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Philippine Economic Briefing
2015 Accountancy WeekRegulators’ Forum
July 15, 2015
OutlineI. The World EconomyII. The Philippines’ Major Trading Partners:
Japan, U.S. and EuropeIII. Two Major Developments in Asia
A. China Losing Its Grip as Factory of the World
B. ASEAN IntegrationIV. The Philippine EconomyV. Choosing Candidates for 2016
World Economic OutlookGDP Growth
Countries 2013 2014Projections
2015 2016 2017
World Output 2.3% 2.6% 3.0% 3.3% 3.3%
USA 1.9% 2.4% 3.2% 2.4% 2.4%
Europe & Central Asia
-0.1% 2.4% 3% 3.6% 4.0%
Japan 1.3% 0.2% 1.2% 1.6% 1.2%
East Asia & Pacific
7.2% 6.9% 6.7% 6.7% 6.7%
Middle East & North Africa
3.6% 3.0% 3.3% 3.6% 3.9%
U.S. Quarterly GDP Growth
(2009-2015)
Headwinds:U.S. Debt & Bankruptcies
• In 2007 - $9 trillion• As of July 14, 2015- $18.31 trillion• Since Sept. 30, 2012 growing at the rate
of $2.15 billion per day.• US Debt /GDP: 105%• As of Dec. 2014, a total of 47 cities and
municipalities in the US 13 have filed for bankruptcies since Jan. 2010 (ex. Detroit, Vallejo, Stockton, San Bernardino, etc.)
Map of Cities and Municipalities who filed for Bankruptcy since 2010
6Cities, towns and counties are shown in red. Utility authorities and other municipalities are displayed in gray.
The City of Detroit became the largest city in U.S. history to file for bankruptcy in Nov. 2013 with a total debt/deficit of $18.5 Billion
World Economic OutlookGDP Growth
Countries 2013 2014Projections
2015 2016 2017
World Output 2.3% 2.6% 3.0% 3.3% 3.3%
USA 1.9% 2.4% 3.2% 2.4% 2.4%
Europe & Central Asia
-0.1% 2.4% 3% 3.6% 4.0%
Japan 1.3% 0.2% 1.2% 1.6% 1.2%
East Asia & Pacific
7.2% 6.9% 6.7% 6.7% 6.7%
Middle East & North Africa
3.6% 3.0% 3.3% 3.6% 3.9%
Crisis Situations In Some EU Members2015 Updates
Country Debt as % of GDP
Unemployment Rate
Portugal 130% 13%
Ireland 110% 9.7%
Italy 132% 12%
Greece 177% 26%
Spain 98% 23%
2015 UpdatesCountry Debt as %
of GDPUnemploym
ent Rate
Portugal 130% 13%Ireland 110% 9.7%Italy 132% 12%Greece 177% 26%Spain 98% 23%
Source: The New York Times
Timeline: Double Bankruptcy of the Greek
Economy• 2008 – Global economic crisis;• 2009 – Greece admits understating its
deficit figures for years raising red flags on the soundness of Greece’s finances;
• Spring, 2010 – Greece moved towards bankruptcy after it was shut out of borrowings from the financial markets;
• Late 2010 – IMF, European Central Bank and European Commission bails out Greece with a $264 billion loan
Timeline: Double Bankruptcy of the Greek
Economy• 2010 to 2015 – Greece implements
deep budget cuts, steep tax increases, streamlining of government, end tax evasion and tries to improve the business environment;
• 2015 – In spite of the $264 billion bail out package: a) GDP has shrunk by 25% in 5 years, b) unemployment rises to 26% and c) closure of cash-strapped banks
Timeline: Double Bankruptcy of the Greek
Economy• July 13, 2015 – Greece and its creditors
have reached an agreement for another bail out amounting to $96 billion in exchange for the reforms in VAT system, improve long-term viability of social security system, automatic spending cuts, and privatization of government assets estimated at $50 billion.
World Economic OutlookGDP Growth
Countries 2013 2014Projections
2015 2016 2017
World Output 2.3% 2.6% 3.0% 3.3% 3.3%
USA 1.9% 2.4% 3.2% 2.4% 2.4%
Europe & Central Asia
-0.1% 2.4% 3% 3.6% 4.0%
Japan 1.3% 0.2% 1.2% 1.6% 1.2%
East Asia & Pacific
7.2% 6.9% 6.7% 6.7% 6.7%
Middle East & North Africa
3.6% 3.0% 3.3% 3.6% 3.9%
Japanese Economy• Economy grew at an annualized
pace of 3.9% in Q1 of 2015;• Growth was heavily driven by a
temporary build up of inventories and business investments;
• The weakened yen is helping drive exports up;
• Tourism is on the rise
World Economic OutlookGDP Growth
Countries 2013 2014Projections
2015 2016 2017
World Output 2.3% 2.6% 3.0% 3.3% 3.3%
USA 1.9% 2.4% 3.2% 2.4% 2.4%
Europe & Central Asia
-0.1% 2.4% 3% 3.6% 4.0%
Japan 1.3% 0.2% 1.2% 1.6% 1.2%
East Asia & Pacific
7.2% 6.9% 6.7% 6.7% 6.7%
Middle East & North Africa
3.6% 3.0% 3.3% 3.6% 3.9%
Two Important Developments
in Asia
China is losing its grip as the factory of the world.a) Decrease in labor productivity;b) Increase in labor cost.
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Asian Labor CostsFactory workers’ wages in emerging Asia
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Asian Labor CostsFactory workers’ wages in emerging Asia
Implications of China Losing Its Manufacturing Crown
Foreign Manufacturers
In China
Low Labor Cost• Myanmar• Cambodia• Laos
Cost-Effective Manufacturers
• Philippines• Thailand• Vietnam• Indonesia
Sophisticated Manufacturers
• Singapore• Malaysia
Two Important Developments
in Asia 2015 ASEAN integration (Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam)
Implications of ASEAN Integration
Free flow of goods by eliminating import tariffs, facilitating trade, and enhancing trade agreements in place.
Implications of ASEAN Integration
Free flow of services across member countries particularly business and professional services, construction, distribution, education, environmental services, health care, maritime transport, telecommunications and tourism.
Implications of ASEAN Integration
Freer flow of investments; Integrated capital markets
Implications of ASEAN Integration
Freer flow of labor through mutual recognition agreements initially on seven professions, namely, medical, dental, nursing, accountancy, engineering, architectural services, and surveying.
•Labor mobility in ASEAN is already happening.
29
•However, the bulk of labor mobility in ASEAN is happening for non-skilled workers.
31
Skilled Labor Movement Have
been limited in the Ff. Areas:• Business visitors• Contractual service suppliers• Intra-company transferees
• Largely to send their personnel (professionals and executives) temporarily to other countries to provide services.
• The above are all covered under the Movement of Natural Persons (MNP) signed in 2012.
Benefits of Labor Mobility if Managed well• Migrants themselves in terms of higher
wages and opportunities to acquire skills and experience.
• Host countries by addressing labor shortages, boosting growth and knowledge transfers.
• Sending countries thru financial remittances and knowledge transfers.
The Philippine Economy
ROLLER COASTER RIDE
ROLLER COASTER RIDE
Inclusive growth?
Unemployment level – 6% - 7%
Underemployment – 17.5%
Poverty level – 24% - 19%
Not yet.
What influenced the growth- poverty reduction linkage
across Asia? (Habito ADBI Study, 2009)
•Quality of governance
•Public expenditures on health and education
•Contribution of agriculture to economic growth
Credit Rating Agency Date
Fitch Ratings March 2013
Standard & Poor’s May 2013
Japan Credit Rating Agency
May 2013
Moody’s Investors Service
Oct. 2013
Philippines Secures Investment
Grade Rating in 2013
GDP Growth5 year Ave. GDP Growth of 5.1%
6.8% for 2013
6.1% for 20145.2% for Q1 2015
Selected Economic Data
% of GDPDeficit 1.4% in 2013
0.6% in 2014
Debt 44.3% in 201345.4% in 2014
Inflation Rate
2.5% year to date
3% for 2013, 4.1% for 2014
Gross Int’l Reserves
(US$ Billion)US$80.86 B equivalent to 10.6 months of imports as of May 2015
Improvements in Ease in Doing
Business and Corruption Index World Bank Ranking in Ease in Doing
Business Index - from 133 in Year 2013 to 109 in Year 2014 and 95 in 2015 out of 189 countries;
Transparency International Corruption Perception Index - from 129 in Year 2011, 105 in Year 2012 and 94 in 2013, 85 in 2014 out of 177 countries.
Economic drivers for 2015 and onwards
• Gross capital formation has picked up
• While the 1Q 2015 started with a low level of infrastructure budget releases, this has picked up in the 2nd Q. Expected to be sustained till 2016.
• Remittances continue growth - $26.924 billion at the end of 2014 from $25.351 billion in 2013
• BPO Industry
BPO Industry(Voice & Non-voice)
BPO Industry major driver of real estate industry development and consumer purchases including food purchases 24/7.
2010
2011 2012 2013
2014
2016
$ Values $9 B $11 B $13.5 B $15.5B $18.4 B
$25 B
Employ-ment
530,000
640,000
790,000 900,000
1.03 million
1.3 million
Economic drivers for 2015 and onwards
• Gross capital formation has picked up • Government spending shifts to high gear.• Remittances continue its growth. Estimated at
$25.5illion in 2014• BPO Industry• China’s waning appeal. Industrialization
prospects?
Economic drivers for 2015 and onwards • Gross capital formation has picked
up • Government spending shifts to high
gear ,• Remittances continue growth.
Estimated at $25.5 billion in 2014• BPO Industry• China’s waning appeal.
Industrialization prospects? • Credit rating upgrade to investment
grade
Gaming investments: Philippines as the new Macau?
Economic drivers for 2015 and onwards
Gaming Investments
SM GroupSino-American Gaming Investment GroupMacau Resources GroupCaesar’s Entertainment Corp.Others
Gaming investments: Philippines as the new Macau?
Food manufactures - driven by growing population, rising incomes; Halal products (with growing Islamic markets worldwide)
The “Pot of Gold” at the bottom of the Philippine population pyramid;
Economic drivers for 2015 and onwards
Forecasts: 2015
• Prices as reflected in the Inflation rate
➔More of the same (2-4%) • Jobs: ➔Marginal improvement at 93-94% ➔Unemployment (6.5%)➔Underemployment (18%)• Income: ➔Prudent GDP growth projection (for
planning purposes): 6.0%
GDP Projections for the Philippines
2015 2016ADB 6.4% 6.3%World Bank 6.5% 6.5%IMF 6.6% 6.4%OECD 6.2% 6.2%NEDA/BSP 7-8% 7.5-8.5%
GDP Projections for the Philippines
2015 2016ADB 6.4% 6.3%World Bank 6.5% 6.5%IMF 6.2% 6.4%OECD 6.2% 6.2%NEDA/BSP 6-6.5% 7.5-8.5%
Choosing The Right Candidate
for 2016
Gloria Macapagal Arroyo 2001 - 2010
Benigno “Noynoy” C. Aquino Jr. 2010 - Present
Ferdinand E. Marcos1965-1986
Ma. Corazon “Cory” C. Aquino
1986 - 1992
Fidel V. Ramos 1992 - 1998
Joseph. E. Estrada 1998 - 2001
AGSB Mission“ We believe that expertise without integrity is empty,
integrity without expertise is ineffectual, and expertise and
integrity without service is irrelevant.”
Candidates’ Profile Matrix
Jejomar Binay
Mar Roxas Grace Poe
Expertise
Integrity
Service
Ave. Score
Score: 4 = Major Strength 3 = Minor Strength
2 = Minor Weakness1 = Major Weakness
Candidates’ Profile Matrix
Rodrigo Duterte
Vilma Santos
Joseph Estrada
Expertise
Integrity
Service
Ave. Score
Score: 4 = Major Strength 3 = Minor Strength
2 = Minor Weakness1 = Major Weakness
“ In looking for people to hire, you look for three qualities: Integrity, Intelligence and Energy. And if you do not have the first, the other two will kill you.”
- Warren Buffet
Thank You!