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26 Sep 2019

Country Economic Forecast


Philippines

Economist
 Our GDP growth forecasts for 2019 and 2020 have been reduced to 5.6% and
Thatchinamoorthy Krshnan 5.8% respectively from 5.7% and 6.0% previously, as external demand is
Economist expected to weaken because of the escalation of the US-China trade war in
August, while the expected pick-up in government spending remains relatively
+65 6850 0126
modest so far. In the short term, private consumption should stay robust on
rising real wages and public spending should turn more supportive compared
2019 growth to H1 but export growth will moderate on weakening external demand at the
forecast lowered to same time as imports pick up in line with higher public investment spending.
5.6% from 5.7%  Public expenditure rose 8.8% y/y in August, showing signs of recovery following the
previously… budget impasse that held back spending in H1 2019. The government has tried to
fast-track projects to reach its spending programme target. Meanwhile, solid revenue
growth meant that the budget deficit was still smaller than a year earlier. Despite the
catch-up attempt, we expect a below-target fiscal deficit of 2.5% of GDP this year.

 The trade deficit narrowed in July, primarily the result of shrinking imports. Going
forward, export growth, particularly in electronics, should remain weak on dampened
external demand while import growth should recover together with public investment
spending. We expect a current account deficit of 2.4% of GDP in 2019.

 Headline inflation fell to 1.7% in August, below the BSP’s 2-4% target range as fuel
inflation turned negative and food inflation continued to fall. Inflation is seen averaging
2.6% in 2019, down from 5.2% last year. As expected, the Bangko Sentral ng
Pilipinas (BSP) cut its policy rate by 25bp at its September meeting to 4% (its third cut
this year) and we forecast the BSP to maintain an easing bias for the rest of the year.

Forecast for Philippines


…as escalated US- (Annual percentage changes unless specified)
China trade war will 2017 2018 2019 2020 2021 2022
further dampen Domestic Demand 6.8 8.3 4.8 6.0 5.4 5.4
Private Consumption 5.9 5.6 6.0 5.4 5.3 5.3
exports and private Fixed Investment 9.4 12.9 1.4 6.9 4.5 6.4
investment Stockbuilding (% of GDP) 0.2 0.3 0.3 0.0 0.3 0.1
Government Consumption 6.2 13.0 6.7 9.7 5.6 5.1
Exports of Goods and Services 19.7 13.4 4.7 4.7 4.4 6.4
Imports of Goods and Services 18.1 16.0 3.6 5.2 4.2 6.1
GDP 6.7 6.2 5.6 5.8 5.6 5.5
Consumer Prices, average 2.9 5.2 2.6 2.8 3.0 3.0
Current Balance (% of GDP) -0.7 -2.4 -2.4 -2.4 -2.1 -1.7
Government Budget (% of GDP) -2.2 -3.2 -2.5 -3.0 -2.9 -2.9
Gross Government Debt (% of GDP) 42.0 42.3 43.4 41.7 41.2 40.6
Trade Balance ($bn) -40.2 -49.0 -53.3 -58.4 -63.7 -69.0
Current Account ($bn) -2.1 -7.9 -8.5 -9.1 -8.8 -8.1
Short-Term Interest Rates (%) 2.62 3.77 4.81 4.18 4.24 4.87
Exchange Rate (Per US$), average 50.4 52.7 52.2 52.6 51.4 50.2

Contact: Thatchinamoorthy Krshnan | tkrshnan@oxfordeconomics.com


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Country Economic Forecast | Philippines

Forecast overview
Growth to pick up after subdued H1 Philippines: Contributions to GDP
% year
Q2 GDP growth slowed to 5.5% y/y, from 5.6% in Q1, a four- 12
year low. Although household spending remained firm,
9 Domestic GDP
growing 5.6% y/y, a sharp fall in government spending demand
weighed heavily on growth. Indeed, investment contracted 6
4.8% y/y as delays in the roll-out of new infrastructure
projects saw public construction plunge 27.2% on the year. 3
Consistent with the fall in investment, imports were no higher
0
than a year earlier, so despite slower export growth, net
exports made a positive contribution to annual growth in Q2. -3 Net exports
F'cast
Growth should pick up in H2 2019 as the government tries to -6
2000 2003 2006 2009 2012 2015 2018 2021
catch up on its spending plans, but we remain cautious in Source: Oxford Economics
our expectations given the challenging global backdrop that
will continue to keep exports under pressure and weigh on
private investment. The key drivers of our forecast are:
Philippines: Consumer prices
% year
• Lower inflation supports household spending: falling
14
inflation and rising real incomes should bode well for F'cast
household spending. Although unemployment ticked up 12

to 5.4% in July from 5.1% in April, the resumption of 10


public spending should boost job creation in the
8
construction sector and employment generally. Results
from BSP’s consumer expectations survey for Q3 2019 6

show a greater proportion of households seeing an 4


improvement in their economic outlook. Moreover, we
2
expect worker remittances to continue rising amid
broadly resilient growth in the US (the largest source of 0
2000 2003 2006 2009 2012 2015 2018 2021
remittances), despite the government’s decision to
Source: Oxford Economics
reduce the number of workers going to the Middle East
by 10%. Overall, we forecast private consumption to
grow 6.0% in 2019, up from 5.6% in 2018.
Philippines: Government budget balance & debt
• Government spending to pick up: although the budget
% of GDP % of GDP
impasse ended in April, public spending did not pick up 2 80
Government debt
meaningfully in Q2, with the government running a 1 (RHS)
70
quarterly surplus for the first time in four years. However, 0
60
we expect public expenditure to pick up in H2 2019 as
-1
the government tries to make up for the shortfall in the 50
-2
first half of the year. Capital outlays should increase as 40
progress in the “Build, Build, Build” program continues, -3
30
while social security spending will increase as the -4

Universal Health Care bill comes into effect. Despite this -5 Government balance 20
(LHS) F'cast
likely surge in spending in H2, the fiscal deficit in 2019 is -6 10
expected at a smaller-than-target 2.5% of GDP. 2000 2003 2006 2009 2012 2015 2018 2021
Source: Oxford Economics

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Country Economic Forecast | Philippines

• Subdued private investment: slowing external demand Philippines: Consumption and investment
and last year’s substantial rise in borrowing costs % year
35
continue to dampen private investment growth. Although Investment
30
the BSP’s Q3 2019 business expectations survey shows
25
a slight drop in business confidence in the current
20
quarter, firms are noticeably more upbeat than in H2
15 Consumption
2018, providing some upside risk to the investment
10
profile, in addition to the support from the loosening of
5
monetary policy this year.
0
-5
• Sluggish external trade: merchandise export growth in
-10
US$ terms stagnated in the first seven months of 2019 F'cast
-15
compared to growth of 1.2% during the same period of 2000 2003 2006 2009 2012 2015 2018 2021
2018. Exports will stay subdued as the downturn in the Source: Oxford Economics

electronics cycle continues and global trade tensions


dampen external demand. Meanwhile, imports contracted
1.5% y/y in January-July, way down from the 20.2%
increase recorded in the equivalent period of 2018, as
Philippines: Exports and imports*
capital and consumer durable goods’ imports lost % year
momentum. However, imports should stage a partial 50

recovery in H2 2019, with capital goods’ imports boosted 40


Exports
by the expected pick-up in public investment in the 30

coming months. 20
10
0
Falling inflation facilitates monetary easing
-10
Inflation has fallen sharply to 1.7% in August compared to a -20
peak of 6.7% in September-October last year. Going -30 Imports

forward, we expect the rice tariffication bill, which replaced -40


*3 month moving average (US$)
the quotas on rice imports with tariffs in March, to keep food -50
1995 1998 2001 2004 2007 2010 2013 2016 2019
inflation muted. Lower global oil prices compared to last year
Source: Haver Analytics
should also result in lower pump prices although there are
upside risks from heightened tensions in the Middle East.
Overall, we forecast inflation to average 2.6% in 2019, down
from 5.2% in 2018.
Philippines: Monetary conditions
Alongside a more dovish US Fed and the anticipated % year
slowdown in global growth, disappointing domestic growth in 16

H1, sharply lower inflation and lacklustre credit expansion 14 F'cast


have created a favourable environment for the central bank 12
Short-term
to loosen monetary policy this year. Accordingly, the BSP interest rate
10
has cut its policy rate by 75bp and the reserve requirement
8
ratio by 200bp thus far in 2019. We forecast the BSP to
maintain an easing bias for the rest of the year. The impact 6

of African Swine fever on pork prices and weather-related 4


disruption to agriculture could push inflation above our 2 Inflation
expected path, which in turn might preclude further monetary
0
policy easing. A weakening peso might also give the BSP 2000 2003 2006 2009 2012 2015 2018 2021
Source: Oxford Economics
reason to pause before implementing further rate cuts.

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Country Economic Forecast | Philippines

Economic Risk Evaluation


Overall risk for Philippines: 4.3/10*
The Philippines economic risk score of 4.3 is well below the Philippines:
emerging market average of 5.6. Supportive macroeconomic Economic risk index
fundamentals have kept the country resilient to external (Scores from 1 to 10 with 10 = highest risk)
shocks while strong household spending drives overall Score
Rank out of
demand growth. However, private sector firms continue to Sep 2019
164†
change
from March
face numerous challenges in starting and running a business
Overall 4.3 51 -0.1
which limits investment growth. While a complex tax system,
Market demand 4.0 29 0.0
bureaucratic red tape, congestion, poor internet
Market cost 5.0 65 0.0
infrastructure and physical infrastructure gaps all raise costs,
Exchange rate * 2.7 46 -0.3
there have been progress in most of these bottlenecks. The Sovereign credit 4.0 54 -0.1
current administration is undertaking tax reform measures to Trade credit 6.0 57 0.0
simplify the tax system, it passed the “Ease of Doing † (1 indicates lowest risk ranking)
Business” Act in 2018 to boost competitiveness and * As of May 2019, the exchange rate risk score is based on our
new methodology. The change from six months ago also refers to
launched a massive infrastructure programme to narrow the
the respective score under the new methodology.
infrastructure gap in the country.

Market demand: 4.0/10


The market demand risk score of 4.0 is well below the
emerging market average, reflecting a sustained period of
buoyant demand. Meanwhile, remittances, an important
driver of consumption, have also stayed reasonably robust in
the face of uncertain global conditions.
Economic risk: Philippines vs Emerging
Domestic demand slowed last year as inflation reached markets average
decade-high levels. However, we expect consumer demand Risk score, 10 = highest
to speed up this year as inflation has returned to target and 10

steady remittances growth remain supportive of 8


Emerging markets average
consumption.
6

Market cost: 5.0/10 4

The market cost risk score is moderate at 5.0. Inflation 2

averaged 5.2% in 2018, well above the target band, but we 0


Philippines
Japan
Singapore

China

Indonesia

India
Taiwan

Korea

Malaysia

Myanmar
Thailand

forecast it will fall back inside the 2-4% range in 2019 as


cost pressures ease. Further out, strong investment will
complement the growing labour force and provide enough
Source : Oxford Economics
capacity for the economy to grow. However, there is still
room for improvement as shortages in some physical and IT
infrastructure, together with persistent bureaucratic
roadblocks (e.g. when starting a business), continue to drive
up the costs of doing business relative to other countries.

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Country Economic Forecast | Philippines

Exchange rate: 2.7/10


In 2018 the PHP weakened further against the dollar, but so
did other Asian currencies. Although the trade-weighted Economic risk: Philippines vs Emerging
PHP has strengthened from last year’s lows, the peso lost markets average
Market demand
some of its 2019 gains in August on news of slower-than- 10.0
expected Q2 economic growth and the re-escalation of US- 8.0
6.0
China trade tensions. Although the current account position 4.0
Trade credit Market cost
no longer offers the support it once did, the country has 2.0
0.0
ample reserves and stable macro fundamentals to help
protect against uncertainty. Furthermore, the central bank
has reintroduced its Currency Risk Protection Program
Exchange rate Sovereign credit
(CRPP), so firms can hedge against potential losses from
exchange rate volatility. Emerging markets average Philippines Philippines 6 months ago

Source : Oxford Economics

Sovereign credit: 4.0/10


The sovereign credit risk score is 4.0 under our data-driven
methodology. Ample foreign exchange reserves, low
external debt and a falling government debt ratio are
supportive factors, while a solid macroeconomic
performance since the global financial crisis means that the
authorities have some room for manoeuvre in the event of
an adverse external shock. However, political and
institutional factors are a drag on the country’s score.

Risk warnings
Trade credit: 6.0/10
GDP growth to pick up in
Trade credit risk, which gives an indication of an economy’s GDP growth coming quarters
potential influence on businesses’ financial commitments, is CPI inflation
Inflation is forecast to be
within target
fair, reflecting steadily improving governance and
Current account to stay in
transparency standards. The Philippines has a good credit Current account balance deficit for some years
payment history, with no instances of disruption in recent Fiscal deficit to come in
years despite periodic regional crises. This is in part thanks Government balance below 3.2% of GDP target
to the cushion provided to its external balances by inflows of Government debt
Debt-to-GDP ratio falling at a
steady pace
workers’ remittances. Solid macro fundamentals, generally
External debt to GDP ratio is
low inflation, and interest rates, together with robust External debt low
domestic demand, also provide a positive economic climate.

* Risk scores are from 1 to 10, with 10 representing the highest risk. For our full country risk service, see
www.risk-evaluator.com. Sovereign credit risk comes from our sovereign risk tool and foreign exchange risk
comes from our FX tool. Find out more.

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Country Economic Forecast | Philippines

What to watch out for


Slower global growth and protectionism: weaker than
Philippines: Sectoral balances
expected global growth would dampen exports and widen % of GDP
the current account deficit. Meanwhile, moves towards 10
Private sector
protectionism by key trade partners could hit services 8 F'cast
exports as well as remittances, both of which have been 6
Current
bolstering the current account position. account
4

Delays in ambitious infrastructure programme: while the 2

Duterte administration wants to usher in a “Golden Age of 0


Infrastructure”, lengthy bureaucratic processes, inefficient -2
procurement and coordination failures could hinder budget
-4
disbursement and the implementation of projects. Public sector
-6
2000 2003 2006 2009 2012 2015 2018 2021
Tax reform revenue shortfall: the tax reform was signed Source: Oxford Economics

into law in December 2017 and the package will cut income
taxes, hike car and fuel levies and reduce VAT exemptions.
The latter are meant to offset the revenue losses of the tax
cuts, but lower demand for cars or the ineffective removal of Impact of scenarios on GDP growth
VAT exemptions could have a negative impact on revenue. Average annual impact over the next 3 years (% points)

Weather-related production risks: the Philippines 0.4 EM upturn


experiences periodic and severe natural disasters, where
0.0 No deal-Brexit
weather-related shocks to the production cycle threaten food
supply, prices, and agricultural exports. In addition, tropical -0.3 US recession
storms and floods put the people and the country’s capital -0.4 Trade war escalation
stock at risk every year.
-0.5 Eurozone slowdown

Exposure to key global risks


Trade war escalation: in this scenario, the US imposes a
25% tariff on all Chinese and Mexican goods imports, as
well as global autos, and a blanket tariff on EU goods
imports. The US’s trading partners retaliate with matching
tariffs. The scale of the shock to business and household
confidence is significant but varies across countries. UK: Consumer spending and income
%Impact
year of scenarios on GDP growth
Fortunately, the Philippines’ domestic demand-driven 6% year
8.0 Real disposable Forecast
economy should limit the impact of the slowdown. income
47.0

EM upturn: this scenario explores how global growth 6.0


2
strengthens on the back of an Emerging Markets upturn. 5.0
EMs benefit from three significant tailwinds. First, a further 0
4.0 US recession
loosening of policy by the Chinese authorities. Second, a Trade war escalation
-23.0
swift resolution to current trade tensions, particularly EM upturn
between the US and China. And third, relatively supportive 2.0 Baseline
-4
monetary policy among advanced economies. The 1.0
Consumer spending
Philippines’ GDP growth increases to an average of 6.3% pa -6
0.0
2004 2006 2008 2010 2012 2014 2016 2018 2020
in 2020-21 in this scenario. 2013 2015
Source: Oxford Economics
2017 2019 2021
Source : Oxford Economics

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Country Economic Forecast | Philippines

Long-term prospects Philippines: Real GDP and potential output


Philippines peso bn, constant 2000 prices
14000
Robust long-term outlook 13000 F'cast
Strong consumer spending combined with a very favourable 12000

demographic dividend – the working-age population is set to 11000


10000
expand by 1.6% pa over the next decade – will sustain
9000
growth. Our medium-term growth forecast of 5.5% pa is also 8000
driven by an anticipated solid expansion of investment and 7000
Actual GDP

improving exports. 6000


5000 Potential
GDP
The combination of improved investor confidence and the 4000
3000
government’s public-private partnership initiative will lead to 2000 2003 2006 2009 2012 2015 2018 2021 2024
a faster accumulation of capital. This will help to ensure Source: Oxford Economics

continued robust growth in potential GDP over the next


decade.
Potential GDP and Its Components
We expect total factor productivity (TFP) growth to maintain Average Percentage Growth
a solid pace, but an even faster performance could be 2008-2017 2018-2027
realised if the labour force were to shift from agriculture to
the more productive manufacturing sector more rapidly. Potential GDP* 5.7 5.5
Employment at NAIRU 1.7 2.3
Capital Stock 4.9 7.4
In addition, to achieve TFP growth rates similar to those in
Total Factor Productivity 2.9 1.4
China, the country needs to boost its research and
*ln(Potential GDP)=0.65*ln(Employment at NAIRU)
development expenditure and continue improving the
+0.35*ln(Capital Stock)+ln(Total Factor Productivity)
business climate. This would allow it to exploit the
considerable ‘catch-up’ potential more fully.

Long-Term Forecast for Philippines


(Average annual percentage change unless otherwise stated)
2008-2012 2013-2017 2018-2022 2023-2027
GDP 4.6 6.6 5.7 5.0
Consumption 4.3 6.1 5.5 5.0
Investment 5.6 14.1 6.4 5.9
Government Consumption 6.4 6.2 8.0 4.9
Exports of Goods and Services 2.8 10.1 6.7 5.7
Imports of Goods and Services 3.7 13.3 6.9 5.9
Unemployment (%) 7.2 6.3 4.7 4.0

Consumer Prices, average 4.9 2.2 3.3 3.0


Current Balance (% of GDP) 2.8 1.9 -2.2 -0.7
Exchange Rate (vs US$), average 44.6 46.0 51.8 47.3
General Government Balance (% of GDP) -2.5 -1.5 -2.9 -2.8
Short-term Interest Rates (%) 4.55 2.46 4.37 5.71
Long-term Interest Rates (%) 7.07 4.26 5.36 6.70

Working Population 2.4 2.0 1.7 1.5


Labour Supply 2.2 1.1 2.4 2.3
Participation Ratio 66.6 65.0 64.7 67.4
Labour Productivity 2.3 5.1 2.9 2.7

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Country Economic Forecast | Philippines

Background
Economic development
The Philippines was once dubbed the “Sick man of Asia” as it grew by just 3.6% a year from 1980 to 2010 – much slower
than its nearby East Asian ‘tigers’ that grew by more than 6% a year over the same period. These neighbouring countries
were able to take advantage of export-driven industrialisation, which the Philippines failed to do. Instead, the country
essentially missed a step in the structural transformation process by quickly transforming from agriculture towards a
services-driven economy. Due to policy distortions that favoured import substitution and foreign exchange and credit
rationing, the country failed to develop its manufacturing sector and its ability to move up the value-chain. The share of
manufacturing in the country’s national accounts has been hovering around 25% since the 1960s. In the absence of
export-driven growth, the country relied less on global trade for much of its income, which in effect has shielded the
economy from the global economic downturn of the past decade. Consequently, it has performed strongly relative to the
rest of the region this decade, growing at an average of 6.3% per year from 2010 to 2018.

Bouncing back from near fiscal crisis in 2004 with greater efforts to significantly reduce the government’s deficit and debt
levels, macroeconomic stability is much improved, with both inflation and the deficit broadly under control. Improved
macroeconomic management has boosted business and consumer confidence, facilitated a significant expansion of
credit, and helped fund investments in the country. However, the country continues to face deficits in infrastructure,
crippling congestion in its cities and ports, high income taxes, poor state of telecommunications, lack of investment in
physical and human capital, and cumbersome and complex business regulations. Much work still needs to be done for
the country to achieve its full potential.

Structure of the economy


On the production side, the services sector accounted for 57.7% of GDP in 2018, industry some 34.2% (23.2% for
manufacturing) and agriculture 8.1%. On the expenditure side, private consumer spending contributed 69.5% of GDP on
average from 1980-2018. Of the 6.2% year-on-year economic growth posted for 2018, 3.8% points were from private
consumption and 4.0% points from investment (the contribution of net trade was heavily negative).

Concerning employment, the labour market is characterised by high levels of informality and it is estimated that 90% of
Filipinos are employed by micro, small, and medium enterprises (MSMEs). Relative to their share of employment, their
contribution to GDP is small as is their share of exports. Furthermore, 99% of all enterprises in the Philippines are
classified as MSMEs. Many of these firms are not registered and operate informally; registering a business and paying
high taxes have become needlessly cumbersome exercises, deterring small businesses from going formal.

Balance of payments and structure of trade


Despite its underdeveloped manufacturing sector, the country’s exports are heavily skewed towards manufactured goods,
particularly low-value added types of electronics, making it vulnerable to the health of the global IT sector. In 2018,
manufactures accounted for 84% of total sales (or US$56.5bn out of US$67.5bn). Of manufactured exports, 49% were for
semiconductors alone. The country’s import structure is weighted towards capital goods, which accounted for 32.8% of
total imports in 2018, and intermediate goods 35.1% – mainly components for the electronics export trade. The country is
also reliant on importing crude oil for its transport needs and is significantly affected by oil price changes.

In terms of the current account, the growth of remittances from overseas workers and the booming Business Process
Outsourcing (BPO) industry has ensured a steady supply of foreign exchange, which helped the current account achieve
a persistent surplus until 2016.

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Country Economic Forecast | Philippines

Policy
A major factor holding back economic development has been the sluggish pace of economic reform. While the
government has recognised key problems, such as the need for tax reform and the lack of infrastructure investment, it
has been unable to mobilise a political consensus behind the desired change. Short-term wins are prioritised over long-
term reforms as each administration cannot extend beyond a 6-year term limit. Moreover, there are bottlenecks holding
up reform implementation. Budget disbursement and project execution are both marred by lengthy bureaucratic
processes, inefficient procurement and implementation procedures, as well as inter-agency coordination failures, among
other factors.

With the new presidency of Rodrigo Duterte from June 2016, however, the country may be on the cusp of significant
political change. The former mayor of Davao City plans to eradicate crime and shift the country towards a federalist form
of government. The latter will involve calling a constitutional convention at some stage. Though constitutional changes
take several years to implement, the potential overhaul could affect the economy. Federalism would lead to devolution of
certain powers from the central government to state governments – likely at considerable cost as state governments set
up their own administrative infrastructures and hold elections. In addition, policy priorities and spending decisions will be
influenced by the varying regional outlooks. Whether or not a new constitutional set-up will lead to improved economic
performance remains to be seen; the international experience of decentralisation is mixed.

Politics
The May 2016 election saw Rodrigo Duterte elected into office with more than 16.6m votes and by a margin of 6m. While
he campaigned without a clear plan for the economy, his administration is poised to continue most of the macroeconomic
policies of the Aquino administration. Outside mainstream democratic politics, the country is still grappling with two long-
running armed insurgencies – one communist and the other Muslim separatist (concentrated in Mindanao). These
conflicts have seriously held back economic development in Mindanao, but with the election of the first Mindanaoan
president, things may improve for the region.

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Country Economic Forecast | Philippines

Data & Forecasts

Key Indicators: Philippines


Percentage changes on a year earlier unless otherwise stated
Industrial CPI Monthly Exports of Imports of Trade Budget Electronics
production Remitt- goods goods balance balance Exports
ances (US$ mn) 12m total
Aug 3.1 6.4 -0.9 4.0 12.6 -3599 -456.5 7.0
Sep 1.3 6.7 2.3 1.1 30.2 -4024 -515.8 4.2
Oct 2.9 6.7 8.7 6.7 26.2 -4415 -553.9 0.6
Nov 1.9 6.0 2.8 1.0 9.6 -4074 -584.4 -1.6
Dec -9.3 5.1 3.9 -12.2 -4.9 -4170 -558.3 -15.2
2019
Jan -4.2 4.4 4.4 -6.7 3.6 -3920 -523.9 1.7
Feb -10.3 3.8 1.5 -0.1 2.6 -2744 -548.6 0.8
Mar -9.9 3.3 6.6 -1.8 7.8 -3100 -496.3 -3.7
Apr -14.7 3.0 4.0 1.0 -1.9 -3469 -455.8 3.0
May -10.3 3.2 5.7 1.0 -5.2 -3298 -420.3 6.2
Jun -11.6 2.7 -2.9 3.3 -10.4 -2370 -407.9 4.3
Jul -8.2 2.4 7.5 3.5 -4.2 -3393 -396.8 2.9
Aug - 1.7 - - - - -396.7 -

Financial Indicators: Philippines


Percentage changes on a year earlier unless otherwise stated
Call loan Money Exchange Exchange Exchange Share Reserves Reserves
rate Supply rate rate rate index price cover
% M3 PhP/€ avg. PhP/$ avg. 2010=100 $bn months
Aug 3.94 10.5 61.5 53.3 94.4 7730 70.3 7.2
Sep 4.20 9.9 62.9 54.0 93.3 7463 67.4 6.7
Oct 4.64 8.5 62.1 53.9 94.1 7083 66.9 6.2
Nov 4.78 8.7 60.0 52.7 96.3 7167 67.9 7.0
Dec 4.94 9.5 60.0 52.8 95.8 7509 71.0 8.0
2019
Jan 5.10 7.9 59.9 52.4 95.3 7924 74.1 8.1
Feb 5.12 7.3 59.2 52.1 95.8 7972 74.4 9.3
Mar 5.17 6.1 59.3 52.5 95.4 7820 75.4 8.4
Apr 5.22 7.0 58.5 52.0 96.6 7877 75.8 8.4
May 5.04 6.4 58.4 52.2 96.9 7776 77.0 8.1
Jun 4.93 6.4 58.5 51.7 97.4 8010 76.9 9.1
Jul 4.81 6.7 57.4 51.1 98.4 8164 77.2 8.1
Aug 4.42 - 57.9 52.2 97.3 7888 78.0 -

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Country Economic Forecast | Philippines

PHILIPPINES TABLE 1 SUMMARY ITEMS


Annual Percentage Changes, Unless Otherwise Specified

CONSUMERS TOTAL TOTAL REAL INDUSTRIAL UNEMPLOY- AVERAGE WHOLE COMPETIT- PRODUCER CONSUMER
EXPENDITURE FINAL FIXED GDP PRODUCTION MENT RATE EARNINGS ECONOMY IVENESS PRICES PRICES
EXPENDITURE INVESTMENT (%) PRODUCT- (2008=100)
IVITY
(C) (TFE) (IF) (GDP) (IP) (UP) (ER) (GDP/ET) (WCR) (PPI) (CPI)

YEARS BEGINNING Q1
2017 5.9 10.9 9.4 6.7 8.4 5.7 3.5 8.4 74.9 -0.9 2.9
2018 5.6 10.1 12.9 6.2 4.9 5.3 4.7 4.1 69.8 0.7 5.2
2019 6.0 4.7 1.4 5.6 5.4 5.0 5.7 2.7 69.8 2.2 2.6
2020 5.4 5.5 6.9 5.8 6.0 4.6 6.1 2.2 70.0 0.4 2.8
2021 5.3 5.0 4.5 5.6 5.3 4.3 6.1 2.7 70.5 1.4 3.0
2022 5.3 5.8 6.4 5.5 5.2 4.2 6.1 2.8 71.1 3.2 3.0
0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2017 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 5.9 11.2 12.9 6.4 7.7 6.6 2.6 10.0 78.0 -0.9 2.9
Q2 6.0 10.7 6.8 6.6 8.0 5.7 3.2 7.6 76.3 -1.8 2.8
Q3 5.4 11.2 8.3 7.2 10.0 5.6 3.7 9.3 73.1 -0.6 2.7
Q4 6.2 10.7 9.5 6.6 8.2 5.0 4.3 7.0 72.1 -0.4 3.0
2018 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 5.6 8.5 8.2 6.5 7.3 5.3 4.4 0.4 69.6 -0.1 3.9
Q2 6.0 11.8 19.3 6.2 5.7 5.5 4.6 4.5 69.3 1.0 4.8
Q3 5.3 11.5 16.6 6.0 3.8 5.4 4.7 4.8 70.2 1.3 6.2
Q4 5.3 8.5 8.5 6.3 3.2 5.1 4.9 6.8 70.1 0.6 5.9
2019 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 6.1 6.9 6.4 5.6 4.9 5.2 5.3 6.6 69.2 4.1 3.8
Q2 5.6 3.2 -4.8 5.5 4.0 5.1 5.6 2.1 69.9 1.5 3.0
Q3 6.2 3.6 -2.1 5.6 6.4 5.0 5.8 0.8 70.1 1.5 1.8
Q4 6.0 5.4 6.0 5.6 6.4 4.8 6.1 1.6 69.9 1.8 1.9
2020 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 5.5 6.7 8.8 6.2 5.5 4.7 6.1 1.5 69.5 -0.3 2.8
Q2 5.4 6.5 10.4 6.1 7.7 4.6 6.1 2.8 69.9 1.3 2.7
Q3 5.4 5.3 6.7 5.8 5.4 4.6 6.1 2.7 70.2 0.2 2.8
Q4 5.4 3.8 2.5 5.1 5.4 4.5 6.1 2.0 70.4 0.3 3.0
2021 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 5.4 4.1 2.7 5.3 5.3 4.4 6.1 2.3 70.2 -0.7 3.0
Q2 5.4 4.8 3.9 5.5 5.3 4.4 6.1 2.6 70.5 0.8 3.0
Q3 5.3 5.4 5.1 5.7 5.3 4.3 6.1 2.8 70.7 2.3 3.0
Q4 5.3 5.8 5.9 5.9 5.2 4.2 6.1 3.0 70.7 3.1 3.0
2022 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 5.3 5.9 6.3 5.8 5.2 4.2 6.1 3.0 70.5 3.2 3.0
Q2 5.3 5.8 6.4 5.6 5.2 4.2 6.1 2.9 70.9 3.2 3.0
Q3 5.3 5.7 6.5 5.5 5.1 4.2 6.1 2.8 71.3 3.2 3.0
Q4 5.2 5.6 6.4 5.3 5.1 4.2 6.1 2.7 71.5 3.2 3.0

COPYRIGHT (C) , OXFORD ECONOMICS

PHILIPPINES TABLE 2 SUMMARY ITEMS

TRADE CURRENT CURRENT GOVERNMENT GOVERNMENT SHORT-TERM SPREAD REAL EQUILIBRIUM EXCHANGE
BALANCE ACCOUNT ACCOUNT FINANCIAL FINANCIAL INTEREST OVER US SHORT-TERM EXCHANGE RATE PER
(US$ BN) (US$ BN) (% OF GDP) BALANCE BALANCE RATE SHORT-TERM INTEREST RATE PER US
(PESO BN) (% OF GDP) RATE RATE US DOLLAR DOLLAR
(BVI$/1000) (BCU$/1000) (BCU%) (GB/1000) (GB*100 (RSH) (RSH - RSH US) (Note 1) (RXEQUIL) (RXD)
/GDP!)

2017 -40.2 -2.1 -0.6 -350.6 -2.2 2.62 1.35 -0.24 47.47 50.40
2018 -49.0 -7.9 -2.3 -558.3 -3.2 3.77 1.46 -1.44 46.94 52.66
2019 -53.3 -8.5 -2.3 -469.7 -2.5 4.81 2.54 2.21 46.49 52.23
2020 -58.4 -9.1 -2.3 -616.1 -3.0 4.18 2.55 1.35 45.76 52.55
2021 -63.7 -8.8 -2.0 -649.7 -2.9 4.24 2.61 1.24 45.25 51.36
2022 -69.0 -8.1 -1.6 -683.6 -2.9 4.87 3.01 1.87 44.67 50.24
0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2017 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Q1 -9.1 -0.9 -1.2 -83.0 -2.3 2.53 1.46 -0.36 47.75 49.99
Q2 -9.1 -0.2 -0.3 -71.5 -1.8 2.57 1.37 -0.27 47.56 49.86
Q3 -9.5 1.4 1.9 -58.6 -1.5 2.56 1.25 -0.11 47.36 50.84
Q4 -12.5 -2.5 -2.8 -137.6 -3.1 2.81 1.34 -0.21 47.20 50.93
2018 0.0 0.0 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00
Q1 -10.6 -0.3 -0.4 -152.2 -3.9 3.08 1.16 -0.78 47.10 51.45
Q2 -12.7 -3.5 -4.2 -40.8 -0.9 3.30 0.96 -1.47 47.01 52.45
Q3 -12.5 -1.6 -2.1 -185.2 -4.4 3.92 1.58 -2.33 46.92 53.55
Q4 -13.3 -2.4 -2.6 -180.0 -3.6 4.77 2.14 -1.17 46.75 53.20
2019 0.0 0.0 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00
Q1 -12.4 -1.2 -1.5 -90.2 -2.1 5.13 2.44 1.30 46.68 52.36
Q2 -11.9 -1.9 -2.1 47.6 1.0 5.06 2.55 2.11 46.57 52.06
Q3 -13.6 -1.6 -1.9 -173.2 -3.9 4.65 2.55 2.88 46.44 51.82
Q4 -15.5 -3.7 -3.7 -253.9 -4.8 4.40 2.63 2.49 46.26 52.67
2020 0.0 0.0 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00
Q1 -12.7 -0.9 -1.1 -186.3 -4.1 4.28 2.65 1.46 46.04 52.96
Q2 -13.4 -2.2 -2.3 -45.7 -0.9 4.15 2.52 1.45 45.81 52.73
Q3 -15.2 -1.9 -2.1 -219.3 -4.5 4.15 2.52 1.31 45.64 52.43
Q4 -17.1 -4.0 -3.7 -164.8 -2.9 4.15 2.52 1.17 45.55 52.10
2021 0.0 0.0 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00
Q1 -14.0 -0.8 -0.9 -198.8 -4.0 4.15 2.52 1.15 45.46 51.78
Q2 -14.6 -2.2 -2.0 -43.8 -0.8 4.15 2.52 1.15 45.32 51.50
Q3 -16.6 -1.8 -1.7 -233.6 -4.4 4.28 2.64 1.28 45.20 51.22
Q4 -18.6 -4.0 -3.3 -173.4 -2.8 4.40 2.77 1.40 45.02 50.94
2022 0.0 0.0 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00
Q1 -15.2 -0.5 -0.5 -211.5 -3.9 4.53 2.72 1.53 44.89 50.66
Q2 -15.8 -2.0 -1.7 -40.9 -0.7 4.78 2.89 1.78 44.73 50.38
Q3 -18.0 -1.6 -1.4 -248.3 -4.3 5.03 3.14 2.03 44.60 50.09
Q4 -20.1 -4.0 -2.9 -182.9 -2.7 5.15 3.27 2.15 44.46 49.81
Note 1 : REAL INTEREST RATES = Nominal interest rate (RSH or RLG) - % change in CPI

COPYRIGHT (C) , OXFORD ECONOMICS

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Country Economic Forecast | Philippines

Long-Term Forecast for Philippines


Annual percentage changes unless otherwise specified

2008-2017 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-2027
GDP 5.6 6.1 6.1 6.9 6.7 6.2 5.6 5.8 5.6 5.5 5.2 5.1 5.0 4.9 4.8 5.4
Consumption 5.2 5.6 6.3 7.1 5.9 5.6 6.0 5.4 5.3 5.3 5.2 5.1 5.0 4.9 4.8 5.3
Investment 9.8 7.2 16.9 26.1 9.4 12.9 1.4 6.9 4.5 6.4 6.3 6.1 5.9 5.7 5.4 6.1
Government Consumption 6.3 3.3 7.6 9.0 6.2 13.0 6.7 9.7 5.6 5.1 5.0 5.0 4.9 4.9 4.8 6.4
Exports of Goods and Services 6.4 12.6 8.5 11.6 19.7 13.4 4.7 4.7 4.4 6.4 5.7 5.8 5.7 5.6 5.5 6.2
Imports of Goods and Services 8.4 9.9 14.6 20.2 18.1 16.0 3.6 5.2 4.2 6.1 6.0 5.9 5.9 5.8 5.7 6.4
Unemployment (%) 6.8 6.8 6.3 5.5 5.7 5.3 5.0 4.6 4.3 4.2 4.1 4.1 4.0 4.0 4.0 4.4

Consumer Prices, average 3.5 3.6 0.7 1.3 2.9 5.2 2.6 2.8 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.2
Consumer Prices, EOP 3.5 2.9 0.3 2.0 3.0 5.9 1.9 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.2
Current Balance (% of GDP) 2.3 3.8 2.5 -0.4 -0.7 -2.4 -2.4 -2.4 -2.1 -1.7 -1.3 -1.0 -0.6 -0.4 -0.2 -1.4
Exchange Rate (vs US$), average 45.3 44.4 45.5 47.5 50.4 52.7 52.2 52.6 51.4 50.2 49.1 48.0 46.9 46.3 46.3 49.6
Exchange Rate (vs US$), EOP 45.9 44.6 47.2 49.8 49.9 52.7 53.1 51.9 50.8 49.7 48.5 47.4 46.4 46.3 46.3 49.3
General Government Balance (% of GDP) -2.0 -0.6 -0.9 -2.4 -2.2 -3.2 -2.5 -3.0 -2.9 -2.9 -2.8 -2.8 -2.8 -2.8 -2.8 -2.9
Short-term Interest Rates (%) 3.5 2.2 2.5 2.5 2.6 3.8 4.8 4.2 4.2 4.9 5.6 5.8 5.8 5.8 5.8 5.0
Long-term Interest Rates (%) 5.7 4.3 4.1 4.2 4.9 6.7 5.3 4.4 4.8 5.6 6.4 6.8 6.8 6.8 6.8 6.0

Working Population 2.2 2.0 2.0 1.9 1.9 1.8 1.8 1.7 1.7 1.6 1.6 1.5 1.5 1.5 1.5 1.6
Labour Supply 1.7 -0.3 2.2 3.8 -1.4 1.6 2.4 3.0 2.5 2.5 2.4 2.4 2.3 2.2 2.0 2.3
Participation Ratio (%) 65.8 64.5 64.6 65.8 63.7 63.6 64.0 64.8 65.4 65.9 66.5 67.0 67.5 67.9 68.3 66.1
Labour productivity 3.7 6.2 3.2 2.0 8.4 4.1 2.7 2.2 2.7 2.8 2.7 2.6 2.6 2.7 2.7 2.8
Employment 1.9 -0.1 2.8 4.7 -1.6 2.0 2.8 3.5 2.8 2.6 2.5 2.4 2.4 2.2 2.1 2.5

Output gap (% of potential GDP) 0.7 1.5 1.0 1.2 1.4 1.1 0.6 0.3 0.0 0.1 0.0 0.0 -0.1 -0.1 -0.1 0.2

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Country Economic Forecast | Philippines

Key Facts
Politics
Head of state: President Rodrigo DUTERTE
Head of government: President Rodrigo DUTERTE
Political system: Democracy
Date of next presidential election: 2022
Date of next legislative election: 2022
Currency: Philippine Peso (PHP), floating exchange rate

Long-term economic & social development


1980 1990 2000 2017*
GDP per capita (US$) 685.2 715.9 1039 2982
Inflation (%) 18.2 12.2 3.9 2.9
Population (mn) 47.4 61.9 78.2 105.3
Urban population (% of total) 37.5 47.0 46.1 46.7
Life expectancy (years) 63.7 66.4 68.8 70.8
Source : Oxford Economics & World Bank

Structure of GDP by output * 2017 or latest


2017 available year
Agriculture 9.7% Source : CIA Factbook
Industry 30.4% Location : Southeastern Asia, archipelago between the
Services 59.9% Philippine Sea and the South China Sea, east of Vietnam
Source : World Bank (CIA Factbook)

Long-term sovereign credit ratings & outlook Corruption perceptions index 2018
Foreign currency Local currency Score
Fitch BBB (Stable) BBB (Stable) Developed economies (average) 74.6
Moody's Baa2 (Stable) Baa2 (Stable) Emerging economies (average) 38.2
S&P BBB+ (Stable) BBB+ (Stable) Philippines 36.0
Emerging Asia 38.5

Source: Transparency International


Structural economic indicators Scoring system 100 = highly clean, 0 = highly corrupt
1990 1995 2000 2017*
Current account (US$ billion) -2.5 -3.2 -3.6 -2.1
Trade balance (US$ billion) -4.5 -9.8 -10.9 -40.2 Composition of goods & services exports 2018
FDI (US$ billion) 0.5 -0.4 1.5 7.0
2.6% 7.1%
Debt service (US$ billion) 3.6 5.4 7.1 11.1 0.1%
Debt service (% of exports) 27.6 16.3 22.9 11.4 22.1%
External debt (% of GDP) 69.0 53.1 72.1 23.4

Oil production (000 bpd) 4 3 1 13


Oil consumption (000 bpd) 235 327 354 398 3.9%
6.7%
Source : Oxford Economics / World Bank / EIA
52.9%

4.6%

Destination of goods' exports 2018


U.S. 15.7% Agricultural products Fuels and mining products
Japan 14.0% Manufactures Other goods exports
European Union 13.1% Transport Travel
Hong Kong 14.2%
Other commercial services Other services exports
Other 43.1%
Source : IMF DOTS Source : WTO

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Country Economic Forecast | Philippines

Overall risk for Philippines: 4.3/10

Factors affecting risk scores: Philippines


Overall risk: 4.3/10

2017 2018 2019 2020 2021 2022 2023


Market demand rating: 4.0/10
Domestic demand, % y/y 6.8 8.3 4.8 6.0 5.4 5.4 5.4
Government balance, % of GDP -2.2 -3.2 -2.4 -3.1 -3.0 -2.9 -2.8
Gross government debt, % of GDP 42.0 42.3 43.4 41.7 41.2 40.6 40.1
Policy interest rate, % 3.00 3.64 4.42 3.78 3.84 4.47 5.16
Domestic credit, % of GDP 66.3 69.1 71.3 73.1 74.7 76.3 77.7
Fixed investment, % of GDP 25.1 26.8 26.0 26.3 25.9 26.1 26.3
Output gap, % of GDP 1.4 1.1 0.6 0.3 0.0 0.1 0.0
Real GDP per capita, 2015 US$ 3168 3320 3457 3607 3760 3916 4068

Market cost rating: 5.0/10


Nominal unit wage costs, 2000=100 126.7 127.4 131.0 136.0 140.6 145.1 149.9
Real fuel imports % total imports 7.4 7.7 7.4 7.5 7.2 6.8 6.5
Energy use per unit of GDPPPP 61.2 57.5 53.8 50.1 46.4 42.7 38.9
Exchange rate, average, LCU per US$ 50.4 52.7 52.2 52.6 51.4 50.2 49.1
Output gap, % of GDP 1.4 1.1 0.6 0.3 0.0 0.1 0.0
Unemployment rate, % 5.7 5.3 5.0 4.6 4.3 4.2 4.1
Real GDP per capita, 2015 US$ 3168 3320 3457 3607 3760 3916 4068

Exchange rate rating: 2.7/10


Exchange rate, average, LCU per US$ 50.4 52.7 52.2 52.6 51.4 50.2 49.1
Exchange rate, avg, PPP, LCU per US$ 18.0 18.3 18.2 18.3 18.5 18.7 18.9
Current account of BOP, % of GDP -0.6 -2.3 -2.3 -2.3 -2.0 -1.6 -1.3
External debt, % of GDP 23.4 22.8 22.7 21.7 20.3 19.0 17.9
Policy interest rate, % 3.00 3.64 4.42 3.78 3.84 4.47 5.16
FX reserves, months of imports 8.5 8.0 8.2 7.8 8.0 8.3 8.4

Sovereign credit rating: 4.0/10


GDP, real, % y/y 6.7 6.2 5.6 5.8 5.6 5.5 5.2
GDP per capita, PPP, US$ 8090 8476 8827 9211 9600 10000 10388
Government balance, % of GDP -2.2 -3.2 -2.4 -3.1 -3.0 -2.9 -2.8
Gross government debt % of GDP 42.0 42.3 43.4 41.7 41.2 40.6 40.1

Trade credit rating: 6.0/10


GDP, real, % y/y 6.7 6.2 5.6 5.8 5.6 5.5 5.2
External debt, % of GDP 23.4 22.8 22.7 21.7 20.3 19.0 17.9
GDP per capita, PPP, US$ 8090 8476 8827 9211 9600 10000 10388

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