
across socioeconomic classes and
regions
• Agriculture, Fishery and Forestry grew
by only 1.4% annually in 2010-2015; -
3.3% in S1 2016.
• Food price, in particular rice, rose;
poverty line increased by almost 30%
during the period 2009-2015.
• High pop’n growth, resulting in 10M+
more Filipinos in 6 years.
Income inequality remains high, albeit slowly declining,
across income classes…

Income Shares of Top and Bottom HH Quintiles

52.3 50.5 49.6

5.4 5.6 5.9

Bottom 20% Top 20%

2000 2006 2012

Source: World Bank’s World Development Indicators

 There are broad-based improvements in average incomes, but wide
disparities across regions persist…
Regional per capita income (constant prices), 2009 & 2015
250,000

200,000

150,000
in PhP

100,000

50,000

2009 2015

Source: PSA
 Poverty rate is declining in most regions, but remains above 20% for
majority of regions…
Poverty Incidence by Region: 2009 and 2012
ARMM
Caraga
Region XII
Region XI
Region X
Region IX
Region VIII
Region VII
Region VI
Region V
2012
Region IV-B
2009
Region IV-A
Region III
Region II
Region I
CAR
NCR

Source: PSA
0 10 20 30 40 50 60
We need to sustain the gains to catch up with our ASEAN neighbors
in terms of poverty reduction
Poverty headcount ratio at national poverty lines, 2012 (% of
population)
25.2

Philippines
Indonesia
12.0
12.6 Thailand
Malaysia

1.7

Philippines Indonesia Thailand Malaysia

Source: World Development Indicators; government statistical agencies

Notes: No poverty data available for the Philippines on 2013 and 2014
 The Plan: The 0-10 Socioeconomic Agenda
designed to address the puzzle & challenge
For instance….
Challenge Agenda
Adverse investment climate Peace and order; massive infrastructure
upgrade; cut red tape; ease constitutional
restrictions on FDI ...
Uneven growth Regional and rural development; pro-poor
economic growth ...
Contraction in Agriculture and Agricultural development; land
Fishery sector administration and asset reform;
technology and innovation; moving up the
value chain and agri-business ...
 The Plan: The 0-10 Socioeconomic Agenda
designed to address the puzzle & challenge
Challenge Agenda

High food prices Raise farm productivity; macroeconomic

esp. price stability; strategic trade policy

Faster population growth [bulge Full, rapid and sustained implementation

of reproductive-age (15-49)
women] during the coming six
years or so
PH’s huge lag in Science and
Technology (S&T) relative to
ASEAN neighbours
of RPRH Law esp. in LGUs.
Promote S&T and creative arts for self-
sustaining inclusive growth and PH’s
participation in global knowledge economy
 The Philippine’s Socio-economic
Performance, Outlook, Challenges, and Vision

National Economic and Development Authority

ILO Trade on Employment Workshop

6-7 October 2016