Report on Economic and Financial Developments - bsp.gov.ph · The BSP maintains monetary policy settings in . Q4 2017. ... (TRAIN) bill on 19 December ... lower than the 66 bps in

Report on Economic and Financial Developments Fourth Quarter 2017

B A N G K O S E N T R A L N G P I L I P I N A S

Report on Economic and Financial Developments Fourth Quarter 2017

Table of Contents

Executive Summary 1

Introduction 4 Real Sector

Aggregate Supply and Demand 5 Labor and Employment 7

Fiscal Sector National Government Cash Operations 8 Monetary Sector Prices 9 Domestic Liquidity 10 Monetary Policy Developments 11 Domestic Interest Rates 12 Financial Sector Banking System 13 Banking Policies 16 Capital Market Reforms 16

Stock Market 16 Bond Market 17 Credit Risk Assessment 19 Payments and Settlements System 20 External Sector Balance of Payments 21 International Reserves 25 Exchange Rate 25 External Debt 27 Foreign Interest Rates 28 Global Economic Developments 29 Financial Condition of the BSP Balance Sheet 31 Income Statement 32 Conclusion, Challenges and Future Policy Directions 32 Annexes 36 List of Acronyms, Abbreviations, and Symbols 43 Statistical Tables

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Executive Summary Philippine economy posts 6.6 percent GDP growth in Q4 2017. The Philippine economy sustained its strong performance in Q4 2017 amid a challenging global and domestic economic landscape. Real Gross Domestic Product (GDP) expanded by 6.6 percent during the review period. Output growth was generally broad-based as all major sectors of the economy performed positively. On the supply side, the services and industry sectors continued to drive growth, helped by the positive outturn in agriculture sector. On the demand side, growth was supported by household and public spending alongside investments. The robust GDP outturn brought the full year 2017 growth of the Philippine economy to 6.7 percent, well-within the National Government’s (NG) target for 2017. Labor market conditions improve. Labor and employment conditions showed improvement based on the preliminary results of the October 2017 Labor Force Survey (LFS). The number of employed persons increased by 3.4 percent to 41.5 million during the said survey round from 40.2 million in the July 2017 survey round due to the robust expansion in the services sector. The unemployment rate continued to decline to 5.0 percent, 0.6 percentage points lower than the previous survey round. Meanwhile, underemployment rate dropped to 15.9 percent from 16.3 percent, the lowest recorded since 2006. NG registers lower deficit. The cash operations of the NG yielded a deficit of P137.6 billion in Q4 2017, slightly lower than the year-ago deficit level of P139.7 billion. The NG’s fiscal deficit for Q4 2017 was equivalent to 3.1 percent of GDP, lower than the year-

ago level of 3.4 percent. Total NG revenues for Q4 2017 reached P671.7 billion, 22.3 percent higher than the Q4 2016 level of P549.2 billion. Meanwhile, total NG expenditures in Q4 2017 reached P809.2 billion, 17.5 percent higher than the P688.9 billion expenditures in Q4 2016.

Inflation increases in Q4 2017. Headline inflation for Q4 2017 increased to 3.3 percent from the quarter-ago rate of 3.1 percent. This brought the full year average inflation to 3.2 percent, well-within the NG’s announced target range of 3.0 percent ± 1.0 percentage point (ppt) for 2017. Inflation pressures in Q4 2017 were traced mainly to upward adjustments in prices of domestic petroleum products as well as higher price increases of selected service-related consumer price index (CPI) items. Domestic liquidity remains adequate. Money supply or M3 grew by 11.9 percent year-on-year (y-o-y) as of end-December 2017 to P10.6 trillion, slightly slower than the 14.8-percent expansion as of end-September 2017. The increase in M3 was driven largely by the 13.4-percent y-o-y growth in domestic claims or credits to the economy in December 2017. Credits extended to the private sector rose by 15.7 percent, supported by the sustained increase in bank lending. The BSP maintains monetary policy settings in Q4 2017. The BSP decided to maintain the key policy interest rate at 3.0 percent for the overnight reverse repurchase (RRP) facility. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement (RR) ratios were likewise left unchanged. The BSP’s decision was based on its assessment that the outlook for the inflation environment has been broadly unchanged. The BSP also recognized that the overall balance of risks to the inflation outlook remains tilted toward the upside due in part to possible higher crude oil prices. At the same time, geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continued to pose downside risks to the near-term prospects for global economic growth. Domestic interest rates show varying trends. Primary markets showed strong preference for shorter-tenored government securities (GS) amid geopolitical concerns overseas in Q4 2017. Meanwhile, the secondary

Fourth Quarter 2017 Report on Economic and Financial Developments | 1

market yields of actively traded GS trended upward in end-December 2017 relative to end-September 2017 levels. The US Federal Reserve policy rate hike on 13 December 2017 supported the rise in the yields of all maturities. The banking system remains sound and resilient. The total resources of the banking system grew by 11.5 percent to P15.5 trillion as of end-December 2017 from P13.9 trillion in the same period last year. Outstanding loans of UKBs, net of banks' RRP placements with the BSP, grew by 19.0 percent, y-o-y as of end-December 2017. The Philippine banking system’s gross non-performing loan (GNPL) ratio improved to 1.7 percent as of end-December 2017 relative to the year-ago ratio of 1.9 percent, as its NPL coverage ratio reached 120.7 percent as of end-December 2017. The capital adequacy ratios as of end-September declined marginally to 15.0 percent and 15.7 percent on solo and consolidated bases, respectively, but remained well above the 10.0-percent regulatory threshold of the BSP and 8.0-percent minimum by international standards. Philippine stock exchange records gains. The Philippine Stock Exchange index (PSEi) rose by 4.3 percent, quarter-on-quarter (q-o-q), to average 8,357.65 index points in Q4 2017. The signing into law (Republic Act No. 10963) of the Tax Reform for Acceleration and Inclusion (TRAIN) bill on 19 December 2017 and Fitch Ratings’ latest rating upgrade for the Philippines in December helped boost investor sentiments. Said factors offset the negative impact of heightened geopolitical tensions arising from North Korea’s continued missile tests and Catalonia’s separatist drive in Spain.

Debt spreads narrow. Debt spreads narrowed for the most part of Q4 2017 due to positive investor sentiments. As of end-December, the Philippines’ 5-year sovereign credit default swaps (CDS) stood at 59 basis points (bps), lower than the 66 bps in end-Q4 2017. It has remained lower than Indonesia’s 85 bps while higher than Malaysia’s 58 bps and Thailand’s 46 bps in the current quarter. BOP position reverses to a surplus. The country’s balance of payments position (BOP) rebounded in Q4 2017, yielding a surplus of US$505 million, after

recording a deficit of US$662 million in Q3 2017. The surplus in Q4 2017 was also a reversal from the US$2.1 billion deficit registered in the same quarter a year ago. This positive outcome was a result primarily of the net inflows (or net borrowing by residents from the rest of the world) in the financial account even as the current account posted a deficit. In particular, the financial account balance reversed to net inflows of US$2 billion from net outflows of US$1.1 billion due to net inflows of direct and portfolio investments which more than offset the net outflows recorded in the other investment account. By contrast, the current account registered a higher deficit of US$3.3 billion due to the widening trade-in-goods deficit. Gross international reserves remain adequate. The country’s gross international reserves (GIR) stood at US$81.6 billion in end-December 2017, higher than the US$81.0 billion in end-September 2017. At this level, the GIR was adequate to cover 8.0 months’ worth of imports of goods and payments of services and primary income. It was also equivalent to 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity. The increase in reserves was due mainly to the inflows from the BSP’s investments abroad, revaluation adjustments on its gold holdings from the increase in the price of gold in the international market, and lesser payments made by the NG and the BSP for their maturing foreign exchange (FX) obligations. External debt remains manageable. External debt stood at US$73.1 billion as of end-December 2017, up by US$730 million (or 1.0 percent) than the end-September 2017 level of US$72.4 billion. The growth in the debt level during the quarter was due largely to the US$1.3 billion increase in the holdings of Philippine debt papers by non-residents, reflecting sustained investor interest in the country.

The peso depreciates slightly against the US dollar in Q4 2017. For the last quarter of 2017, the peso averaged ₱50.93/US$1, depreciating slightly against the US dollar by 0.19 percent from the previous quarter’s average of ₱50.84/US$1. The peso’s depreciation during the review period may be attributed to expectations of stronger US economic growth and speculations over the top post in the US Federal

2 | Fourth Quarter 2017 Report on Economic and Financial Developments

Reserve Board. Depreciation pressures were, however, offset partly by optimism over the country’s stronger-than-expected third quarter GDP growth and the passage of the TRAIN bill into law. On a y-o-y basis, the peso depreciated by 3.59 percent relative to the ₱49.11/US$1 average in Q4 2016. Nevertheless, sustained inflows of remittances, foreign direct investments (FDI), BPO and tourism receipts, the ample level of the country’s GIR, and the country’s robust economic growth continued to provide stability to the peso. Global economic activity continues to firm up. Economic activity in key economies posted solid growth in Q4 2017. In the US, the improvement in economic activity resulted in 2.5 percent growth in Q4 2017. The increase in US real GDP was led by positive contributions from personal consumption expenditure, residential and non-residential fixed investments, exports, and local and federal government expenditure. Eurozone economic activity grew by 2.7 percent in Q4 2017 due to positive business sentiments. Most emerging economies in Asia remained on track with solid output growth performances that were driven by strong consumption and investment.


Introduction

The Philippine economy grew by 6.6 percent in Q4 2017, resulting to a full year 2017 growth 6.7 percent, well-within the NG’s target for the year. Output growth was generally broad-based as all major sectors of the economy performed positively. On the supply side, the services and industry sectors continued to drive growth, helped by the positive outturn in agriculture sector. On the demand side, growth was supported by household and public spending alongside investments. Headline inflation increased to 3.3 percent from the quarter-ago rate of 3.1 percent. This brought the full year average inflation to 3.2 percent, well within the NG’s announced target range of 3.0 percent ± 1.0 ppt for 2017. Monetary policy settings were maintained in Q4 2017 based on BSP’s assessment that the outlook for the inflation environment has been broadly unchanged. The BSP also recognizes that the overall balance of risks to the inflation outlook remains tilted toward the upside due in part to possible higher crude oil prices and potential second-round effects. The Philippine banking system remained solid and resilient in Q4 2017. Bank lending grew by 19.0 percent as of end-December 2017. This was accompanied by adequate bank capitalization and loan exposure coverage. In terms of external payments position, the country’s external buffers remained adequate, with reserves amounting to US$81.6 billion as of end-December 2017. Remittances and receipts from business process outsourcing (BPO) continued to support the country’s external position. At the same time, external debt remained manageable, with a debt profile composed largely of medium- to long-term maturities. Looking ahead, external headwinds coming mainly from key advance economies’ ongoing shift toward policy normalization may have financial and real-sector impact on the domestic economy. Nevertheless, the country’s solid macroeconomic

fundamentals and built-in buffers as well as sufficient policy space to pursue appropriate and timely response to possible shocks should mitigate any adverse spillovers and keep the economy on track toward achieving its growth objectives.


Real Sector Aggregate Supply and Demand The Philippine economy sustained its strong performance in Q4 2017 amid a challenging global and domestic economic landscape. Real GDP expanded by 6.6 percent during the review quarter (Table 1).

Domestic economy sustains strong performance in Q4 2017 Output growth in Q4 2017 has been generally broad-based as all major sectors of the economy performed positively. On the supply side, the services and industry sectors continued to drive growth, helped by the positive outturn in the agriculture sector. On the demand side, growth was supported by household and public spending alongside investments. The robust Q4 2017 GDP outturn brought the full year 2017 growth of the Philippine economy to 6.7 percent, well-within the NG’s target for 2017 of 6.5 percent- 7.5 percent. Chart 1. Gross Domestic Product and Gross National Income annual growth rate in percent; at constant 2000 prices

GDP by industry On the production side, the services sector continued to be the principal growth driver of the domestic economy as it accounted for 3.8 percentage points (ppts) of the fourth quarter growth print. This was amid the slower growth posted by the sector at

6.8 percent compared to its year-ago and quarter-ago growth levels which were both at 7.2 percent. The dominance of the services sector was fuelled by the continued expansion of the trade and repair of motor vehicles, motorcycles, personal and household goods (7.9 percent); real estate, renting and business activities (6.6 percent); financial intermediation (5.9 percent); and transportation, storage and communication (5.4 percent). These enabled the retail trade sub-sector to pitch in 1.4 ppts to the 3.8 ppts total contribution of the services sector while the real estate sub-sector supplied 0.7 ppts. Meanwhile, both the financial intermediation and transportation sub-sectors added 0.8 ppts to the services sector growth in Q4 2017. Chart 2. Gross Domestic Product, by Industry annual growth rate in percent; at constant 2000 prices

The industry sector continued to be a reliable source of growth for the economy. The sector registered a 7.3 percent expansion in Q4 2017, albeit lower than the year-ago and quarter-ago growth rate of 7.9 percent. The manufacturing sub-sector, which expanded by 8.8 percent during the review quarter served as the growth anchor of the industry sector as it accounted for 2.1 ppts of the 2.5 ppts contribution of the sector to the Q4 2017 GDP outturn. Among the manufacturing products that were highly in demand during the quarter included: furniture and fixtures (which grew by 32.9 percent); non-metallic mineral products (26.4 percent); fabricated metal products (22.8 percent); and basic metal industries (21.0 percent). The agriculture sector decelerated in Q4 2017 following four consecutive quarters of positive performance. The sector grew by 2.4 percent, slower than the average growth rate of the sector for the

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Source: Philippine Statistics Authority (PSA)

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2014 2015 2016 2017

Agriculture, Hunting, Forestry and FishingIndustryServices

Source: PSA


preceding three quarters of 4.6 percent. The slowdown in the agriculture sector may be attributed largely to the lower output registered by its major crops, particularly palay (which posted a 4.4 percent growth from an average of 12.8 percent in the past three quarters). It may be noted that palay alone accounted for about 31.0 percent of the total agriculture output in Q4 2017. Other major crops which registered lower yields during the review quarter were corn (contracted further from 2.7 percent in Q3 2017 to 5.6 percent in Q4 2017), sugarcane (from growing at an average of 110.3 percent in the past two quarters to 14.6 percent in Q4 2017), and rubber (from growing at an average of 14.9 percent in the past three quarters to 8.9 percent in Q4 2017). On a positive note, lending support to the agriculture sector in Q4 2017 were the robust performance of some major agriculture accounts such as poultry which grew by 4.7 percent (with a 14.5 percent share to the total agriculture output in Q4 2017), agriculture activities and services and livestock which grew by 4.3 percent (with a 9.5 percent share), and livestock which expanded by 1.8 percent (with a 16.4 percent share). It is worth noting that this was the first time since 2012 that the agriculture sector recorded four consecutive quarters of positive growth. Given these latest developments in the agriculture sector, the government continues to recognize the need to push for more aggressive reforms in the sector particularly in improving the investment climate by enabling farmers and farm operators to decide based on market and geophysical conditions, among others.11

GDP by expenditure On the expenditure side, household consumption remained the main contributor of growth. The expansion in GDP was also supported by the double-digit growth posted by government spending and exports. In line with the government’s commitment to fast-track its expenditure program, government spending increased by 14.3 percent compared to 4.5 percent in the same period in 2016 and 8.3 percent in the previous quarter, making it the sector’s highest growth level since Q1 2016. This enabled public expenditure to contribute 1.2 ppts to the 6.6 percent

11 http://www.neda.gov.ph/

GDP growth in Q4 2017 (Table 1a). Much of this progress was on the back of the intensified move of the government to release funds to (i) assist the victims of typhoons as well as those affected by the Marawi siege; (ii) fund public scholarship; and (iii) fund health expenditure programs, among others.12

The other major driving force in the domestic economy during the review quarter was the gradual improvement in external demand as reflected in the uninterrupted double-digit growth in exports since Q4 2016. The sector posted an 18.6 percent growth in Q4 2017, higher than its year-ago and quarter-ago growth levels of 13.4 percent and 17.7 percent, respectively. Exports growth during the quarter in review was driven mainly by the increase in outbound shipments of manufactured goods such as electronics components, metal components, petroleum products, and copper, among others. The recent resurgence in global trade has boosted optimism globally and has improved prospects for the country’s exports sector. Meanwhile, imports also recorded double-digit growth at 17.5 percent due to the surge in imports of capital goods as a result of the government’s infrastructure program. Meanwhile, household consumption and capital formation continued to take the lead in steering growth during the review quarter. Household spending rose by 6.1 percent, faster than its average growth of 5.7 percent in the first three quarters of 2017. Providing support to the sector was the increase in the consumption of food and non-alcoholic beverages (comprising 41.0 percent of the total household consumption), which grew by 5.6 percent in Q4 2017 from posting a 4.3 percent growth in the previous quarter, the slowest since Q3 2014. Notable increase in household spending in Q4 2017 relative to the previous quarter was also observed on the following items: housing and utilities (9.5 percent from 6.3 percent), recreation and culture (5.3 percent from 0.7 percent), and communication (6.0 percent from 5.1 percent). Capital formation stabilized in Q4 2017 as it posted an 8.2 percent growth, albeit lower than in the same period last year and in the previous quarter when it posted a 14.7 percent and 8.7 percent expansion, respectively. Nonetheless, it was a major

12Ibid.


http://www.neda.gov.ph/

contributor to the Q4 2017 output growth as it added 2.4 ppts of the said growth. The two principal components of capital formation, namely, fixed capital and durable equipment registered robust growth in Q4 2017. Fixed capital formation grew by 9.3 percent and durable equipment by 12.1 percent compared to their quarter-ago growth levels of 8.0 percent and 10.0 percent, respectively. Public construction activities have gathered steam during the quarter, demonstrated by the 25.1-percent expansion of the sub-sector. This partially offset the contraction in private construction during the review period. Chart 3. Gross Domestic Product, by Expenditure annual growth rate in percent; at constant 2000 prices

Labor and Employment Labor and employment conditions showed improvement based on the preliminary results of the October 2017 Labor Force Survey (LFS).13 The number of employed persons increased by 3.4 percent to 41.5 million during the said survey round from 40.2 million in July 2017 survey round due to the robust expansion in the services sector (Table 2).

Labor market conditions improve The services sector posted the highest increase in the number of employed persons at 6.0 percent (October 2017 versus July 2017) due mainly to the additional 679,000 workers in wholesale and retail trade, repair of motor vehicles and motorcycles; 189,000 workers in transportation and storage; and 149,000 workers in administrative and support services activities sub-sectors.

13 October 2017 LFS was released on 12 December 2017.

Employment in the agriculture sector notably improved by 2.4 percent during the survey round due to the 306,000 additional workers in agriculture, hunting and forestry which offset the reduction of 60,000 workers in fishing and aquaculture. Conversely, employment in the industry sector declined by 2.7 percent. The employment losses in the construction sub-sector (335,000 workers) pulled down employment gains of 121,000 workers in the manufacturing sub-sector. Of the total employed persons, 57.0 percent were in the services sector, 25.0 percent in the agriculture sector, and 18.1 percent in the industry sector. In the October 2017 LFS, employment in all classes of workers exhibited gains. Those in the wage and salary workers category had 317,000 additional workers mainly comprised of those who worked in private establishments. The number of self-employed and unpaid family workers rose by 455,000 and 398,000, respectively. On the number of hours worked, employed persons who worked on a full-time basis increased by 2.4 percent and those who worked on a part-time basis increased by 5.3 percent. Underemployment rate dropped to 15.9 percent from 16.3 percent (October 2017 LFS versus July 2017 LFS), the lowest recorded since 2006, as quality employment has been gained with the 14.5 percent decrease in invisibly underemployed persons (i.e., those working in jobs where their skills are not adequately utilized14) during the survey round. The unemployment rate continued to decline to 5.0 percent in October 2017 LFS, 0.6 percentage points lower than the previous survey round. Most of the unemployed persons were male (64.2 percent or 1.4 million), between 15 to 24 years of age (43.9 percent or 961,000), and have junior high school education (42.9 percent or 928,000).

14 Source: Organization for Economic Co-operation and Development

(OECD) Glossary

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Source: PSA


Chart 4. Unemployment and Underemployment Rates in percent

The labor force participation rate (LFPR)15 in the October 2017 LFS was at 62.1 percent, higher compared to the 60.6 percent in July 2017. The rise in LFPR could be attributed to more women and young persons between ages 15 to 34 years who are at work.

Fiscal Sector National Government Cash Operations The cash operations of the NG yielded a deficit of P137.6 billion in Q4 2017, slightly lower than the year-ago deficit level of P139.7 billion. The NG’s fiscal deficit for Q4 2017 was equivalent to 3.1 percent of GDP, lower than the year-ago level of 3.4 percent (Table 3).

NG cash operations yield a lower deficit Total NG revenues for Q4 2017 reached P671.7 billion, 22.3 percent higher than the Q4 2016 level of P549.2 billion. The total revenues as a share of GDP was recorded at 15.1 percent in Q4 2017, higher than the comparable 2016 outturn of 13.4 percent of GDP. The y-o-y increase in revenues was due mainly to improved collections by the Bureau of Customs (BOC)

15 Labor Force Participation Rate is computed by dividing the total number of persons in the labor force by the total population 15 years old and above.

and Bureau of Internal Revenue (BIR) by 24.0 percent and 19.0 percent, respectively. Tax collections, which constituted 91.1 percent of total revenues, amounted to P611.8 billion, 20.5 percent higher than the comparable figure a year-ago. Non-tax revenues, which consisted mainly of collections made by the Bureau of the Treasury (BTr), likewise increased by 44.7 percent y-o-y. Meanwhile, total NG expenditures in Q4 2017 reached P809.2 billion, 17.5 percent higher than the P688.9 billion expenditures in Q4 2016. Relative to the size of the economy, total NG disbursements was recorded at 18.2 percent of GDP in Q4 2017, an increase from the previous year’s 16.8 percent ratio. The y-o-y expansion in expenditures can be attributed mainly to the increase in maintenance and infrastructure spending by 10.8 percent and 15.4 percent, respectively.16 Likewise, allotment and capital transfers to local government units (LGUs) as well as for personnel services and subsidiaries to government-owned and controlled corporations (GOCCs) increased during the quarter. Chart 5. Cash Operations of the National Government in billion pesos

Source: Bureau of the Treasury

Netting out the interest payments from total expenditures, the resulting primary deficit amounted to P76.0 billion, representing 1.7 percent of GDP during the review quarter. In terms of financing the deficit, the NG incurred net borrowings in Q4 2017 of P209.1 billion coming mainly from domestic sources.

16 Department of Budget and Management (DBM) Assessment Report on National Government Disbursement Performance as of December 2017.

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Source: Labor Force Survey - Philippine Statistics Authority


Fiscal discipline has generated sufficient fiscal space which can be allocated to accelerate infrastructure development. The need to address infrastructure gaps is a top priority for the country to increase productive capacity and competitiveness. The government is pursuing massive buildup in infrastructure and increase infrastructure spending over the medium term.

Monetary Sector

Prices Headline inflation. Headline inflation for Q4 2017 increased to 3.3 percent17 from the quarter- and year-ago rates of 3.1 percent and 2.5 percent, respectively (Table 4). This brought the full year average inflation to 3.2 percent, well within the NG’s announced target range of 3.0 percent ±1.0 ppt for 2017.

Headline inflation increases slightly

Inflation pressures in Q4 2017 were traced mainly to upward adjustments in prices of domestic petroleum products as well as higher price increases of selected service-related CPI items. Core inflation. Core inflation, which measures generalized price pressures by excluding volatile items such as food and energy, was unchanged at 3.1 percent in Q4 2017. In terms of the BSP-computed alternative measures for core inflation, the weighted median measure was likewise unchanged at 1.8 percent. Meanwhile, trimmed mean and net of volatile items measures of core inflation were slightly higher at 2.5 percent (from 2.3 percent) and 2.7 percent (from 2.4 percent), respectively.

17 It should be noted that prices for Marawi City were imputed using data from sample municipalities of Lanao del Sur for comparability.

Table A. Alternative Core Inflation Measures quarterly averages of year-on-year change

Food inflation was steady in Q4 2017 as prices of selected agricultural products such as, corn, meat, and fish accelerated due to some tightness in domestic supply brought about by weather disturbances during the quarter. At the same time, the higher demand during the holiday season also further contributed to the price increase. However, slower price adjustments for rice, milk, cheese, and eggs as well as fruit and vegetables tempered the rise in food inflation. Inflation of sugar, jam, and honey also remained negative for the third consecutive quarter in Q4 2017. Inflation for non-food went up in Q4 2017 to 3.1 percent from 2.7 percent in Q3 2017. Following the upward trend in global oil prices, higher pump prices of domestic petroleum products during the quarter led to higher y-o-y inflation for operation of personal transport equipment. Moreover, electricity rates increased in Q4 2017 with higher cost of power from the Wholesale Electricity Spot Market (WESM).

QuarterOfficial

Headline Inflation

Official Core Inflation

Trimmed Mean 1

Weighted Median 2

Net of Volatile Items 3

2014 4.1 3.0 3.5 2.9 2.6Q1 4.1 3.0 3.3 2.6 2.8Q2 4.4 3.0 3.6 3.2 2.6Q3 4.7 3.3 3.8 3.1 2.8Q4 3.6 2.7 3.3 2.7 2.4

2015 1.4 2.1 1.9 1.9 1.8Q1 2.5 2.5 3.0 3.0 2.3Q2 1.7 2.2 2.1 2.2 1.9Q3 0.6 1.6 1.3 1.2 1.5Q4 1.0 1.8 1.3 1.3 1.5

2016 1.8 1.9 1.6 1.8 1.6Q1 1.1 1.6 1.2 1.3 1.3Q2 1.5 1.7 1.5 1.7 1.3Q3 2.0 2.0 1.8 2.1 1.7Q4 2.5 2.5 1.9 1.9 2.0

2017 3.2 2.9 2.4 1.9 2.4Q1 3.2 2.7 2.2 1.9 2.2Q2 3.1 2.9 2.4 1.9 2.2Q3 3.1 3.1 2.3 1.8 2.4Q4 3.3 3.1 2.5 1.8 2.7

1 The trimmed mean represents the average inflation rate of the (weighted) middle 70 percentin a lowest-to-highest ranking of year-on-year inflation rates for a l l CPI components .2 The weighted median represents the middle inflation rate (corresponding to a cumulative CPIweight of 50 percent) in a lowest-to-highest ranking of year-on-year inflation rates .3 The net of volati le i tems method excludes the fol lowing i tems: bread and cerea ls , meat, fi sh,frui t, vegetables , gas , sol id fuels , fuels and lubricants for personal transport equipment, andpassenger transport by road, which represents 39.0 percent of a l l i tems. The series has been recomputed us ing a new methodology that i s a l igned with PSA's method of computing theofficia l core inflation, which re-weights remaining i tems to comprise 100 percent of the corebasket after excluding non-core i tems. The previous methodology reta ined the weights of volati le i tems in the CPI basket whi le keeping thei r indices constant at 100.0 from month to month.Source: PSA, BSP estimates


Chart 6. Food and Non-Food Inflation in the Philippines (2006=100) in percent

In terms of geographical location, inflation rate in the National Capital Region (NCR) rose further to 4.8 percent from 4.2 percent from the previous quarter (Table 4A). Higher NCR inflation in Q4 2017 was attributed mainly to oil-related CPI items. Inflation in NCR of certain key food items like fish, meat, as well as oils and fats went up but was more than offset by slower increases in the prices of vegetables, milk, cheese, and eggs while inflation outturns for rice and fruit posted in the negative territory rates during the quarter. Non-food inflation increased significantly to 5.0 percent (from 3.7 percent) in Q4 2017 as increasing global prices of oil were also reflected in the higher inflation outturns for operation of personal transport equipment. Inflation of selected non-food items, notably recreation and cultural services as well as catering services also increased. Inflation in areas outside NCR (AONCR) reached 2.9 percent from 2.8 percent in the previous quarter (Table 4B). The uptick was due to higher prices of selected food and non-food items. Food inflation went up as prices of key agricultural products such as corn, meat, and fish posted higher outurns during the quarter. Likewise, alcoholic beverages and tobacco inflation rose in Q4 2017. At the same time, inflation for electricity, gas, and other fuels as well as operation of personal transport equipment accelerated due to upward adjustments in domestic petroleum products amid rising imported crude oil prices. Inflation for services relating to outpatient and postal services also increased.

Chart 7. Inflation Rate (2006=100) in percent

Domestic Liquidity18 Money supply or M3 grew by 11.9 percent y-o-y as of end-December 2017 to P10.6 trillion, slightly slower than the 14.8-percent expansion as of end-September 2017 (Table 5).

Domestic liquidity remains ample

The increase in M3 was driven largely by the 13.7-percent y-o-y growth in domestic claims or credits to the economy in December 2017. Credits extended to the private sector rose by 16.1 percent, supported by the sustained increase in bank lending. Meanwhile, net claims on the central government grew by 2.0 percent, reflecting mainly the proceeds from the offering of Retail Treasury bonds (RTBs) during the quarter. Table B. Domestic Liquidity (M3)

18The indicators used for money supply are: M1 (or narrow money), comprised of currency in circulation and demand deposits; M2, composed of M1 plus savings and time deposits (quasi-money); M3, consisting of M2 plus deposit substitutes; and M4, consisting of M3 plus foreign currency deposits.

Source: PSA Source: PSA

Source: BSP


Net foreign assets (NFA) in peso terms rose by 2.2 percent y-o-y in December 2017. The BSP’s NFA position continued to expand during the month on the back of robust FX inflows coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts, and foreign portfolio investments. The NFA of banks also expanded but at a slower pace as growth in banks’ foreign assets eased on account of lower interbank loans and deposits with other banks. Meanwhile, the growth of M4, a broader concept of domestic liquidity comprising broad money liabilities and foreign currency deposits of residents, decelerated to 11.4 percent y-o-y in December 2017 compared from the 15.2-percent growth in September 2017.

Monetary Policy Developments During the monetary policy meetings on 9 November and 14 December, the BSP decided to maintain the key policy interest rate at 3.0 percent for the overnight reverse repurchase or RRP facility. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The RR ratios were likewise left unchanged.

The BSP maintains monetary policy settings during the quarter

The BSP’s decision was based on its assessment that the outlook for the inflation environment had been broadly unchanged. Latest baseline forecasts remain within the target range of 3.0 percent ± 1 percentage point for 2018-2019. Inflation expectations also continue to be firmly anchored to the target over the policy horizon.

Chart 8. BSP Policy Rates in percent

The BSP also recognizes that the overall balance of risks to the inflation outlook remains tilted toward the upside due in part to possible higher crude oil prices. While there may be potential transitory effects on consumer prices from the proposed tax reform program, various mitigation measures and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term. Meanwhile, the proposed reforms in the rice industry involving the replacement of quantitative restrictions with tariffs and the deregulation of rice imports could serve to temper inflation. At the same time, geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to the near-term prospects for global economic growth. Nonetheless, the Monetary Board emphasized that prospects for domestic economic activity are likely to remain firm owing to buoyant consumer and business sentiment and ample liquidity. Moreover, as credit continues to expand in line with output growth, the Monetary Board remains watchful over evolving liquidity and credit conditions and their implications for price and financial stability. With these considerations, the BSP believes that prevailing monetary policy settings should be kept unchanged. Nevertheless, the BSP will remain vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure that future inflation remains consistent with the medium-term target while being supportive of sustainable economic growth.

Source: BSP


Domestic Interest Rates Treasury bill (T-bill) rates in the primary markets in Q4 2017 showed strong preference for shorter-tenored GS amid geopolitical concerns overseas.

Primary market interest rates fell across the board The 91-day, 182-day, and 364-day T-bill rates in the primary market fell to 2.03 percent, 2.50 percent and 2.88 percent, respectively, in Q4 2017 from the Q3 2017 rates of 2.13 percent, 2.55 percent and 2.94 percent, likewise respectively (Table 6).

Yields of secondary market GS track different movements Meanwhile, the secondary market yields of actively traded GS trended upward in end-December 2017 relative to end-September 2017 levels. The US Federal Reserve policy rate hike on 13 December 2017 supported the rise in the yields of all maturities, ranging from 10.62 bps (5-year) to at most 109.01 bps (10-year). Chart 9. Yield Curve of Government Securities in percent

Source: BSP – Department of Economic Statistics (DES)

The time deposit, lending, and interbank call loan rates were higher in Q4 2017 by 18.30 bps, 3.60 bps and 33.79 bps, respectively, compared to their Q3 2017 levels. Meanwhile, the savings deposit rate was lower by 1.00 bp.

Other market interest rates generally increase Interest rate on the 7-day term deposit facility (TDF) rose by 8.24 bps to settle at 3.39 percent in Q4 2017. Meanwhile, the interest rate of the 28-day TDF fell slightly by 0.06 bp to settle at 3.49 percent. This reflected the impact of the RTB issuance by the NG and the high demand for liquidity during the Christmas season.

Adjusted for risk premium, interest rate differentials narrow The differentials (gross and net of tax) between the domestic and US interest rates further narrowed in Q4 2017 relative to Q3 2017. The lower interest rate differential can be traced to the 3.9-bp decline in RP 91-day T-bill rate relative to a 16.9-bp gain in 90-day LIBOR, and a 16.0-bp gain in average US 90-day T-bill rate. The lower differential is largely due to higher foreign interest rates following the US Fed policy rate hike.19 The positive differential between the BSP's policy interest rate (overnight borrowing or RRP rate) and the US Federal Funds target declined to 150 bps as of end-December 2017, given the 25 bps increase in the US Federal Funds rate against the unchanged BSP policy rate. Compared to its September 2017 level, the risk-adjusted spread between the two policy rates further narrowed to 88 bps in December 2017, with a 2.6-bp decline in risk premium (measured as the difference between the 10-year ROP and the 10-year US note). The lower risk premium was due to the 8.3-bp increase in the yields of 10-year ROP note relative to the much larger 11.0-bp increase in the yields of the 10-year US Treasury note.

19 In November 2017, average 91-day T-bill rate rose primarily on account of the P255-billion RTB issuance of the NG. However, 91-day T-bill rates declined anew in December because of withdrawal from NG deposits, thus tempering the average rate increase in Q4 2017.


Financial Sector

Banking System

Philippine banking system’s assets and deposits continue to grow The Philippine banking system remained sound, supportive of long-term economic growth and stable financial condition. In the fourth quarter of 2017, banks’ balance sheets exhibited steady growth in assets and deposits. Furthermore, asset quality indicators improved while capital adequacy ratios remained above international standards. Banks continued to dominate the financial sector, with universal and commercial banks (U/KBs) accounting for about 91 percent of total banks’ resources. In terms of the number of head offices and branches/agencies, non-bank financial intermediaries maintained its relatively widest physical network, consisting mainly of pawnshops. Performance of the Banking System Market Size

Banks’ operating network sustains expansion The number of banking institutions (head offices) decreased to 592 offices as of end-September 2017 from 613 offices a year ago and 595 offices a quarter ago (Table 7). The banks’ head offices are comprised of 43 U/KBs, 57 thrift banks (TBs), and 492 rural banks (RBs).This indicated continued consolidation of banks as well as the exit of weaker players in the banking system. Meanwhile, the operating network (head offices and branches/agencies) of the banking system expanded to 11,571 offices as of end-September 2017 from 11,024 offices a year ago and 11,393 offices a quarter ago, due

mainly to the increase in the branches/agencies of U/KBs, TBs, and RBs. The total resources of the banking system grew by 11.5 percent to P15.5 trillion as of end-December 2017 from P13.9 trillion in the same period last year and by 3.6 percent from P15.0 trillion as of end-September 2017 (Table 8). As a percent of GDP, total resources as of end-December 2017 reached 98.1 percent, higher than the 96.8 percent as of end-September 2017. Chart 10. Total Resources of the Banking System levels in trillion pesos; share in percent

Source: BSP Savings Mobilization As of end-December 2017, banks’ total deposits reached P9.2 trillion, 11.4 percent and 3.5 percent, higher than the year- and quarter-ago levels, respectively.20 On a quarterly basis, time, demand, and savings deposits grew by 3.8 percent, 3.5 percent, and 3.2 percent, respectively. Meanwhile, foreign currency deposits owned by residents (FCD-Residents) decreased marginally by 1.7 percent to P1.8 trillion, q-o-q.21

Deposits post steady growth

20 This refers to the total peso-denominated deposits of the banking system. 21 FCD-Residents, along with M3, forms part of a money supply measure called M4. Meanwhile, M3 consists of savings deposits, time deposits, demand deposits, currency in circulation, and deposit substitutes.


Chart 11. Deposit Liabilities of Banks in billion pesos

Source: BSP Bank Lending Operations Outstanding loans of UKBs, net of banks' RRP placements with the BSP, grew by 19.0 percent, y-o-y as of end-December 2017. Meanwhile, bank lending, inclusive of RRPs, registered an annual growth of 18.1 percent.

Bank lending moderates Chart 12. Loans Outstanding of Commercial Banks (Gross of RRPs) in trillion pesos

Source: BSP

Loans for production activities—which comprised 88.9 percent of banks’ aggregate loan portfolio, net of RRP — grew by 18.5 percent in December 2017. The growth in production loans was driven primarily by increased lending to the following sectors: real estate activities (19.3 percent); electricity, gas, steam and airconditioning supply (25.4 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (20.1 percent); manufacturing (11.7 percent); and, financial and insurance activities (16.8 percent). Bank lending to other sectors also increased during the

month except in agriculture, forestry and fishing (-13.7 percent), and administrative and support services activities (-30.4 percent).

Growth in loans for household consumption grew by 17.2 percent, y-o-y, in December 2017 due mainly to the double-digit increase in credit card (20.4 percent) and motor vehicle (17.5 percent) loans.

Credit Card Receivables

Credit card receivables continue to rise The combined credit card receivables (CCRs) of the banking system as of end-September 2017 increased by 18.2 percent to P216.5 billion, y-o-y, and by 6.3 percent, q-o-q. The ratio of CCRs to the total loan portfolio (TLP) remained unchanged at 2.7 percent as of end-September, relative to the year- and quarter-ago ratio. In terms of loan quality, the ratio of non-performing CCRs to total CCRs improved as it fell to 5.8 percent from 6.2 percent a year ago. Motor Vehicle Loans22

Motor vehicle loans sustain growth As of end-September 2017, the banking system’s motor vehicle loans (MVLs), increased to P442.4 billion or by 21.5 percent, y-o-y, and by 2.9 percent, q-o-q. Consumers’ strong demand for passenger cars and commercial vehicles, the introduction of new and refreshed models, appropriate product mix, as well as flexible financing schemes from banks and other car financing firms helped sustain the rise in vehicle purchases. In addition, anticipation of the approval of the TRAIN Act which imposes higher consumption taxes on goods such as cars likewise pushed the demand for motor vehicles. The share of total MVLs to TLP remained unchanged at 5.5 percent relative to the previous year’s ratio but decreased slightly with respect to the previous quarter’s ratio of 5.6 percent. In terms of loan quality, the ratio of non-performing

22 Formerly “Auto Loans”, renamed effective September 2015


MVLs to total MVLs improved to 3.9 percent from the year-ago ratio of 4.3 percent. Salary-Based General-Purpose Consumption Loans23

Salary loans remain on the uptrend The banking system’s Salary-Based General-Purpose Consumption Loans (SBGPCL) increased to P151.6 billion as of end-September 2017 or by 13.0 percent, y-o-y, and 4.1 percent, q-o-q.24 The share of total SBGPCLs to TLP decreased to 1.9 percent from the year-ago ratio of 2.0 percent but remained unchanged relative to the previous quarter. In terms of loan quality, the ratio of non-performing SBGPCLs to total SBGPCLs increased to 4.8 percent relative to the previous year’s ratio of 4.1 percent. Residential Real Estate Loans

Residential real estate loans maintain strong growth As of end-September 2017, the total residential real estate loans (RRELs) of the banking system reached P573.9 billion growing by 15.5 percent, y-o-y, and by 4.4 percent, q-o-q. Sustained household investments in residential properties, the increase in the number of projects unveiled by real estate developers and the intensified promotional campaigns by banks, supported the growth in real estate purchases during the review period. Total RRELs to TLP decreased to 7.2 percent from the year-ago ratio of 7.4 percent, but remained unchanged from the quarter-ago ratio. In terms of loan quality, the non-performing RRELs improved slightly to 2.9 percent from 3.0 percent registered a quarter-ago. Asset Quality and Capital Adequacy The Philippine banking system’s gross non-performing loan (GNPL) ratio improved to 1.7 percent as of end-December 2017 relative to the year- and a quarter-ago

23 Formerly “Salary Loans” 24 Data collection started with June 2014 data.

ratio of 1.9 percent (Table 9). Banks’ initiatives to improve their asset quality along with prudent lending regulations helped maintain the GNPL ratio below its pre-Asian crisis level of 3.5 percent.25 Chart 13. Ratio of Gross NPLs and Net NPLs to Total Loans of the Banking System

Source: BSP

Meanwhile, the net non-performing loan (NNPL) ratio increased to 0.8 percent as of end-December 2017 relative to the ratio of 0.6 percent registered a year-ago but decreased from the quarter-ago ratio 0.9 percent. In computing for the NNPLs, specific allowances for credit losses on TLP are deducted from the GNPLs. Said allowances decreased to P85.1 billion in end-December 2017 from P100.8 billion a year ago and P86.6 billion a quarter ago.26 The Philippine banking system’s GNPL ratio of 1.7 percent was higher with respect to that of Malaysia (1.1 percent) and South Korea (1.2 percent) but lower than that of Indonesia (2.8 percent) and Thailand (2.9 percent).27 The loan exposures of banks remained adequately covered as the banking system registered an NPL coverage ratio of 120.7 percent as of end-December 2017 from 119.9 percent registered a year ago and 114.2 percent a quarter ago.

25 The 3.5 percent NPL ratio was based on the pre-2013 definition. 26 This type of provisioning applies to loan accounts classified under loans especially mentioned (LEM), substandard-secured loans, substandard-unsecured loans, doubtful accounts and loans considered as loss accounts. 27 Sources: Malaysia (Banking System’s Ratio of net impaired loans to net total loans, December 2017); South Korea (Domestic Banks’ Substandard or Below Loans [SBLs] ratio, September 2017); Indonesia, IMF and financial stability reports (Banks’ Nonperforming Loans to Gross Loans Ratio, Q3 2017); and Thailand (Total Financial Institutions’ Gross NPLs ratio, December 2017).


Banks’ CAR remained well above international standards The capital adequacy ratio (CAR) of U/KBs at end-September 2017 decreased slightly to 15.0 percent on solo basis, relative to the previous quarter’s ratio of 15.3 percent. Likewise, the CAR, on a consolidated basis, declined marginally to 15.7 percent from the quarter-ago ratio of 16.0 percent. Nonetheless, these figures remained well above the BSP regulatory threshold of 10.0 percent and international minimum of 8.0 percent. Chart 14. Capital Adequacy Ratio of Universal and Commercial Banks in percent

Source: BSP

The CAR of Philippines’ U/KBs, on a consolidated basis, at 15.7 percent was higher than that of South Korea (15.4 percent) but lower than those of Malaysia (17.1 percent), Thailand (18.2 percent) and Indonesia (23.0 percent).28

Banking Policies Banking policies implemented during the quarter were aimed at enhancing and providing guidelines/regulations on the following: (1) banking offices and establishment of branch-lite units; (2) Manual of Regulations on Foreign Exchange Transactions (FX Manual); (3) reserve requirement

28 Sources: South Korea (Domestic Banks’ Capital Ratio, June 2017); Malaysia (Banking System’s Total Capital Ratio, December 2017); Thailand (Commercial Banks’ Capital Funds Percentage of Risk Assets, December 2017); and Indonesia, IMF and financial stability reports (Commercial Banks, Regulatory Capital to Risk-Weighted Assets Ratio Q3 2017).

(RR) on repurchase transactions; (4) information security management; (5) guidelines on liquidity risk management (6) adoption of National Retail Payment System (NRPS) framework; (7) risk-weighting of bank loans to the extent guaranteed by Credit Surety Fund (CSF) cooperatives; (8) exclusion of loans and other credit accommodations covered by guarantees of international/regional institutions/multilateral financial institutions from ceilings to subsidiaries and affiliates of banks; (9) Expanded Report on Real Estate Exposure (ERREE) and the submission of the Report on Project Finance Exposures (RPFE); and (10) issuance of bonds and commercial papers (Annex A).

Capital Market Reforms Capital market policy reforms continued to gain ground in the fourth quarter of 2017 as landmark institutional measures were adopted by the BSP, the Securities and Exchange Commission (SEC) and the BTr. During the period, the reforms implemented focused on deepening the local capital markets by enhancing transparency; development of market infrastructure; and improving the ease of doing business in the country (Annex B).

Stock Market

In the last quarter of 2017, the PSEi rose by 4.3 percent, q-o-q, to average 8,357.65 index points (Table 10). Chart 15. Average PSEi in index points

The Philippine economy’s continued robust growth and the expected enactment of the TRAIN bill saw the

Source: Philippine Stock Exchange (PSE)


PSEi post 11 record highs during the quarter. The eventual signing into law of the TRAIN bill and Fitch Ratings’ latest rating upgrade for the Philippines in December also helped boost investor sentiments and offset the negative impact of heightened geopolitical tensions arising from North Korea’s continued missile tests and Catalonia’s separatist drive in Spain. Moreover, the nomination of a perceived dovish new Federal Reserve Chief in Jerome Powell,29 the bullish outlook on the economic performance of the US and Europe, and window dressing saw the benchmark index close at 8,558.4 index points on 29 December 2017, about 25.1 percent higher year-to-date (Table 10). Mirroring the rally in the benchmark index, total market capitalization went up by 2.8 percent q-o-q and 21.8 percent y-o-y to reach P17.58 trillion as of 29 December 2017, amidst brisk trading activity. More than half of the local sector counters finished in positive territory q-o-q, with the financials rising by 5.2 percent, the property sector by 4.3 percent, the holding firms by 4.2 percent and the industrials by 1.7 percent. In contrast, the remaining three sub-indices (services, mining and oil and SME) dipped q-o-q by 2.8 percent, 12.8 percent and 6.0 percent, respectively. Chart 16. PSE Market Capitalization by Sector Q4 2017, percent share

Moreover, preliminary data from the PSE showed that foreign investors continued to be net buyers of

29 Mr. Powell’s moderate stance at a confirmation hearing in November 2017 reiterated the US Fed's current policy of increasing interest rates slowly if the pace of economic growth remains steadfast.

P0.33 billion worth of local shares during the last three months of the year. This was lower than the net purchases of P33.88 billion posted in the previous quarter, amid expectations of another hike by the US Fed in the last month of 2017. Chart 17. PSEi Foreign Transactions in billion pesos

Data from Bloomberg also showed continued investors’ willingness to hold local shares as the domestic price-earnings ratio rose from 22.72x in end-September to 23.10x in end-December. However, the elevated valuation is starting to concern foreign investors as reflected in the foreign net sales recorded in the first half of the month of December.

Bond Market Local Currency Bond Market

Size and Composition30 Local currency (LCY) bonds issued by both the public and private sectors amounted to P424.9 billion in the fourth quarter of 2017, 4.2 percent higher than the P407.6 billion registered in the previous quarter and 183.8 percent higher than the P149.7 billion recorded in the same period last year.

LCY bond issuances of public sector increase

30This refers to the peso-denominated bond issuances by both public and private sectors. Public sector issuances of LCY bonds include issuances in the primary market and rollovers of maturing series which were issued by the BTr and GOCCs.

Source: PSE

Source: PSE


The NG-issued T-bills and Fixed-rate Treasury bonds (T-bonds) reached a total of P394.1 billion, higher by 11.9 percent from Q3 2017. The increase in government issuance reflected the continued strong demand and interest of investors in government debt papers. Meanwhile, the private sector issuance of LCY bonds amounted to P30.8 billion, 44.5 percent lower relative to the previous quarter and 57.3 percent lower compared to Q4 2017. Local firms had fewer issuances as the US Fed monetary policy normalization started to fuel a higher interest rate environment. Chart 18. LCY Bond Issuances in billion pesos

Source: Bureau of the Treasury, Bloomberg, Staff calculation

In terms of market share, issuances from the public sector comprised 92.8 percent share of the total bond issuances while the private sector took the remaining 7.2 percent. Bonds issued by the BTr accounted for the entire public sector issuance while issuers from the private sector came from banks and real estate companies.

Chart 19. LCY Bond Issuances As percent of market share; Q4 2017

Primary Market 31 In the primary auctions conducted for both T-bills and T-bonds, the NG offered a total of P310.0 billion of both short- and long-term debt securities. Demand was robust as tenders were oversubscribed by about 1.5 times. Tenders for T-bills reached P158.5 billion as against the NG’s offering of P90.0 billion while for T-bond, tenders reached P297.9 billion against the P220.0 billion offering.

NG partially awards bids to accept only favorable yields The NG partially awarded the P310.0 billion offering in GS in Q4 2017 following the NG’s rejection of some bids for T-bills and T-bonds, which were found to be relatively higher than NG’s preferred rates. Demand for shorter-term debt instruments tended to be higher than that for long-term instruments given the uncertain external developments that affected investment decisions in the long-term. Secondary Market Trading of both government and private corporate bonds in the secondary market decreased by 46.7 percent to P390.7 billion in Q4 2017 from P732.7 billion registered in the previous quarter. Meanwhile, on a y-o-y basis, trading in the secondary market increased by 13.0 percent.

Trading decreases at the secondary market Trading was dominated mostly by Fixed Income Treasury Notes (FXTNs) which accounted for about 65.0 percent of the total trading while the share of corporate bonds traded at the Philippine Dealing and Exchange Corporation remained marginal at 1.7 percent. The lackluster trading at the secondary market partly reflected negative investor sentiments due to rising geopolitical tensions, such as North

31 The discussion includes primary market for government issuances only.

0

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Public Sector Private Sector

Public Sector ,

93%

Private Sector, 7%

Source: Bureau of the Treasury, Bloomberg, Staff calculation


Korea’s continued missile tests and Catalonia’s separatist drive in Spain. Chart 20. Secondary Market Volume in billion pesos

Source: PDEX

Foreign Currency Bond Market

NG refrains from tapping the international bond market The last time the government tapped the offshore market was in Q1 2017 when it issued US$2 billion worth of new 25-year US dollar bonds. This indicated NG plans to rely more on domestic financing sources than on foreign creditors to limit exposure to FX risks. Meanwhile, for the private sector, most firms also took advantage of the ample domestic liquidity, as indicated by a lone issuance by a financial institution of US$500 million bonds in the foreign capital market. Sourcing by corporates of their financing needs from the local capital market reflects prudent liability management and hedging strategy as the dollar was expected to strengthen backed by the gradual US Fed rate hikes.

Credit Risk Assessment On 10 December 2017, Fitch Ratings upgraded the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BBB’ from ‘BBB-‘. The outlook was stable.

Fitch upgrades Philippines to ‘BBB’ with stable outlook

The upgrade of the IDRs reflected the following key rating drivers: 1) strong and consistent macroeconomic performance has continued, underpinned by sound policies that are supporting high and sustainable growth rates; 2) investor sentiment has also remained strong, as evident in solid domestic demand and inflows of FDI; 4) higher infrastructure spending over the medium term was expected under the government’s public investment programme; 5) Fitch forecast real GDP growth of 6.8 percent in 2018 and 2019, which would maintain the Philippines’ place among the fastest-growing economies in the Asia-Pacific region; 6) the Philippines maintained fiscal policies geared towards a sustained decline in the gross general government debt (GGD) ratio32; 7) the recent appointment of a new central bank Governor from within the BSP has provided continuity and supported monetary policy credibility, 8) inflation is exptected to remain within the BSP’s target range of 2-4 percent; 9) continuation of exchange rate flexibility should help preserve the recent build-up of FX reserves; and 10) the Philippines’ fiscal profile should improve as a result of the government’s tax reform initiative. The ‘BBB’ IDR also took into account the following key factors drivers: 11) the Philippine’s current account has been expected to shift into a deficit in 2017, the second consecutive year to continue in 2018 and 2019. The deficit has been expected to be manageable. Strong imports of capital goods, associated with the government’s public infrastructure programme, were likely to remain a key driver of the deficit partly offset by strong remittance inflows and business process outsourcing receipts. Further, FDI inflows have been expected to continue to fully cover the current account deficit, limiting the increase in external indebtedness; 12) strong growth momentum has remained supported by domestic demand and higher investment spending; and 13) banking sector liquidity, capitalisation levels and asset quality ratios has remained healthy.

32GGD projected by Fitch to decline to around 34 percent of GDP at end-2017, below the ‘BBB’ median of 41.1 percent of GDP.


Meanwhile on 18 December 2017, Rating and Investment Information, Inc. (R&I) has affirmed the Philippines BBB/a-2 with a stable outlook . Bond spreads In October, debt spreads narrowed as investor concerns remained muted. On the domestic front, investor sentiment improved on indications that the Senate would be supporting an immediate passage of the comprehensive tax reform measure. In addition, the Philippine government has declared the end of the Marawi siege.

Debt spreads narrower on TRAIN passage and improved US economic data

In November, debt spreads widened albeit marginally. The country’s premium in holding a 5-year government bonds started to rise and peaked in November as uncertainties about the prospects of the US tax reform bill led to a broader “risk-aversion” stance by investors across the globe. At the domestic front, high inflation for October and the decline in remittance figures in September likewise contributed to the widening in debt spreads. In December, debt spreads eased and narrowed as the US Fed increased its interest rates, indicating a healthier and more bullish US economy. Locally, the TRAIN bill was signed into law. It is expected to generate more revenues that will finance the infrastructure needs of the country. As of end-December, the Philippines’ 5-year sovereign credit default swaps (CDS) stood at 59 bps, lower than the 66 bps in end-3Q 2017. It has remained lower than Indonesia’s 85 bps while higher than Malaysia’s 58 bps and Thailand’s 46 bps in the current quarter.

Chart 21. 5-Year CDS Spreads of Selected ASEAN Countries in basis points

Meanwhile, the Emerging Market Bond Index Global (EMBIG) Philippines ended the quarter wider at 95 bps when compared to the previous quarter’s closing of 91 bps.

Chart 22. EMBIG Spreads of Selected ASEAN Countries in basis points

Payments and Settlements System33 In Q4 2017, the total number of transactions settled and processed in the Philippine Payments and Settlements System (PhilPaSS) increased by 4.6 percent to 530,500 from the previous quarter’s level of 507,088. The uptick in the volume of transactions was due mainly to the increase in regional banks’ withdrawals (35.3 percent), OF remittances via PhilPaSS REMIT (11.3 percent) and interbank transactions (1.6 percent).

33 Starting 1 April 2014, the volume and value of transactions exclude payment transfers to BSP Payments Unit.

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Q12013

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Philippines Indonesia Thailand Malaysia

Source: Bloomberg

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EMBIG Philippines EMBIG Malaysia EMBIG Indonesia

Source: Bloomberg


Table C. PhilPaSS Transactions

2017 2016 Growth rates (in percent)

Q4 Q3 Q4 Q-o-Q Y-o-Y Volume 530,500 507,088 406,791 4.6 30.4 Value 59.0 62.8 111.5 (6.2) (47.1) (in Trillion PhP) Transaction Fees 35.1 37.0 32.6 (5.1) 7.7 (in Million PhP)

Source: Payments and Settlements Office, BSP

Meanwhile, the total value of transactions decreased to P59.0 trillion, 6.2 percent lower than the previous quarter’s level of P62.8 trillion. The drop in the value of transactions was due mainly to the decline in the level of overnight deposit facility (ODF) placements/maturities (76.3 percent), interbank transactions (8.0 percent), and placements/maturities in monetary operations system (MOS) facilities such as the reverse repurchase and term deposit facilities (3.4 percent). OF remittances coursed through the REMIT system and interbank dealings continued to dominate the volume of transactions in PhilPaSS, accounting for 80.9 percent of the total volume for the quarter. In terms of value, interbank dealings, placements/maturities in MOS facilities (reverse repurchase and term deposit), and overnight deposit placements/maturities made up 80.4 percent of the total value of transactions for the quarter. On a y-o-y basis, the volume of transactions in Q4 2017 increased by 30.4 percent while the value of transactions fell by 47.1 percent. The decrease in the value of transactions in Q4 2017 pulled down the total revenue derived from PhilPaSS operations to P35.1 million, 5.1 percent lower than the quarter-ago level but 7.7 percent higher than the year-ago level of P32.6 million.

External Sector

Balance of Payments The country’s balance of payments position (BOP) rebounded in Q4 2017, yielding a surplus of US$505 million, after recording a deficit of US$662 million in Q3 2017.

Q4 2017 BOP position reverses to a surplus

The surplus in Q4 2017 was also a reversal from the US$2.1 billion deficit registered in the same quarter a year ago. This positive outcome was a result primarily of net inflows (or net borrowing by residents from the rest of the world) in the financial account even as the current account posted a deficit. In particular, the financial account balance reversed to net inflows of US$2.0 billion from net outflows of US$1.1 billion. Net inflows of direct and portfolio investments more than offset the net outflows recorded in the other investment account. By contrast, the current account registered a higher deficit of US$3.3 billion due to the widening trade-in-goods deficit. Table D. Balance of Payments in million US$

Q4 2016 2017

Current Account -566 -3,297 Capital Account 14 14 Financial Account 1,089 -2,033 Net Unclassified Items -427 1,754

Overall BOP* -2,068 505

*Positive balance in the financial account indicates net outflows while a negative balance indicates net inflows. The overall BOP position, therefore, is equal to the current plus the capital account minus the financial account plus net unclassified items. Details may not add up due to rounding.

Economic activity continued to strengthen on both global and domestic fronts leading to upbeat investor sentiment which helped shore up the country’s FDIs. External demand also improved and kept exports of goods on an upward path. Meanwhile, imports of


goods continued to expand in support of the government’s big infrastructure projects that reflect robust domestic economic activity. Current Account. The current account posted a deficit of US$3.3 billion in Q4 2017, significantly higher than the US$566 million deficit recorded in Q4 2016.

Current account posts higher deficit This developed as the trade-in-goods deficit widened even as higher net receipts were recorded in the trade-in-services, and secondary and primary income accounts.34 Trade-in-Goods. The trade-in-goods deficit increased to US$13.1 billion in Q4 2017 from US$9.2 billion in the same period in 2016 on account of the higher expansion in imports of goods (by 20.4 percent) than that of exports of goods (by 2.0 percent).

Trade-in-goods deficit widens Exports of Goods. Exports of goods increased by 2.0 percent to US$11.3 billion in Q4 2017 from US$11.1 billion in Q4 2016. The modest upturn was partly a result of higher shipments of mineral products, notably copper, metal, and gold.

Exports of goods post modest improvement Growth in exports of forest, petroleum, and sugar and products was also posted during the quarter. However, negative growth was recorded in manufactures, fruits and vegetables, coconut, and other agro-based products. Exports of manufactured goods, which comprised about 74 percent of total goods exports, declined slightly by 1.1 percent. The decline owed largely to reduced shipments of wood manufactures

34Primary Income account (formerly the Income account) shows the flows for the use of labor and financial resources between resident and non-resident institutional units. Secondary Income account (formerly the Current Transfers account) shows current transfers, in cash or in kind, for nothing in return, between residents and non-residents.

(by 82.3 percent), chemicals (by 43.5 percent), and garments (by 43.7 percent) which more than offset the continued increase in exports of non-consigned electronics (including other electronics), and machinery and transport equipment. Exports of fruits and vegetables contracted by 30.8 percent on account of the decline in shipments of canned pineapple and bananas. Exports of bananas continued to decline as tariff for Philippine agricultural exports to South Korea and Japan remained high, compared to those of competitors such as Costa Rica and Ecuador. Exports of coconut products dropped by 13.3 percent due to lower shipments of coconut oil (by 18.4 percent) following the drop in export volume. Lower exports of coconut products may be partly due to the damages brought by a series of tropical storms which destroyed a huge number of coconut trees in Visayas and Mindanao. Chart 23. Exports by Major Commodity Group in percent share, Q4 2017

Imports of Goods. Imports of goods rose by 20.4 percent in Q4 2017 to reach US$24.5 billion compared to US$20.3 billion in Q4 2016. The double-digit expansion was due to increments registered across all major commodity groups.

Imports of goods continue to expand Leading the growth in imports of goods was raw materials and intermediate goods which grew by 25.6 percent to reach US$9.6 billion during the quarter. Growth was driven by increased purchases of semi-processed raw materials, specifically materials


and accessories for the manufacture of non-consigned electronics (by 43.9 percent), and manufactured goods (by 26.1 percent). Imports of raw materials for electronics production amounted to US$2.3 billion while imports of manufactured goods totaled US$3.2 billion, following increased purchases of iron and steel, and metal products. Imports of mineral fuels and lubricant went up by 39.0 percent to reach US$2.9 billion in Q4 2017 from US$2.1 billion in the same quarter last year. Such import was boosted by imports of petroleum crude and other mineral fuels and lubricant such as gas oils, diesel fuel, naphtha reformate, and motor and aviation spirit. Imports of petroleum crude oil increased by 40.4 percent in Q4 2017 as a result of the continued rise in the price of crude oil in the world market and the increase in import volume to 19 million barrels from 18 million barrels in Q4 2016.35 Imports of capital goods expanded by 12.7 percent due to higher importation of office and EDP machines, aircraft, ships and boats, telecommunication equipment and electrical machines, and land transport equipment, excluding passenger cars and motorized cycle. Imports of consumer goods likewise increased by 14.1 percent to US$4.6 billion due mainly to higher purchases of durable goods. Durables went up by 22.0 percent on account of increased importation of passenger cars and motorized cycle and miscellaneous manufactures.

Chart 24. Imports by Major Commodity Group in percent share, Q4 2017

Trade-in-Services. Net receipts in trade-in-services amounted to US$2.2 billion in Q4 2017, 47.6 percent higher than the US$1.5 billion net receipts in Q4 2016.

35Based on World Bank Commodities Price data, the average price of Dubai crude oil in October-December 2017 increased to US$59.2/barrel from US$47.9/barrel in October-December 2016.

Net receipts in trade-in-services increase The growth in net services receipts was buoyed by the increments registered in other business services, manufacturing services and financial services along with decreased net payments in travel services. The expansion in other business services was spurred by technical, trade-related, and other business services (34.1 percent), mostly BPO-related transactions. Export revenues in BPO services totaled US$5.5 billion in Q4 2017, or an increase of 19.3 percent from the US$4.6 billion receipts in Q4 2016. Meanwhile, the 21.5-percent decline in net payments for travel services resulted from the higher growth in travel exports (69.0 percent), compared to that of travel imports (17.4 percent). These positive developments were partly mitigated by the decline in net receipts of computer services and higher net payments of insurance and pension services. Primary Income. The primary income account posted net receipts of US$785 million in Q4 2017, higher than the US$710 million net receipts in Q4 2016.

Net receipts in primary income rise due to higher compensation flows from OF workers The 10.5-percent increase was attributed largely to the 10.9-percent rise in compensation inflows mostly from resident OF workers amounting to US$2.0 billion during the quarter. Interest receipts on reserve assets also increased during the quarter (24.6 percent). These gains more than compensated for the 11.1 percent increase in net payments of investment income brought about largely by higher dividends paid to foreign direct investors (32.8 percent). Secondary Income. Net receipts in the secondary income account totaled US$6.8 billion in Q4 2017, higher than the US$6.4 billion net receipts in Q4 2016.

Net receipts in secondary income continue to improve


The 6.0-percent improvement came from the 5.9-percent increment in net receipts of personal transfers amounting to US$6.4 billion. The bulk of these personal transfers comprised of non-resident OF workers' remittances (about 97 percent), which totaled US$6.3 billion in Q4 2017. The continued stream of OF remittance flows was supported by steady demand for skilled Filipinos abroad. The 39.8-percent growth in net receipts of other current transfers (e.g., gifts and donations from financial and non-financial corporations, and other non-profit institutions) amounting to US$224 million also contributed to the improvement in the secondary income account during the quarter. Capital Account. Net receipts in the capital account were steady at US$14 million in Q4 2017, consisting largely of other capital transfers to the NG.

Capital account registers net receipts Financial Account. The financial account recorded net inflows (or net borrowing of residents from the rest of the world) of US$2.0 billion in Q4 2017, a turnaround from the US$1.1 billion net outflows in the comparable quarter in the previous year. This resulted mainly from the net inflows of direct and portfolio investments which more than offset the net outflows of other investments.

The financial account shifts to net inflows Direct Investments. Net inflows of direct investments grew by 79.8 percent to US$2.6 billion in Q4 2017 from the year-ago level of US$1.5 billion. This resulted as FDI expanded by 62.1 percent to US$3.6 billion on the back of the threefold increase in net equity capital investments to US$2.0 billion. Gross placements of equity capital totaling US$2.2 billion were channeled mostly to electricity, gas, steam and air-conditioning supply activities. This was followed by manufacturing, real estate, construction, and wholesale and retail trade activities. These equity capital infusions during the quarter were mainly sourced from the Netherlands, Singapore, Japan, Kuwait and the United

States. Meanwhile, outflows stemming from residents’ net acquisition of financial assets grew by 27.5 percent to US$961 million during the period. This was mainly on account of the surge in net equity capital investments to US$ 1.1 billion from US$165 million in Q4 2016.

Direct investments post higher net inflows Portfolio Investments. Portfolio investments registered lower net inflows of US$114 million in Q4 2017 from US$279 million in Q4 2016.

The portfolio investments account registers lower net inflows

This was mainly on account of outflows arising from residents’ net acquisition of financial assets, which reached US$1 billion (from US$389 million inflows or net disposal of financial assets), comprising mostly of local non-financial corporations’ investments in long-term debt securities issued by non-residents. Meanwhile, net incurrence of liabilities amounted to US$1.1 billion (from net repayment of US$109 million) as non-residents’ investments in long-term debt securities issued by the NG more than doubled to US$2.2 billion during the quarter.

Financial Derivatives. The financial derivatives account recorded a net loss of US$41 million in Q4 2017, a turnaround from the US$78 million gain recorded in the same quarter in 2016.

Trading in financial derivatives results in net loss

Other Investments. The other investment account recorded net outflows of US$686 million in Q4 2017, lower by 76.5 percent than US$2.9 billion in the comparable period in 2016.

Net outflows in the other investment account decline


Outflows from residents’ net acquisition of financial assets dipped by 50.3 percent to US$837 million from US$1.7 billion. This was due mainly to non-residents’ repayment of loans extended by local banks amounting to US$600 million. Meanwhile, residents’ net incurrence of liabilities totaled US$150 million (from net repayment of US$1.2 billion) as residents’ availment of loans reached US$626 million.

International Reserves

The country’s gross international reserves (GIR) stood at US$81.6 billion in end-December 2017, higher than the US$81.0 billion in end-September 2017 (Table 12).

Reserves remain adequate The GIR remains adequate as it can cover 8.0 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity. Chart 25. Gross International Reserves in billion US dollars

Source: BSP

The increase in reserves was due mainly to the inflows from the BSP’s investments abroad, revaluation adjustments on its gold holdings from the increase in the price of gold in the international market, and lesser payments made by the NG and the BSP for their maturing FX obligations. This was, however, partially offset by lower inflows from the BSP’s FX operations, net foreign currency deposits by the NG and reserve position in the International Monetary Fund (IMF).

The bulk or 80.7 percent of the total reserves as of end-December 2017 were held in foreign investments. The remaining 10.2 percent were in gold and 9.1 percent were in holdings of Special Drawing Rights (SDRs), the BSP’s reserve position in the IMF, as well as foreign exchange. Net international reserves (NIR), which refer to the difference between the BSP’s GIR and total short term liabilities, amounted to US$81.6 billion as of end-December 2017, an increase of US$618 million from end-September 2017.

Exchange Rate For the last quarter of 2017, the peso averaged ₱50.93/US$1, depreciating slightly against the US dollar by 0.19 percent from the previous quarter’s average of ₱50.84/US$1 (Table 13).

Peso depreciates against the US dollar in Q4 2017 The peso’s depreciation during the review period may be attributed to expectations of stronger US economic growth and speculations over the candidate for the top post in the US Federal Reserve Board. Depreciation pressures were, however, offset partly by the country’s stronger-than-expected third quarter GDP growth and the passage of the TRAIN bill into law. On a y-o-y basis, the peso depreciated by 3.59 percent relative to the ₱49.11/US$1 average in Q4 2016.36 In October, the peso averaged ₱51.34/US$1, depreciating by 0.65 percent relative to the ₱51.01/US$1 average in September as markets turned bullish on continued reports of a hawkish candidate to take over top post in the US Federal Reserve Board. Better-than-expected US economic data on services and manufacturing and expectations of stronger third quarter US GDP likewise added pressure to the peso. Meanwhile, the peso averaged ₱51.04/US$1 in November, appreciating by 0.60 percent from the

36 Dollar rates (per peso) or the reciprocal of the peso-dollar rates were used to compute for the percentage change.

76.0

78.0

80.0

82.0

84.0

86.0

88.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2017


October average. The strong performance of the peso was due mainly to: (i) the appointment of widely perceived “dovish” and then current US Fed Governor Jerome H. Powell as the new US Fed Chair; (ii) growing skepticism on planned corporate tax cut in the US; and (iii) the country’s stronger-than-expected third GDP growth.37 The appreciation of the peso continued in December as it averaged ₱50.39/US$1, gaining 1.28 percent from the November average. The peso’s appreciation was due mainly to the passage of the TRAIN bill into law and amid strong OF remittances and profit taking by market players ahead of the holiday season. On a year-to-date basis, the peso depreciated against the US dollar by 0.42 percent on 29 December 2017 as it closed at ₱49.93/US$1 from the ₱49.72/US$1 closing on 29 December 2016. This was in contrast with the strengthening of other monitored Asian currencies during the same period, except for the Indonesian Rupiah which likewise depreciated against the US dollar.38 Chart 26. Year-to-date Appreciation (+)/Depreciation (-) of Asian Currencies against US dollar in percent, as of 29 December 2017 Source: PDEX, BSP Treasury Department

Nonetheless, the sustained inflows of FX from OF remittances, FDIs, BPO receipts, and recovery of exports, as well as the ample level of the country’s GIR

37 The Philippine economy, as measured by GDP, grew by 6.9 percent in the third quarter of 2017 according to a report released by the Philippine Statistics Authority on 16 November 2017. 38 Based on the last done deal transaction in the afternoon.

and the country’s robust economic growth, continued to provide support to the peso.39

Meanwhile, the volatility of the peso’s daily closing rates (as measured by the coefficient of variation) stood at 1.02 percent during the review quarter, higher than the 0.61 percent registered in the previous quarter.40 Relative to other currencies in the region, the volatility of the peso remained in the middle of the pack.41 On a real trade-weighted basis, the peso marginally lost external price competitiveness in Q4 2017 against the basket of currencies of all trading partners (TPI) and trading partners in advanced (TPI-A) countries by 0.17 percent and 0.64 percent, respectively. On the other hand, against the basket of currencies of developing countries (TPI-D), the peso slightly gained external price competitiveness by 0.15 percent (Table 13b).42,43

39 As of end-December 2017, country’s gross international reserves (GIR) stood at US$81.6 billion (revised). This can cover 8.0 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 5.7 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity. FDI remained positive and registered a net inflow of US$7.9 billion as of end-October 2017. Remittances from OF workers amounted to US$28.2 billion for the period January to November 2017. Exports of goods grew y-o-y by 16.2 percent from January to September 2017. As of end-September 2017, business process outsourcing (BPO) and tourism receipts reached US$16.9 billion and US$5.0 billion, respectively. 40 The coefficient of variation is computed as the standard deviation of the daily closing exchange rate divided by the average exchange rates for the period. 41 The volatility of the peso was higher than that of Indonesian rupiah, Chinese yuan, Singapore dollar, Japanese yen, and Thailand baht but lower than that of Malaysian ringgit and South Korean won. 42 The Trading Partners Index (TPI) measures the nominal and real effective exchange rates of the peso across the currencies of 14 major trading partners of the Philippines, which includes US, Euro Area, Japan, Australia, China, Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand. The TPI-Advanced measures the effective exchange rates of the peso across currencies of trading partners in advanced countries comprising of the US, Japan, Euro Area, and Australia. The TPI-Developing measures the effective exchange rates of the peso across 10 currencies of partner developing countries which includes China, Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand. 43 The REER index represents the Nominal Effective Exchange Rate (NEER) index of the peso, adjusted for inflation rate differentials with the countries whose currencies comprise the NEER index basket. A decrease in the REER index indicates some gain in the external price competitiveness of the peso, while a significant increase indicates the opposite. The NEER index, meanwhile, represents the weighted average exchange rate of the peso vis-à-vis a basket of foreign currencies.


Relative to Q4 2016, the peso gained external price competitiveness against the TPI, TPI-A, and TPI-D baskets. This developed as the nominal depreciation of the peso offset the impact of widening inflation differential against these currency baskets, resulting to a decrease in the REER index of the peso by 3.79 percent, 2.28 percent, and 4.81 percent against the TPI, TPI-A, and TPI-D baskets, respectively.

External Debt Outstanding Philippine external debt stood at US$73.1 billion as of end-December 2017, up by US$730 million (or 1.0 percent) than the end-September 2017 level of US$72.4 billion (Table 14). The growth in the debt level during the quarter was due largely to the US$1.3 billion increase in the holdings of Philippine debt papers by non-residents, reflecting sustained investor interest in the country.

External debt remains manageable

Positive FX revaluation adjustments (US$70 million) contributed to the increase in the debt stock as the Philippine peso strengthened against the US dollar during the last quarter of 2017 due to strong remittances and equity inflows. Net principal repayments (US$643 million) by both public and private sector borrowers had a dampening effect on debt stock.

Chart 27. Philippine External Debt in billion US dollars

Source: International Operations Department (IOD)-BSP

By Maturity

As of year-end, the maturity profile of the country’s external debt continued to be largely medium- to long-term (MLT) in nature [i.e., those with original maturities longer than one (1) year], with share to total external debt at 80.5 percent (US$58.8 billion); thus, FX requirements for debt payments are well spread out and more manageable. The figure is slightly higher (by US$673 million) than the end-September 2017 level of US$58.2 billion (80.4 percent of total external debt). The weighted average maturity for all MLT loans stood at 17.3 years at the close of 2017, slightly shorter than the 17.4 years recorded in the previous quarter.

Chart 28. Philippine External Debt by Maturity as of end-December 2017

Source: IOD-BSP

Short-term (ST) accounts [or those with original maturities of up to one (1) year] comprised the 19.5 percent balance of debt stock and consisted of: (a) bank liabilities of US$11.6 billion; (b) trade credits (US$2.5 billion); and (c) other liabilities (US$192 million). ST accounts marginally increased to US$14.3 billion from US$14.2 billion as of end-September 2017.

By Borrower

Public sector external debt rose to US$37.5 billion from US$37.2 billion in the previous quarter, although share to total external debt declined from 51.4 percent to 51.3 percent. Net principal repayments of US$579 million recorded during the quarter were fully offset by the increase in non-residents’ investment in debt papers issued abroad (US$820 million) as well as upward FX revaluation adjustments (US$50 million). About US$31.0 billion

Short-Term US$14.2 billion 19.5% Medium and

Long-Term US$58.2 billion 80.5%

Total = US$73.1 billion


(82.7 percent) of public sector obligations were borrowings of the NG.

Chart 29. Philippine External Debt by Borrower as of end-December 2017

Source: IOD-BSP

Private sector debt likewise grew from US$35.1 billion in September 2017 to US$35.6 billion, with share to total external debt increasing from 48.6 percent to 48.7 percent. The increase was due largely to higher investments by non-residents in private sector debt papers (US$485 million). About US$12.3 billion of these accounts were obtained without BSP approval, while capital leases amounted to US$1.2 billion.

The Debt Service Ratio (DSR), which relates principal and interest payments (debt service burden or DSB) to exports of goods and receipts from services and primary income, is a measure of adequacy of the country’s FX earnings to meet maturing obligations. As of end-December 2017, the ratio stood at 6.2 percent compared to 4.8 percent recorded a quarter ago. The DSR has also consistently remained well below the international benchmark range of 20.0 to 25.0 percent. The external debt ratio (a solvency indicator), or total outstanding debt expressed as a percentage of GNI, remained at 19.4 percent, similar to last quarter’s figure. The same improving trend was observed using GDP as denominator, with the Philippine economy growing by 6.6 percent in the last quarter of 2017. The ratios indicated the country's sustained strong position to service foreign obligations in the medium to long-term.

Foreign Interest Rates The timing of exit from accommodative monetary policy in AEs has differed across countries depending on the strength of their respective economic growth conditions. Accommodative monetary policy is expected to continue in countries where risk of low inflation persists and recovery remains fragile due to the weakness in labor market conditions, slowdown in spending, and anemic bank lending growth.

Some AEs begin to increase policy rates In Q4 2017, the US Fed raised the target range for the Federal funds rate at 1.25-1.50 percent as labor market has continued to strengthen and economic activity has been rising at a solid rate. As part of its monetary policy stance, the Fed continued to roll over at auction the amount of principal payments from its holdings of Treasury securities. The Fed also continued reinvesting in agency mortgage-backed securities the amount of principal payments from the Fed’s holdings of agency debt and agency mortgage-backed securities. As a result of the Fed hike, both the average US prime rate and discount rate slightly increased to 4.298 percent and 1.798 percent from the previous quarter’s figures of 4.250 percent and 1.750 percent, respectively. Moreover, the US Fed funds rate increased to 1.201 percent from the 1.55 percent average reported in the previous quarter (Table 16). The Monetary Policy Committee (MPC) of the Bank of England (BOE) increased the official bank rate paid on commercial banks’ reserves by 25 bps to 0.50 percent. It maintained the purchase of up to £10 billion of corporate bonds, financed by the issuance of central bank reserves. In addition, it maintained the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.44 The Bank of Japan (BOJ) continued its “Quantitative and Qualitative Monetary Easing with Yield Curve Control” as a new framework to further strengthens its monetary easing scheme. Currently, the framework is

44 Press Release. (n.d.). Retrieved from https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2017/november-2017

Public Sector US$37.5 billion

51.3%

Private Sector US$35.1 billion

48.7%

Total = US$73.1 billion


composed of two components. The first component is the "yield curve control" in which the BOJ controls short-term and long-term interest rates; and the second component is an "inflation-overshooting commitment" in which the BOJ commits itself to expand the monetary base until inflation exceeds the target of 2 percent. As for the short-term interest rate, the BOJ applies a negative interest rate of 0.1 percent to current accounts that financial institutions hold at the Bank. For the long- term interest rate, the BOJ buys Japanese government bonds (JGBs) at a rate of 80 trillion yen per year in order for the 10-year JGB yields to remain at around zero percent. In terms of asset purchases, the BOJ has doubled the purchase of exchange-traded funds (ETFs) at an annual pace of 6 trillion yen from 3.3 trillion yen while the purchase of Japanese real estate investment trusts (J-REITs) were maintained at 90 billion yen annually. Likewise, the BOJ continues its purchases of commercial papers and corporate bonds until their outstanding amounts reach 2.2 trillion yen and 3.2 trillion yen, respectively.45 Meanwhile, the Governing Council of the European Central Bank (ECB) decided to maintain the interest rates on the deposit facility, main refinancing operation, and marginal lending facility at -0.40 percent, 0.0 percent, and 0.25 percent, respectively. For non-monetary policy measures, the Governing Council also decided that from January 2018, the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond, if necessary.46 Meanwhile, both the 90-day London Interbank Offered Rate (LIBOR) and 90-day Singapore Interbank Offered Rate (SIBOR) increased in Q4 2017 to 1.466 percent and 1.168 percent from 1.315 percent and 1.110 percent, respectively, in the previous quarter as global financial markets remained generally liquid.

45 Press Release. (n.d.). Retrieved from https://www.boj.or.jp/en/announcements/release_2017/k171221a.pdf 46 Press Release. (n.d.). Retrieved from https://www.ecb.europa.eu/press/pr/date/2017/html/ecb.mp171214.en.html

Chart 30. Selected Foreign Interest Rates in percent

Source: Bloomberg, Asian Wall Street Journal, Reuters 1

SIBOR data refers to SIBOR rates (in Singapore $) Global Economic Developments Global economic activity continued to firm up in Q4 2017. The pick-up in growth was the broadest synchronized upsurge since 2010, brought about by the notable improvements in Europe and Asia. Resilient domestic demand, strong global trade among advanced economies (AEs) and increased manufacturing output in Asian economies contributed to the sustained momentum in global activity. In the US, the improvement in economic activity resulted in 2.5 percent growth in Q4 2017. The increase in US real GDP was led by positive contributions from personal consumption expenditure, residential and non-residential fixed investments, exports, and local and federal government expenditure. These were partly offset by negative contributions from private inventory.47 The Japanese economy has been expanding moderately at 1.5 percent in Q4 2017. 48 The expansion has been attributed to the robust domestic demand brought by stronger private consumption. However, the expansion was slower compared to the previous quarter growth of 1.9 percent due to surge in imports. The Eurozone economic activity advanced by 2.7 percent in Q4 2017, a slight drop from the

47 US Bureau of Economic Analysis News Release, 26 January 2018

48 Quarterly Estimates of GDP for October-December 2017 (First Preliminary Estimates), Cabinet Office Japan, 14 February 2018


2.8 percent growth in the previous quarter.49 Positive business sentiments were at multi-year highs in France and Germany while the Euro area economy enjoyed the strongest period of economic growth in more than a decade, despite political uncertainty in Germany, Spain and Italy. Chart 31. Real GDP of G3 Countries year-on-year growth; in percent

Source: Bloomberg, Country Websites

Most emerging economies in Asia remained on track with solid output growth that was driven by strong consumption and investment. Growth of the Chinese economy remained steady at 6.8 percent50, reflecting resilient private consumption and service activities amid strong global demand. Singapore’s 3.1 percent expansion was fueled primarily by robust output expansions in the electronic and precision engineering sectors. This offset the output declines in the biomedical engineering and transport engineering clusters.51 Similarly, South Korea’s economy expanded by 3.0 percent y-o-y due mainly to the rapid expansion in consumption and surge in facilities investment.52 The Hong Kong economy marked the fifth consecutive quarter of above-trend economic expansion, with Q4 GDP growth of 3.4 percent. The steady expansion was supported by expansion of private and government consumptions.53

49 Eurostat News Release and Euro Indicators, 30 January 2018 50 “Preliminary Accounting Results of GDP for the Fourth Quarter of 2017,” National Bureau of Statistics of China, 25 January 2018 51Ministry of Trade and Industry Singapore , 2 January 2018 52Press Release on “Real Gross Domestic Product: 4th Quarter of 2017 (Advance Estimate),“ The Bank of Korea, 25 January 2018 53“Gross Domestic Product for the 4th Quarter 2017,“ Census and Statistics Department, Hong Kong, 28 February 2018

India’s economy grew by 7.2 percent in Q4 2017, the fastest in five quarters. The revival of the investment and jump in government spending boosted the economic growth amidst disruptions brought by the abrupt currency ban and goods and services tax (GST). In the ASEAN-5 region, member countries’ GDP growth rates remained at a steady momentum. Growth was maintained in the Indonesian economy at 5.2 percent in the reference quarter owing to improved investment on the back of government infrastructure projects and the expanding role of private investment.54 Growth surged in Vietnam at 6.8 percent, stimulated by the double-digit rise in exports, depreciation in the dong against the dollar, and a massive surge in FDI.55 The Malaysian economy remained resilient with 5.9 percent GDP growth in Q4 2017, buoyed by the favorable growth in services, manufacturing and agriculture sectors on the production side, while private consumption were the main drivers on the expenditure side.56 In Thailand, the 4.0 percent GDP growth was driven mainly by tourist-related industries and manufacturing sector.57 Average headline inflation in the US rose to 2.1 percent from the previous quarter’s 1.9 percent due to rising cost of rental, healthcare, and autos. Meanwhile, Japan’s inflation was unchanged at 0.6 percent, reflecting stable price movements. Likewise, inflation in the Euro area remained steady at 1.4 percent as prices rose at a softer pace for energy and unprocessed food.

Chart 32. Inflation of G3 Countries quarterly average, in percent


54 Bank Indonesia, 18 January 2018 55

Vietnam Economic Growth, FocusEconomics, 23 January 2018

56Press Release on “Gross Domestic Product Fourth Quarter 2017,“ Department of Statistics, Malaysia, 14 February 2018 57Economic Report on “Gross Domestic Product : Q4/2017 2017,” National Economic and Social Development Board (NESDB), 19 February 2018


Most emerging Asian economies recorded lower inflation in Q4 2017, except for China and India. China recorded a higher inflation of 1.9 percent during the review quarter due to continued increase in prices of non-food commodities. Similarly, average inflation rate in India was higher at 3.7 percent during the review period as cost of food and housing climbed faster, signaling recovery from price drops in the previous periods. Consumer prices rose at the same pace in Singapore at 0.5 percent, as the cost of transport and food increased at a slower pace while cost of housing and utilities continued to fall. Meanwhile, Hong Kong’s inflation was recorded at 1.6 percent, as a result of increase in housing and transport costs. In South Korea, the falling costs of food resulted in an average inflation rate of 1.5 percent. In the ASEAN-5 region, average inflation rates generally moved slower in Q4 2017, except for Philippines and Thailand. Inflation in Thailand rose to 1.0 percent during the review quarter, mostly driven by higher consumer prices of non-food and beverages, food and non-alcoholic beverages, raw food and energy, and housing and furnishing. Global labor market conditions moderately improved. The unemployment rate in the US, Japan and Euro area eased to 4.1 percent, 2.8 percent and 8.7 percent, respectively, during the review quarter. Chart 33. Unemployment Rates of G3 Countries in percent


In Asia, the unemployment rate showed a general decrease in Hong Kong, South Korea and Singapore at 3.0 percent, 3.6 percent and 2.1 percent, respectively. Similarly, unemployment rate in Thailand was lower from its Q3 2017 level at 1.1 percent.

Table E. Macroeconomic Indicators in Selected Economies in percent

Financial Condition of the BSP Balance Sheet The BSP’s total assets stood at P4,601.3 billion as of end-November 2017, slightly higher by P2.5 billion or 0.1 percent than the year-ago level of P4,598.8 billion. This was lower by P76.9 billion or 1.6 percent relative to the end-September 2017 level of P4,678.2 billion (Table 17). The BSP’s liabilities decreased by P7.2 billion or 0.2 percent, y-o-y, to P4,530.6 billion. Liabilities, however, declined by P79.0 billion or 1.7 percent when compared to the end-September 2017 level. Consequently, BSP’s net worth for the review period was reported at P70.7 billion, 15.9 percent above the year-ago level of P61.0 billion, and 3.2 percent higher than the end-September 2017 net worth of P68.5 billion.

BSP’s net worth continues to expand The BSP’s assets were substantially composed of international reserves amounting to P4,024.1 billion as of end-November 2017, 0.2 percent lower than the year-ago balance of P4,033.8 billion. The slight decline in the international reserves was brought about by outflows arising from the foreign exchange operations

Q4 2016

Q1 2017

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Q4 2017

G3 US 2.0 2.0 2.2 2.3 2.5 1.8 2.5 1.9 1.9 2.1 4.7 4.7 4.4 4.3 4.1 Japan 1.7 1.5 1.4 1.9 1.5 0.3 0.3 0.4 0.6 0.6 3.1 2.9 2.9 2.8 2.8 Euro Area 1.7 1.9 2.3 2.8 2.7 0.7 1.8 1.5 1.4 1.4 9.7 9.5 9.2 9.0 8.7Emerging Asia3/

Hong Kong 3.1 4.3 3.9 3.7 3.4 1.2 0.6 2.0 1.8 1.6 3.3 3.3 3.2 3.1 3.0 South Korea 2.3 2.9 2.7 3.8 3.0 1.4 2.0 1.9 2.3 1.5 3.6 3.8 3.8 3.7 3.6 Singapore 2.9 2.5 2.9 5.4 3.6 0.0 0.7 0.8 0.5 0.5 2.2 2.2 2.2 2.2 2.1 China 6.8 6.9 6.9 6.8 6.8 1.5 2.1 1.9 1.8 1.9 4.0 4.0 4.0 4.0 n.a. India 7.0 6.1 5.7 6.5 7.2 2.7 2.4 1.5 2.4 3.7 n.a. n.a. n.a. n.a. n.a.

ASEAN-54/

Indonesia 4.9 5.0 5.0 5.1 5.2 3.3 3.6 4.3 3.8 3.5 5.6 5.3 5.3 5.5 n.a.

Malaysia 4.5 5.6 5.8 6.2 5.9 1.7 4.3 4.0 3.7 3.5 3.5 3.4 3.4 3.4 n.a. Philippines 6.6 6.4 6.7 7.0 6.6 2.5 3.1 3.1 3.1 3.4 4.7 6.6 5.7 5.6 5.0 Thailand 3.0 3.3 3.8 4.3 4.0 0.7 1.3 0.1 0.5 0.9 1.0 1.2 1.2 1.2 1.1 Vietnam 6.2 5.1 5.7 6.4 6.8 4.5 5.0 3.3 3.1 2.7 2.1 2.3 2.1 2.2 n.a.Sources: Bloomberg, Country Websites1/ Average inflation rate was around -0.03 percent for the second quarter of 2015 2/ Unemployment rate is the proportion (in percent) of the total number of unemployed as a percentage of the labor force3/ Includes Emerging Asia countries classified in the July 2016 IMF World Economic Outlook (WEO) Update , plus Hong Kong, South Korea, and Singapore.4/ ASEAN-5 pertains to those countries in the said WEO Update.

CountryReal GDP (y-o-y growth rate) Inflation (quarterly average)1/ Unemployment rate2/


of the BSP and payments made by the NG for its maturing foreign exchange obligations. These were partially offset by the additional foreign currency deposits of the NG, the BSP’s income from investments abroad and revaluation adjustments in the gold holdings of the BSP resulting from the increase in the price of gold in the international market. The BSP’s liabilities of P4,530.6 billion as of end-November 2017 comprised mostly of deposits and currency issues. The y-o-y fall in liabilities was due mainly to lower placements in ODF and TDF. However, these were subdued by higher volume/value of notes in circulation under currency issue, and reserve demand deposits of Other Depository Corporations (ODCs) by approximately P150.0 billion and P219.0 billion, respectively. Table G. Balance Sheet of the BSP in billion pesos

Income Statement Based on unaudited data, the BSP registered a net income of P3.3 billion for the period October-November 2017. Net income was primarily a result of interest income combined with realized P2.5 billion foreign exchange gains during the period (Table 18).

BSP continues to register net income during the review period Total revenues for the period October-November 2017 amounted to P10.9 billion, 26.7 percent higher than

the P8.6 billion posted in the same period last year. The increased revenue was brought mainly by the rise in interest income on international reserves and domestic securities by approximately P1.8 billion and P0.3 billion, respectively. Table G. Income Position of the BSP in billion pesos

Meanwhile, total expenditures as compared to the same period last year, decreased by P2.4 billion to P10.1 billion. The y-o-y fall in expenditures was brought about mainly by lower interest expense and cost of minting/printing of currency.

Conclusion, Challenges and Policy Directions The Philippines’ macroeconomic fundamentals have remained solid for 19 years to date, supported by decades of purposeful structural and regulatory reforms. The country likewise remained as one of the fastest growing economies in the world. The country’s GDP growth has averaged above 6.0 percent annually since 2012. More importantly, growth has been increasingly broad-based, against a backdrop of stable inflation environment. Overall, the Philippine economy is poised to sustain its growth momentum amid external and domestic concerns. GDP expansion is expected to continue to


pick up in 2018 with the services sector remaining as the key driver of growth. The increase in the share of industry output (e.g., manufacturing and construction) in recent years as a key contributor to output expansion has been a welcome transformation as this has created jobs and contributed to a sustainable inclusive growth. On the demand side, growth has historically been buoyed by strong private consumption aided by sustained remittance inflows and recently by capital investments. Demand growth has been anchored on increased confidence in the country and prospects of growing public investment on infrastructure. The current administration is prioritizing higher infrastructure spending, among others, in the annual budget to support economic development. The government’s infrastructure program is expected to contribute in the achievement of the country’s growth target of 7.0-8.0 percent for 2018-2022, as approved by the Development Budget Coordination Committee (DBCC). The resulting expansion in productive capacity of the economy is seen to moderate inflationary pressures over the medium to long term. Although baseline forecasts show higher inflation outturns for 2018, the inflation path is expected to moderate and settle within the inflation target range of 3.0 percent ± 1.0 percentage point in 2019. The risks to the inflation outlook remain weighted toward the upside owing mainly to price pressures emanating from possible further increases in global oil prices. At the same time, inflation expectations continue to be anchored within the inflation target band over the policy horizon. The BSP is watchful against any signs of second-round effects and inflation becoming broader based. While the country’s progress toward a high growth trajectory appears to be on track, policymakers remain mindful of the imminent risks, which could emanate both from external and domestic fronts. Among the external risks include growing protectionist sentiment and policy uncertainty (such as in the US and in the UK); fragilities in China’s financial sector, as well as possible corrections in asset price valuations and

compressed term premiums. External risks could be domestically transmitted through weaker-than-expected trade flows; lower demand for overseas Filipino workers; and services-related activities (e.g., tourism). Furthermore, a slowdown in the Chinese economy could have a modest impact on Philippine growth prospects, particularly exports. The risk of asynchronous global monetary policy could generate capital flow volatility and bouts of financial market turbulence. Other external factors that could pose risks to the Philippine economy include faster-than-expected US Federal funds rate hikes and geopolitical tensions (notably in East Asia and Middle East). Meanwhile, increased intensity and frequency of natural hazards (e.g., seasonal typhoons, La Niña), restrictive employment protection legislation, delays in infrastructure projects, logistics bottlenecks (e.g., in imports processing), peace and security issues are among the risks in the domestic scene. Amid these challenges, the Philippine economy remains in a favorable position given its strong fundamentals. In the event that risks materialize, the Philippines has available policy space to respond. There is enough room for both fiscal and monetary authorities to pursue reforms and implement policies to keep the economy afloat over the medium to long term. To continue to support the positive growth and inflation dynamics in the country through enhancing further monetary policy transmission, the BSP adopted operational reforms through the interest rate corridor (IRC) system on 3 June 2016. The IRC was implemented to enhance the link between the BSP’s monetary policy stance and financial markets, and thereby impact the real economy. Recently, market interest rates have been slowly moving into the corridor, closer to the policy rates while market interest rates have become less volatile. The BSP has considered further enhancements to the IRC framework, along with other reforms and policies to further develop the domestic capital market. Going forward, the BSP will continue to keep a watchful eye over how domestic and external


developments will evolve to ensure that an enabling monetary and financial environment is maintained to achieve the country’s growth objectives, while safeguarding price and financial stability. In response to uncertainties in the global financial market, the BSP will ensure adequate level of liquidity in the economy and the financial markets during periods of heightened uncertainty. While guarding against speculative flows that could contribute to the peso’s volatility and undermine the inflation target, the BSP will continue to maintain a market-determined exchange rate and a comfortable level of international reserves as safeguard against external shocks. To guard against possible formation of financial imbalances, the BSP has expanded its crises surveillance and monitoring toolkit. To name a few, the Philippine Composite Index of Financial Stress (PCIFS) has been used to measure the degree of stress across financial markets; and the Early Warning System on currency crisis and on debt sustainability has preemptively helped flag any brewing risks in the economy. The BSP continues to further refine these tools as appropriate. The sound and stable condition of the Philippine banking system has been one of the anchors of the sustained robust performance of the domestic economy. The state of the country’s financial system, at present, is grounded on the structural and regulatory reforms pursued in the sector over the years. To this end, the BSP will continue to ensure that a sound regulatory framework is in place. As such, Philippine banks will be able to cope with challenges related to global financial volatilities. The BSP will also continue to pursue reforms promoting effective risk management, a stronger capital base and improved corporate governance standards, which are essential ingredients to ensuring stability in the financial system. The BSP will continue to craft banking regulations that are responsive, consistent with best practices and in line with the international financial architecture reform agenda. In addition, the BSP will continue to actively pursue initiatives to promote a deeper domestic capital market that will complement the presence of a

resilient banking system. The policy thrust is to focus on enhancing further the infrastructure and the regulatory framework for capital market transactions to promote efficiency in trading, settlement and delivery of securities. At the same time, the BSP will continue to adopt policies and programs that would help develop a sound, responsive, and inclusive financial system that will broaden the access of the underserved and the unbanked segments of our population to the financial sector. Among the key strategies in the BSP’s financial inclusion agenda are putting in place banking regulations that leverage on technology to increase access to financial products; strengthening financial consumer protection; and raising financial education and awareness to new financial products and modes of delivery.58 The BSP will likewise remain proactive in promoting a safe, sound and efficient payments and settlements system. The BSP will continue to ensure its credibility and enhance the processes by providing the necessary infrastructure in the operation of the Philippines’ real time gross settlement system or the PhilPaSS. In pursuing the digitization of the payments system, the BSP launched the Philippine Electronic Fund Transfer (EFT) System and Operations network, or “PESONet” in November 2017.59 This initiative is part of the NRPS which lays down the principles that guide BSP’s strategic initiatives to modernize the country’s retail payment system and to shift from a cash-heavy to cash-lite economy. The BSP is also working on the launch of Instapay, a real-time low value push payment scheme.60

58 As early as 2004, the BSP has adopted a “test and learn” approach, now called regulatory sandbox, to allow financial technology (FinTech) innovations in the financial system. 59 The PESONet is the first Automated Clearing House (ACH) under the NRPS. The PESONet can be the electronic alternative to the paper-based check system. Businesses will be able to conveniently transfer funds maintained with banks and other non-banks such as electronic money issuers to any other account. In addition to the convenience of interoperability, PESONet allow funds to be made available within the same banking day. This provides better liquidity management opportunities for private businesses. 60 It is designed to facilitate small value payments and enable merchants to accept digital payments from customer on real-time basis using cards or any digital device, like smartphones.


Finally, amid the increasing interconnectedness of global financial markets, the BSP will remain an active participant in regional and international cooperation programs and fora, in order to reap the benefits of collaborative engagement.


Annexes

Annex A. Banking Policies

Rationalization of Prudential Requirements on Banking Offices and Guidelines on the Establishment of Branch-lite Units (BSP Circular No. 987 dated 28 December 2017) The BSP approved the guidelines on the establishment of bank branch-lite units anywhere in the country to facilitate greater access to efficient and competitive financial products and services. This reform addresses the current situation where there are over 570 cities and municipalities with no banking presence. With simplified and more flexible provisions, banks will be better able to expand in areas which are unbanked and underserved. A branch-lite unit shall refer to any permanent office or place of business of a bank, other than its head office or a branch. Branch-lite units can provide a wide range of products and services suited for servicing the needs of the market. These product and service offerings will depend on the business model and strategies of the banks as defined by the board of directors. The banking products offered in branch-lite units shall exclude those suited for sophisticated clients with high risk tolerance. 61 The new guidelines also rationalize the current classifications of banking offices such as extension offices (EOS), other banking offices (OBOs) and micro-banking offices (MBOs) under the branch-lite framework. This policy initiative is consistent with the BSP's reform agenda to develop a more inclusive banking system. Amendments to the Manual of Regulations on Foreign Exchange Transactions (FX Manual) (BSP Circular No. 984 and 985 dated 22 December 2017)

61 As described under Subsec. X661.3 of the MORB.

The BSP has approved further reforms to the FX regulatory framework. This is in line with the Bank’s thrust to further open up the economy through a more liberal policy environment. The reforms aim to promote greater ease in the use of the FX resources of the banking system for legitimate needs by further relaxing FX rules and further streamlining of procedures and requirements. The latest thrust represents the BSP’s goal to ensure greater and ease of access to FX resources in order to help support economic activities. This is also done with due recognition of the continuing volatility in the external financial markets. The new policy reforms included the following: 1) The prior BSP approval requirement for purely private sector loans (that is, those without guarantee from/exposure of any public sector entity) was lifted, such that these loans now only need to be registered with the BSP to allow use of banking system resources for loan payments. Requirements to support applications for registration and purchase of FX from the banking system were also substantially trimmed down, and the form of documents liberalized, including allowing the use of scanned Application to Purchase FX form. The revised rules aimed to further facilitate financing of critical and urgent projects and activities that can contribute to a more vibrant business climate conducive to growth. 2) A temporary window was opened for six months during which purely private sector loans/borrowings obtained without the required BSP approval requirement and were recorded in the obligor’s books as of the date of the implementing circular can be applied for registration following the guidelines set for the purpose. The BSP registration of these accounts has qualified the outstanding balances of the obligations to be paid on scheduled due dates using FX resources of the banking system. Previously, these loans could only be settled with the borrower’s own FX or with funds sourced outside the banking system. The initiative was intended to further widen the coverage of the BSP’s records on the country’s external obligations to support policy review and formulation,


analysis and statistical needs. Effectivity of the circulars is on 15 January 2018. The BSP emphasized that even as the rules are further liberalized, banks had been expected to continue to adopt safe and sound practices in their operations. This liberalization move was expected to further strengthen the BSP’s database and its timely and necessary adoption of the prudential measures to address any perceived emerging concerns. Reduction of Reserve Requirement on Repurchase Transactions (BSP Circular No. 983 dated 23 November 2017) The Manual of Regulations for Banks (MORB) and Manual of Regulations for Non-Banks Financial Institution (MORNBFI) shall be amended to reflect the reduction in the RR rate on repurchase (repo) transactions, as well as set forth the features of the repo program that shall be eligible for the zero reserve rate requirement. The rates of required reserves against deposit and deposit substitute liabilities in local currency of banks starting reserve week 1 December 2O17 shall be as follows: UBs/KBs TBs RBs/Coop

Banks a. Demand Deposit 20% 8% 5% b. NOW accounts 20% 8% 5% c. Savings Deposits 20% 8% 3% d. Time Deposits, Negotiable Certificates of Time Deposits (CTDs), Long-term Non-negotiable Tax Exempt CTDs

20% 8% 3%

e. Long-term negotiable certificates of time deposits

1. LTNTCDs under Circular No. 304 2. LTNTCDs under Circular No. 842

4% 7%

4% 7%

4% 7%

f. Deposit Substitutes (DS) 20% 8% NA g. DS evidenced by repo agreement62

0% 0% NA

h. IBCL (Sec. X343) 0% 0% 0% i. Bonds 6% 6% NA j. Mortgage/CHM cert. NA 6% NA k. Peso deposits lodged under 20% NA NA

62Refers to deposit substitutes evidenced by repo agreements covering GS that are transacted in an organized market under the Government Securities Repo Program.

Due to foreign banks l. Peso deposits lodged under Due to Head Office/Branches/Agencies Abroad (Philippine branch of a foreign bank)

20% NA NA

Section 4253Q of the MORNBFI shall be amended to reflect the reduction in the RR rate on repo transactions, as well as set forth the features of the repo program that shall be eligible for the zero reserve rate requirement. Enhanced Guidelines on Information Security Management (BSP Circular No. 982 dated 9 November 2017) In order to promote cyber resilience of the entire banking industry, the BSP issued the pioneering guidelines on information security management that place a renewed focus on cybersecurity. This is to address the growing concerns on fast-evolving cyber-threats that continue to confront global as well as domestic financial communities. The cyber-threat landscape has continuously evolved with more threats surfacing in the cyber realm in an increasingly complex and sophisticated fashion. If not properly managed, cyber-threats and attacks launched against Bangko Sentral supervised financial institutions (BSFIs) may result in operational, legal, reputational, and systemic risks. The amendments highlight the role of the BSFIs’ Board and senior management in spearheading sound information security governance and strong security culture within their respective networks. Likewise, BSFIs are mandated to manage information security risks and exposures within acceptable levels through a dynamic interplay of people, policies, processes, and technologies following a continuing cycle (i.e. identify, prevent, detect, respond, recover and test phases). The Circular also encompasses key elements of cyber resilience such as participation in information sharing and collaboration fora, enhancing situational awareness capabilities as well as adoption of advanced cybersecurity controls and countermeasures. A good example is the requirement to set-up a 24 by 7 security operations center (SOC) equipped with advanced technologies and manned by competent analysts to


proactively monitor emerging and highly sophisticated cyber-threats and attacks. The new guidelines recognize that BSFIs are at varying levels of cyber-maturity and cyber-risk exposures which may render certain requirements restrictive and costly vis-à-vis expected benefits. Thus, the IT profile classification has been expanded from two (2) to three (3), namely: “Complex”, “Moderate” and “Simple” to provide greater flexibility in complying with the requirements. BSFIs with complex IT profile classification would warrant adoption of advanced cybersecurity tools and processes such as the setting up of an SOC. The new regulation will serve as one of the critical components in the BSP’s Strategic Roadmap on cybersecurity. Considering the need to strike the right balance between promoting innovation and managing cyber-related risks, the new guidelines, one of the first in Southeast Asia, cover a holistic framework on information security risk management (ISRM) as an integral part of the BSFIs’ information security program, enterprise risk management system and governance mechanisms. The new Circular incorporates, to the extent possible, key principles and concepts from leading standards, technology frameworks and global best practices on information security. BSFIs are given one (1) year from the effectivity date of the Circular to fully comply with the provisions. Further, plan of actions with specific timelines, as well as the status of initiatives being undertaken to achieve full compliance, should be readily available upon request starting December 2017. Guidelines on Liquidity Risk Management (BSP Circular No. 981 dated 3 November 2017) The Monetary Board (MB) approved the revision of the guidelines on liquidity risk management for banks and quasi-banks. This revision amends the liquidity risk management guidelines which were first issued in 2006. Liquidity risk is generally defined as the current and prospective risk to earnings or capital arising from a

bank's/QB's inability to meet its obligations when they come due without incurring unacceptable losses or costs. Banks are exposed to liquidity risk as they take advantage of opportunities to expand lending activities, enter new markets, engage in and offer innovative products, and grow their off-balance sheet transactions. The guidelines emphasize the responsibility of the Board of Directors to clearly define the tolerance for liquidity risk in a manner that can easily be communicated and understood by personnel. On the other hand, it falls upon Senior Management to develop funding strategies that are aligned with the set risk tolerance. The strategies must ensure the availability of stable funding sources, the diversification of maturities, and the preservation of alternative funding sources. While the BSP expects all covered supervised institutions to identify, measure, monitor and control liquidity risk, the guidelines recognize that approaches of simple and complex banks will vary. The Circular states that bank's/QB's set of metrics or tools shall be commensurate with its size, complexity, and liquidity risk profile. The provisions of the guidelines that would largely impact complex banks and quasi-banks are those on: • Foreign currency management, which require

banks to identify and monitor positions in significant currencies;

• Intraday liquidity management, which emphasize the need for banks to measure and anticipate the timing of intraday inflows and outflows so that they may contribute to the smooth functioning of payments and settlements systems;

• Intragroup liquidity management, which set out the expectations for supervised institutions that belong to a financial group to manage and control exposures across legal entities within the group and assess the possibility that a problem in one entity may spread to other entities because of market perception;

• Collateral management, which recognize the growing utilization of repo markets as a source of funds and the requirement for financial


institutions to post margins for their derivatives transactions; and

• Stress testing and contingency funding plans, which relate the design of stress tests to banks’ specific circumstances and activities, and require greater consistency between the scenarios assumed in stress tests and the sources of funding identified in the contingency plan.

The implementing Circular gives covered supervised institutions until 1 September 2018 to develop or revise their policies and procedures and ensure that these are in accordance with the requirements of the revised guidelines. The revised liquidity risk management guidelines are primarily anchored on the Principles for Sound Liquidity Risk Management and Supervision issued by the Basel Committee. It is part of a broader set of BSP reforms on liquidity standards. This initiative was preceded by the issuance of the liquidity coverage ratio (or “LCR”) framework in March 2016. Adoption of National Retail Payment System (NRPS) Framework (BSP Circular No. 980 dated 6 November 2017) The BSP adopted the National Retail Payment System (NRPS) Framework consistent with Bangko Sentral regulations on risk management in light of the complex interplay of different types of risk arising from the rapid evolution of retail payment activities of BSFIs. The NRPS vision should help achieve higher economic growth and enhance the overall competitiveness of our economy. In carrying out retail payment-related activities, BSFIs have adhered to the NRPS Framework. This framework requires BSFIs to ensure that the retail payment systems they participate in demonstrate sound risk management, and effective and efficient interoperability. BSFIs should comply with BSP rules and regulations, particularly on information technology, consumer protection, and anti-money laundering/combating the financing of terrorism. The NRPS Framework applies to all BSFIs which meet regulatory requirements and the criteria set on a per Automated Clearing House (ACH) basis under the NRPS

framework. The NRPS framework covers all retail payment-related activities, mechanisms, institutions and users. lt applies to all domestic payments which are denominated in Philippine Peso (Php), and which may be for payments of goods and services, domestic remittances or fund transfers. Retail payments under the NRPS Framework are payments that meet at least one of the following characteristics: a. the payment is not directly related to a financial market transaction; b. the settlement is not time-critical; c. the payer, the payee, or both are individuals or non-financial organization; and d. either the payer, the payee, or both are not direct participants in the payment system that is processing the payment. Risk-Weighting of Bank Loans to the Extent Guaranteed by Credit Surety Fund (CSF) Cooperatives (BSP Circular No. 979 dated 25 October 2017) To further support the growth of the micro, small and medium enterprises (MSMEs), the BSP issued the amendments to the risk-based capital adequacy framework for banks by assigning a lower risk weight of 20 percent on performing loans to MSMEs to the extent guaranteed by a qualified Credit Surety Fund (CSF) Cooperative. A qualified CSF Cooperative refers to a cooperative that is organized consistent with the provisions of Republic Act (R.A.) No. 10744 (Credit Surety Fund Cooperative Act of 2015) and its implementing rules and regulations. Said CSF Cooperative shall have an initial leverage ratio of three, which means a CSF Cooperative can guarantee MSME loans up to three times its capital. The leverage ratio can be subsequently increased subject to review of the performance of the CSF Cooperative. Existing regulations provide that a 75 percent risk weight shall be applied to a qualified MSME portfolio. This policy intends to facilitate the increased flow of funds to MSMEs that will translate to the further growth of the sector and of the domestic


economy. The CSF Program was first launched by the BSP in 2008 with the end goal of enhancing the creditworthiness of MSMEs. This program was institutionalized with the enactment of R.A. No. 10744 on 6 February 2016. Exclusion of Loans and Other Credit Accommodations Covered by Guarantees of International/Regional Institutions/Multilateral Financial Institutions from Ceilings to Subsidiaries and Affiliates of Banks (BSP Circular No. 978 dated 27 October 2017) The MB approved the exclusion of all loans guaranteed by multilateral financial institutions (MFIs) where the Philippine Government is a member or shareholder, from the regulatory limits on banks’ loans to their subsidiaries and affiliates. For the purpose of determining compliance with this policy, the BSP considers the International Finance Corporation, the Asian Development Bank, and the Credit Guarantee and Investment Facility as MFIs. This policy amendment aims to promote level-playing field for bank borrowers through consistent application of regulatory limits on credit. Under existing regulations, loans guaranteed by MFIs are excluded from the Single Borrower’s Limit (SBL) and ceilings on a Director, Officer, Stockholder and their Related Interests (DOSRI). The amended regulations extend this exclusion to banks’ loans to subsidiaries and affiliates. This is to recognize that the mitigation of credit risk similarly applies to all MFI-guaranteed loans regardless of whether the borrower is a third party, DOSRI, or a subsidiary or affiliate of the bank. The rationalization of prudential measures is expected to result in greater flexibilities in financing the country’s large-scale projects for developmental purposes. In addition, the credit risk mitigant offered by MFIs will provide added cushion for the credit risk exposures of the banking system. Amendments to the Expanded Report on Real Estate Exposure (ERRE) and the Submission of the Report on Project Finance Exposures (RPFE) (BSP Circular No. 976 dated 10 October 2017) The BSP approved enhancements to banks’ prudential reporting requirements in order to strengthen

oversight of their real estate and project finance exposures. The reportorial enhancements form part of BSP’s macroprudential toolkit and are being deployed to sharpen the BSP’s assessment of banking system exposures to the property sector. MORB, on the limits on real estate exposures and other real estate property is amended to (1) clarify the definition of loans to finance infrastructure projects for public use that are currently exempt from the twenty percent (20%) limit on real estate loans, the expanded definition of real estate exposures and the Real Estate stress Test (REST) limits, and (2) update the definition of socialized and low-cost housing units in accordance with the latest definition of the Housing and Urban Development Coordinating Council (HUDCC). Under the new guidelines, covered banks shall report granular information on their real estate loans to mid- and high-end housing units, in addition to socialized and low-cost housing. Moreover, covered banks shall now report commercial real estate loans as to the underlying commercial project being financed such as residential units, office buildings, malls and factory/plant facilities. Universal and commercial banks (U/KBs) shall also be required to submit a new Report on Project Finance Exposures which shall include information in terms of type of infrastructure project and project phase. This report will enable the BSP to obtain a better grasp of the extent and quality of U/KB exposures to project finance, especially since demand for project finance is expected to increase and gain further traction as the country moves towards achieving its infrastructure goals. The new reports shall be implemented starting with the quarter-ending 30 June 2018. Prior to this, a pilot run submission shall be made for the reporting period ending 31 March 2018. For the pilot run submission of the revised Expanded Report on Real Estate Exposures for the quarter-ending 31 March 2018, this shall be made in parallel with the reportorial template of the Expanded Report on Real Estate Exposures issued under Memorandum to All Banks M-2012-046 dated 21 September 2012.


The enhancements to banks’ disclosure requirements aims to further capture the dimension of risks faced by banks on their real estate and project finance exposures. A deeper understanding of these exposures will improve the quality of BSP’s financial surveillance process as well as enable the BSP to adopt calibrated policy measures that shall be targeted only towards areas that warrant supervisory action. These measures supplement the existing regulatory framework governing real estate exposures of banks. This framework consists of the real estate loan limit of 20 percent of total loan portfolio, net of interbank loans, as well as the real estate stress test limits which were adopted in pursuit of the BSP’s objective of fostering financial stability. Issuance of Bonds and Commercial Papers (BSP Circular No. 975 dated 10 October 2017) The BSP issued amendments to pertinent regulations to streamline the requirements on the issuance of bonds and commercial papers by banks and quasi-banks (QBs). The amendments include removal of the minimum bond features, such as the requirement on eligible collaterals, which may constrain banks and QBs from issuing debt securities. The revised regulation however reiterates compliance with the securities law and its implementing rules and regulations. The new regulation aims to provide greater flexibility to banks and QBs in tapping the capital market as an alternative funding source. This is also consistent with the initiatives of the BSP, together with other financial regulators, to spur the development of the domestic bond market.

Annex B. Capital Market Reforms63

On enhancing transparency through the development of necessary market infrastructure

• The BSP, the BTr, and the SEC launched the

government securities repurchase (or repo)

63 Source: Bangko Sentral ng Pilipinas, Media Releases.

program. This allowed dealers to borrow securities, ensure title transfer and quote two-way prices on government bonds, providing the added liquidity and access to credit risk-free funding. The platform for the repo trading was provided by Bloomberg that is directly linked to the settlement engine of the Philippine Depository and Trust Corporation (PDTC), enabling a straight through processing of all repo trades.

• In support of this development, the BSP approved the issuance of a circular assigning a zero-percent RR on repo transactions. This responds to the industry request to minimize the friction cost on repo transactions that conform to international best practices. This complements the earlier issuance of the BIR providing exemption of repo transactions under the Program from documentary stamp tax.

• With the launching of the repo market, the SEC

approved a provisional license for the Money Market Association of the Philippines (MART) to act as the self-regulatory organization (SRO) for the government securities repo market. The MART as the SRO shall have the right to formulate its own policies within a period of six months, allowing the participants to trade in the repo market following the SRO rules.

• The SEC announced the launching of the ASEAN Green Bond Standards (AGBS) during the ASEAN Capital Markets Forum (ACMF) in Kuala Lumpur, Malaysia. The AGBS were developed based on International Capital Market Association’s (ICMA) Green Bond Principles (GBP) and tailored to meet the needs and commitment of ASEAN. The AGBS label is to be used only for issuers and projects in the region and specifically excludes fossil fuel-related projects. Per SEC, a Philippine company has already issued certified green debt which sets the standards for future green geothermal projects worldwide. The alignment of AGBS with GBP is expected to drive sustainable investment in the Philippines. The adoption of international standards is a welcome development as it helps in increasing transparency and disclosure and promoting integrity in the green bond market.


On improving ease of doing business

• The BSP approved another wave of reforms in the FX market to further enhance the ease of doing business in the Philippines. The BSP lifted the approval requirement for private sector loans, that is, those without guarantee from/exposure of any public sector entity. These loans will only need to be registered with the BSP to allow the use of banking system resources for loan payments. The requirements to support applications for registration and purchase of FX from the banking system were also substantially trimmed down, and the form of documents liberalized, including allowing the use of scanned “Application to Purchase FX” form. These measures forms part of a broader agenda for an organized FX market to enhance depth and transparency, improve price discovery, and increase availability of FX products.

• To streamline the requirements on the issuance of bonds and commercial papers by banks and quasi-banks (QBs), the BSP approved the removal of the minimum bond features, such as the requirement on eligible collaterals, which may constrain banks and QBs from issuing debt securities. The revised regulation, however, reiterates compliance with the securities law and its implementing rules and regulations. The new regulation aims to provide greater flexibility to banks and QBs in tapping the capital market as an alternative funding source. This is also consistent with the initiatives of the BSP, together with other financial regulators, to spur the development of the domestic bond market.

• As part of the BSP’s strategic initiatives to modernize the country’s retail payment system, increase the adoption of greater use of e-payments, and to shift from a cash-heavy to a cash-lite society, the Philippine Electronic Fund Transfer (EFT) System and Operations Network (PESONet) was launched in November 2017. Through the PESONet, businesses, the government, and individuals will be able to conveniently initiate electronic fund transfers and recurring payments from the sender’s accounts maintained in BSFIs, such as banks and other non-bank electronic money issuers (NB EMIs),

to corresponding recipient accounts in other BSFIs. Funds can be made available to the recipient account/s within the same banking day or immediately upon clearing. Payees receive the funds transferred in full and shall not pay for electronic crediting to their accounts. Moreover, for greater transparency and to help clients determine which EFT products offer the best value for their money, all participating BFSIs are required to disclose to BSP the details of all fees that will be charged to their clients.


AE Advanced Economies

AONCR Area Outside National Capital Region

ACMF Asean Capital Markets Forum AGBS Asean Green Bond Standards

ASEAN Association of Southeast Asian Nations

ACH Automated Clearing House BOP Balance of Payments BSP Bangko Sentral ng Pilipinas

BSFI Bangko Sentral Supervised Financial Institutions

BOE Bank of England BOJ Bank of Japan bps basis points

BOC Bureau of Customs BTr Bureau of the Treasury BPO Business Process Outsourcing CAR Capital Adequacy Ratio

CPI Consumer Price Index CCR Credit Card Receivables CDS Credit Default Swaps CSF Credit Surety Fund

DBM Department of Budget And Management

DBCC Development Budget Coordination Committee

DOSRI Director, Officer, Stockholder and Their Related Interests

EFT Electronic Fund Transfer EMI Electronic Money Issuers

EMBIG Emerging Market Bond Index Global

ECB European Central Bank ETF Exchange-Traded Funds

ERREE Expanded Report on Real Estate Exposures

FXTN Fixed Income Treasury Notes FCD Foreign Currency Deposits FDI Foreign Direct Investment

FX Foreign Exchange GGD General Government Debt GS Government Securities

GOCC Government-Owned and Controlled Corporations

GBP Green Bond Principles GNPL Gross Non-Performing Loan

GDP Gross Domestic Product

GIR Gross International Reserves

HUDCC Housing And Urban Development Coordinating Council

Ibid ibidem, “at the same place”

ISRM Information Security Risk Management

ICMA International Capital Market Association

IMF International Monetary Fund

IDR Issuer Default Rating JGB Japanese Government Bonds

J-REIT Japanese Real Estate Investment Trusts

LFPR Labor Force Participation Rate LFS Labor Force Survey LCY Local Currency LGU Local Government Unit

LIBOR London Interbank Offered Rate MORB Manual of Regulations For Banks

MORNBFI Manual of Regulations for Non-Bank Financial Institutions

MBO Micro Banking Offices

MSME Micro, Small and Medium Enterprises

MB Monetary Board MCI Monetary Conditions Index

MOS Monetary Operations System MPC Monetary Policy Committee

MART Money Market Association of The Philippines'

MVL Motor Vehicle Loans MFI Multilateral Financial Institutions NCR National Capital Region

NESDB National Economic and Social Development Board

NG National Goverment NRPS National Retail Payment System NFA Net Foreign Assets

NIR Net International Reserves NNPL Net Non-Performing Loan NEER Nominal Effective Exchange Rate NPL Non-Performing Loan

OECD Organization for Economic Co-operation and Development

OBOS Other Banking Offices O/N Overnight

List of Acronyms, Abbreviations, and Symbols


ODF Overnight Deposit Facility

OF Overseas Filipinos ppts percentage points

PDTC Philippine Depository And Trust Corporation

EFT Philippine Electronic Fund Transfer

PESONet Philippine Electronic Fund Transfer System and Operations Network

PhilPass Philippine Payments and Settlements System

PSA Philippine Statistics Authority PSE Philippine Stock Exchange PSEi Philippine Stock Exchange index q-o-q Quarter-on-Quarter

QB Quasi Banks REER Real Effective Exchange Rate REST Real Estate Stress Test

RPFE Report On Project Finance Exposures

RA Republic Act ROP Republic of the Philippines RP Repurchase

RR Reserve Requirement RREL Residential Real Estate Loans RTBs Retail Tresury Bonds RRP Reverse Repurchase

RB Rural Banks

SBGPCL Salary-Based General-Purpose Consumption Loans

SEC Securities and Exchange Commission

SRO Self-Regulatory Organization SIBOR Singapore Interbank Offered Rate SME Small and Medium Enterprises SDA Special Deposits Account

SDR Special Drawing Rights

TRAIN Tax Reform for Acceleration and Inclusion

TRAIN Tax Reform For Acceleration And Inclusion

TDF Term Deposit Facility TBs Thrift Banks TLP Total Loan Portfolio

TPI Trading Partners Index

TPI-A Trading Partners Index- Advanced Countries

TPI-D Trading Partners Index- Developing Countries

T-bill Treasury bill

T-bond Treasury bond U/KB Universal and Commercial Banks WESM Wholesale Electricity Spot Market y-o-y Year-on-Year


Report on Economic and Financial Developments – Fourth Quarter 2017 Statistical Tables

1 Gross National Income and Gross Domestic Product by Industrial Origin

1a Gross National Income and Gross Domestic Product by Expenditure Shares

2 Selected Labor, Employment and Wage Indicators

3 Cash Operations of the National Government

4 Consumer Price Index in the Philippines

4a Consumer Price Index in the National Capital Region

4b Consumer Price Index in Areas Outside the National Capital Region

5 Monetary Indicators

6 Selected Domestic Interest Rates

7 Number of Financial Institutions

8 Total Resources of the Philippine Financial System

9 Ratios of Non-Performing Loans and Loan Loss Provisions to Total Loans of the Banking System

10 Stock Market Transactions

11 Balance of Payments

12 International Reserves of the Bangko Sentral ng Pilipinas

13 Exchange Rates of the Peso (Peso per Unit of Foreign Currency)

13a Exchange Rates of the Peso (Unit of Foreign Currency per Peso)

13b Effective Exchange Rate Indices of the Peso

14 Total External Debt

15 Selected Foreign Debt Service Indicators

16 Selected Foreign Interest Rates

17 Balance Sheet of the Bangko Sentral ng Pilipinas

18 Income Statement of the Bangko Sentral ng Pilipinas

1 GROSS NATIONAL INCOME AND GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGINfor periods indicated


Agriculture, Hunting, Forestry and Fishing 179.7 167.0 155.8 216.3 181.4 166.9 155.6 215.8 173.6 163.6 160.2 213.0 182.1 173.9 164.4 218.1

Industry 561.3 614.6 558.1 657.3 592.4 654.6 594.7 703.8 647.4 704.4 646.9 759.6 688.3 756.9 697.7 815.4Mining and Quarrying 21.7 30.3 16.4 13.3 21.1 27.7 16.4 15.2 23.5 26.6 16.1 16.9 19.3 29.9 17.1 18.3Manufacturing 400.8 414.7 378.6 472.4 425.0 434.2 400.7 501.2 459.0 461.1 428.0 536.2 493.8 497.8 470.8 583.1Construction 87.3 109.0 98.5 114.5 91.8 129.5 108.0 127.7 104.8 147.0 126.6 141.4 114.2 157.4 131.0 145.4Electricity, Gas and Water Supply 51.5 60.6 64.6 57.2 54.4 63.2 69.6 59.7 60.0 69.8 76.2 65.2 60.9 71.8 78.7 68.5

Services 941.0 1,052.3 1,001.4 1,060.6 993.6 1,123.2 1,074.1 1,144.1 1,068.4 1,215.1 1,147.3 1,226.7 1,139.9 1,292.1 1,229.5 1,310.1Transportation, Storage and Communication 130.0 144.0 119.1 144.9 141.0 153.6 128.7 158.1 148.4 164.4 134.6 168.2 154.5 170.0 139.3 177.3Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 255.2 288.4 312.0 330.2 270.3 307.6 338.3 354.3 290.7 334.9 359.7 377.4 312.2 354.0 385.2 407.3Financial Intermediation 125.5 136.7 124.0 129.2 130.9 144.6 130.7 140.4 143.7 154.6 141.8 148.1 153.7 168.7 154.1 156.9Real Estate, Renting and Busines Activities 181.2 208.7 204.5 203.6 192.6 222.3 220.5 219.3 209.4 241.8 240.1 239.2 224.4 261.9 258.9 254.9Public Administration and Defense; Compulsory Social Security 69.0 83.4 71.2 70.3 66.2 82.8 73.1 75.4 69.7 88.1 75.7 85.4 73.5 94.7 82.0 92.8Other Services 180.1 191.1 170.6 182.4 192.5 212.3 183.0 196.5 206.7 231.4 195.4 208.2 221.6 242.7 210.1 220.9

Gross Domestic Product 1,682.0 1,833.8 1,715.4 1,934.3 1,767.4 1,944.7 1,824.4 2,063.7 1,889.4 2,083.2 1,954.5 2,199.3 2,010.3 2,222.8 2,091.7 2,343.5

Net Primary Income 372.0 365.0 358.5 379.3 381.3 372.7 377.5 411.5 417.1 395.3 393.0 425.0 439.8 423.1 416.5 442.4

Gross National Income 2,054.0 2,198.8 2,073.9 2,313.5 2,148.7 2,317.4 2,201.9 2,475.2 2,306.5 2,478.5 2,347.5 2,624.3 2,450.0 2,645.9 2,508.1 2,785.9


Agriculture, Hunting, Forestry and Fishing 0.9 3.3 -2.3 4.1 1.0 -0.1 -0.1 -0.2 -4.3 -2.0 3.0 -1.3 4.9 6.3 2.6 2.4

Industry 4.8 9.0 7.8 9.2 5.5 6.5 6.5 7.1 9.3 7.6 8.8 7.9 6.3 7.4 7.9 7.3Mining and Quarrying 17.4 10.8 12.7 6.3 -2.5 -8.6 0.5 14.0 11.4 -4.0 -2.0 10.8 -18.0 12.5 6.1 8.8Manufacturing 7.0 11.1 7.5 7.7 6.0 4.7 5.8 6.1 8.0 6.2 6.8 7.0 7.6 7.9 10.0 8.8Construction -4.2 3.9 12.0 17.1 5.1 18.8 9.6 11.6 14.2 13.5 17.2 10.7 9.0 7.1 3.5 2.8Electricity, Gas and Water Supply 0.5 4.3 2.5 7.4 5.8 4.4 7.7 4.5 10.2 10.3 9.6 9.2 1.5 2.9 3.3 5.1

Services 7.0 6.0 5.7 5.5 5.6 6.7 7.3 7.9 7.5 8.2 6.8 7.2 6.7 6.3 7.2 6.8Transportation, Storage and Communication 8.2 6.8 5.3 5.5 8.4 6.6 8.0 9.1 5.3 7.0 4.6 6.4 4.2 3.4 3.5 5.4Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 6.3 6.7 7.0 3.4 5.9 6.7 8.4 7.3 7.5 8.9 6.3 6.5 7.4 5.7 7.1 7.9Financial Intermediation 5.7 6.1 8.4 8.9 4.3 5.8 5.4 8.7 9.7 6.9 8.5 5.5 7.0 9.1 8.6 5.9Real Estate, Renting and Busines Activities 9.5 7.9 5.9 8.9 6.3 6.5 7.8 7.7 8.7 8.8 8.9 9.1 7.1 8.3 7.8 6.6Public Administration and Defense; Compulsory Social Security 7.0 1.8 -2.4 11.5 -4.0 -0.7 2.6 7.3 5.2 6.4 3.7 13.3 5.5 7.6 8.2 8.7Other Services 5.5 4.3 5.0 1.5 6.9 11.1 7.3 7.7 7.3 9.0 6.8 6.0 7.2 4.9 7.5 6.1

Gross Domestic Product 5.6 6.8 5.6 6.6 5.1 6.0 6.4 6.7 6.9 7.1 7.1 6.6 6.4 6.7 7.0 6.6

Net Primary Income 11.4 9.6 -1.9 2.7 2.5 2.1 5.3 8.5 9.4 6.1 4.1 3.3 5.4 7.0 6.0 4.1

Gross National Income 6.6 7.2 4.2 5.9 4.6 5.4 6.2 7.0 7.3 7.0 6.6 6.0 6.2 6.8 6.8 6.2


Agriculture, Hunting, Forestry and Fishing 0.1 0.3 -0.2 0.5 0.1 . . . -0.4 -0.2 0.3 -0.1 0.4 0.5 0.2 0.2

Industry 1.6 3.0 2.5 3.0 1.8 2.2 2.1 2.4 3.1 2.6 2.9 2.7 2.2 2.5 2.6 2.5Mining and Quarrying 0.2 0.2 0.1 . . -0.1 . 0.1 0.1 -0.1 . 0.1 -0.2 0.2 0.1 0.1Manufacturing 1.6 2.4 1.6 1.9 1.4 1.1 1.3 1.5 1.9 1.4 1.5 1.7 1.8 1.8 2.2 2.1Construction -0.2 0.2 0.6 0.9 0.3 1.1 0.5 0.7 0.7 0.9 1.0 0.7 0.5 0.5 0.2 0.2Electricity, Gas and Water Supply . 0.1 0.1 0.2 0.2 0.1 0.3 0.1 0.3 0.3 0.4 0.3 . 0.1 0.1 0.2

Services 3.9 3.5 3.3 3.1 3.1 3.9 4.2 4.3 4.2 4.7 4.0 4.0 3.8 3.7 4.2 3.8Transportation, Storage and Communication 0.6 0.5 0.4 0.4 0.6 0.5 0.6 0.7 0.4 0.6 0.3 0.5 0.3 0.3 0.2 0.4Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods 0.9 1.1 1.3 0.6 0.9 1.0 1.5 1.2 1.2 1.4 1.2 1.1 1.1 0.9 1.3 1.4Financial Intermediation 0.4 0.5 0.6 0.6 0.3 0.4 0.4 0.6 0.7 0.5 0.6 0.4 0.5 0.7 0.6 0.4Real Estate, Renting and Busines Activities 1.0 0.9 0.7 0.9 0.7 0.7 0.9 0.8 0.9 1.0 1.1 1.0 0.8 1.0 1.0 0.7Public Administration and Defense; Compulsory Social Security 0.3 0.1 -0.1 0.4 -0.2 . 0.1 0.3 0.2 0.3 0.1 0.5 0.2 0.3 0.3 0.3Other Services 0.6 0.5 0.5 0.1 0.7 1.2 0.7 0.7 0.8 1.0 0.7 0.6 0.8 0.5 0.7 0.6


. Rounds off to zero

Note: Total may not add up due to rounding.

Data on real GDP and its components are based on 2000 prices. The use of terminology Gross National Income (GNI) in place of Gross National Product (GNP) has been adopted in the revised/rebased Philippine System of National Accounts (PSNA) in

accordance with the 1993/1998 System of National Accounts prescribed by the United Nations.

Source of basic data: Philippine Statistics Authority (PSA)

2016

2014 2015

2014 2015 2016 2017

2017

2017CONTRIBUTION TO GDP GROWTH (in percent)

LEVELS (in billion pesos; at constant 2000 prices)

ANNUAL CHANGE (in percent)

2016

2014 2015

1aGROSS NATIONAL INCOME AND GROSS DOMESTIC PRODUCT BY EXPENDITURE SHARESfor periods indicated


Household Final Consumption Expenditure 1,161.4 1,212.1 1,172.8 1,406.6 1,231.6 1,289.8 1,245.1 1,500.1 1,319.5 1,386.5 1,334.3 1,592.5 1,395.8 1,468.1 1,404.4 1,690.1

Government Final Consumption Expenditure 185.2 219.5 168.9 155.3 185.2 224.3 195.0 179.5 207.1 254.5 201.1 187.5 207.4 272.5 217.8 214.3

Capital Formation 370.0 315.4 386.6 481.1 428.2 405.7 445.5 559.0 563.0 528.5 542.3 640.9 622.9 573.6 589.4 693.8 Fixed Capital 373.8 358.9 379.8 427.8 425.3 406.4 442.6 526.2 545.6 529.7 555.2 623.8 625.6 579.8 599.6 681.6

Construction 135.0 163.9 152.6 180.7 142.2 190.4 167.6 201.6 163.7 224.4 199.1 220.3 181.4 241.4 204.2 226.6Durable Equipment 202.7 163.1 194.3 203.0 244.2 183.1 237.2 274.2 335.6 268.2 312.3 346.3 392.3 291.8 343.6 388.3Breeding Stock & Orchard Dev't 26.1 22.5 18.3 30.4 26.1 23.0 19.0 31.2 27.1 23.8 19.6 32.3 27.9 24.9 20.3 33.2Intellectual Property Products 9.9 9.5 14.5 13.7 12.7 9.9 18.8 19.2 19.1 13.3 24.3 24.8 24.0 21.6 31.5 33.5

Changes in Inventories -3.8 -43.5 6.8 53.3 3.0 -0.7 2.9 32.7 17.5 -1.3 -12.9 17.2 -2.7 -6.2 -10.2 12.2

Exports 811.6 906.8 964.8 723.3 899.5 937.0 1,054.1 804.9 991.4 1,036.6 1,149.3 912.9 1,192.5 1,248.0 1,352.4 1,082.7

Less: Imports 859.1 802.4 966.8 847.6 968.4 909.5 1,106.1 1,000.2 1,172.9 1,140.5 1,253.4 1,154.6 1,391.0 1,353.7 1,451.8 1,356.2

Statistical Discrepancy 12.9 -17.5 -10.9 15.5 -8.7 -2.7 -9.1 20.5 -18.8 17.7 -19.0 20.1 -17.3 14.3 -20.6 18.8

Gross Domestic Product 1,682.0 1,833.8 1,715.4 1,934.3 1,767.4 1,944.7 1,824.4 2,063.7 1,889.4 2,083.2 1,954.5 2,199.3 2,010.3 2,222.8 2,091.7 2,343.5

Net Primary Income 372.0 365.0 358.5 379.3 381.3 372.7 377.5 411.5 417.1 395.3 393.0 425.0 439.8 423.1 416.5 442.4

Gross National Income 2,054.0 2,198.8 2,073.9 2,313.5 2,148.7 2,317.4 2,201.9 2,475.2 2,306.5 2,478.5 2,347.5 2,624.3 2,450.0 2,645.9 2,508.1 2,785.9


Household Final Consumption Expenditure 6.3 5.6 5.0 5.3 6.0 6.4 6.2 6.6 7.1 7.5 7.2 6.2 5.8 5.9 5.3 6.1

Government Final Consumption Expenditure 3.4 1.5 -1.1 11.1 . 2.2 15.5 15.5 11.8 13.5 3.1 4.5 0.1 7.1 8.3 14.3


Construction -5.5 7.2 12.8 19.0 5.3 16.2 9.9 11.6 15.1 17.9 18.8 9.3 10.8 7.6 2.6 2.9Durable Equipment 4.8 3.9 11.3 5.2 20.5 12.3 22.0 35.1 37.4 46.5 31.7 26.3 16.9 8.8 10.0 12.1Breeding Stock & Orchard Dev't -4.4 -2.0 -1.6 2.3 0.1 2.3 3.6 2.6 3.8 3.6 3.1 3.7 3.1 4.6 3.5 2.5Intellectual Property Products 15.7 38.6 46.4 9.5 28.3 4.7 29.6 40.7 50.4 34.2 28.7 29.0 25.2 62.4 29.9 35.3

Changes in Inventories 87.9 -34.9 -85.2 -24.8 178.4 98.5 -57.5 -38.6 489.7 -88.7 -549.5 -47.6 -115.5 -389.0 20.8 -29.0

Exports 13.3 10.3 14.6 12.3 10.8 3.3 9.3 11.3 10.2 10.6 9.0 13.4 20.3 20.4 17.7 18.6

Less: Imports 17.9 4.9 8.0 9.5 12.7 13.3 14.4 18.0 21.1 25.4 13.3 15.4 18.6 18.7 15.8 17.5

Statistical Discrepancy 281.2 -66.3 -264.3 40.7 -167.1 84.7 16.3 31.8 -116.4 760.3 -108.6 -1.6 8.0 -19.2 -8.4 -6.7


Net Primary Income 11.4 9.6 -1.9 2.7 2.5 2.1 5.3 8.5 9.4 6.1 4.1 3.3 5.4 7.0 6.0 4.1

Gross National Income 6.6 7.2 4.2 5.9 4.6 5.4 6.2 7.0 7.3 7.0 6.6 6.0 6.2 6.8 6.8 6.2


Household Final Consumption Expenditure 4.3 3.8 3.5 3.9 4.2 4.2 4.2 4.8 5.0 5.0 4.9 4.5 4.0 3.9 3.6 4.4

Government Final Consumption Expenditure 0.4 0.2 -0.1 0.9 . 0.3 1.5 1.2 1.2 1.6 0.3 0.4 . 0.9 0.9 1.2


Construction -0.5 0.6 1.1 1.6 0.4 1.4 0.9 1.1 1.2 1.7 1.7 0.9 0.9 0.8 0.3 0.3Durable Equipment 0.6 0.4 1.2 0.6 2.5 1.1 2.5 3.7 5.2 4.4 4.1 3.5 3.0 1.1 1.6 1.9Breeding Stock & Orchard Dev't -0.1 . . . . . . . 0.1 . . 0.1 . 0.1 . .Intellectual Property Products 0.1 0.2 0.3 0.1 0.2 . 0.3 0.3 0.4 0.2 0.3 0.3 0.3 0.4 0.4 0.4

Changes in Inventories 1.7 -0.7 -2.4 -1.0 0.4 2.3 -0.2 -1.1 0.8 . -0.9 -0.8 -1.1 -0.2 0.1 -0.2

Exports 6.0 4.9 7.6 4.4 5.2 1.6 5.2 4.2 5.2 5.1 5.2 5.2 10.6 10.2 10.4 7.7

Less: Imports 8.2 2.2 4.4 4.1 6.5 5.8 8.1 7.9 11.6 11.9 8.1 7.5 11.5 10.2 10.1 9.2

Statistical Discrepancy 1.3 -0.4 -1.1 0.2 -1.3 0.8 0.1 0.3 -0.6 1.0 -0.5 . 0.1 -0.2 -0.1 -0.1


. Rounds off to zero

Accounts (PSNA) in accordance with the 1993/1998 System of National Accounts prescribed by the United Nations. Total may not add up due to rounding.

Source : Philippine Statistics Authority (PSA)

LEVELS (in billion pesos; at constant 2000 prices)

2015 2016

2014 2015 2016

Note: Data on Real GDP and its components are based on 2000 prices. The use of terminology Gross National Income (GNI) in place of Gross National Product (GNP) has been adopted in the revised/rebased Philippine System of National

CONTRIBUTION TO GDP GROWTH (in percent)2014 2015 2016

2017

2017

2017

ANNUAL CHANGE (in percent)2014

2 SELECTED LABOR, EMPLOYMENT AND WAGE INDICATORS

2016 2017Ave/Total Ave/Total Q1 Q2 Q3p Q4p

w/ Leyte w/o Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte w/ Leyte

Employment Status 1

Labor Force (in thousands) 41,343 43,361 42,777 43,144 43,289 43,286 43,724 42,109 42,714 42,543 43,739 Employed 38,741 40,998 40,335 40,689 40,664 40,954 41,685 39,347 40,271 40,170 41,551

Employment Created2 (663) 1,777 1,910 (1,342) (393) (784) (134)Agriculture (803) 186 40 (881) 125 (1,028) (1,427)Industry 212 812 785 (1) 41 434 374 Services (72) 779 1,085 (460) (559) (189) 920

Unemployed 2,602 2,363 2,441 2,455 2,625 2,332 2,040 2,761 2,443 2,373 2,188 Underemployed 7,180 7,513 6,506 7,975 7,431 7,134 7,510 6,398 6,468 6,541 6,617

Labor Force Participation Rate (%) 63.7 63.5 61.2 63.6 63.5 63.2 63.6 60.7 61.4 60.6 62.1 Employment Rate (%) 93.7 94.6 94.3 94.3 93.9 94.6 95.3 93.4 94.3 94.4 95.0 Unemployment Rate (%) 6.3 5.4 5.7 5.7 6.1 5.4 4.7 6.6 5.7 5.6 5.0 Underemployment Rate (%) 18.5 18.3 16.1 19.6 18.3 17.4 18.0 16.3 16.1 16.3 15.9 NCR Labor Turnover Rate (%) 1.4 2.6 1.0 2.3 3.7 3.4 1.3 2.1

Overseas Employment (Deployed, in thousands) 1,844 2,112 Land-based 1,438 1,670 Sea-based 407 443

Strikes

Number of New Strikes 5 15 9 0 3 5 7 2 4 3 0 Number of Workers Involved 730 3,106 1,479 0 650 283 2173 352 693 434 0

Nominal Daily Wage Rates (in pesos)2

Non-Agricultural

NCR 481.0 491.0 512.0 481.0 491.0 491.0 491.0 491.0 491.0 491.0 512.0Regions Outside NCR 362.5 378.5 380.0 362.5 364.0 378.5 378.5 378.5 380.0 380.0 380.0

Agricultural

NCR

Plantation 444.0 454.0 475.0 444.0 454.0 454.0 454.0 454.0 454.0 454.0 475.0 Non-Plantation 444.0 454.0 475.0 444.0 454.0 454.0 454.0 454.0 454.0 454.0 475.0Regions Outside NCR

Plantation 337.5 353.5 353.5 337.5 337.5 353.5 353.5 353.5 353.5 353.5 353.5 Non-Plantation 335.0 335.0 348.0 335.0 335.0 335.0 335.0 348.0 348.0 348.0 348.0

Real Daily Wage Rates (in pesos), 2006=100 3

Non-Agricultural

NCR 363.8 361.6 360.3 364.7 369.2 366.1 361.6 357.9 358.1 349.7 360.3Regions Outside NCR 257.8 265.2 251.2 259.1 250.7 268.3 265.2 262.1 254.4 253.2 251.2

Agricultural

NCR

Plantation 335.9 334.3 334.3 336.6 341.4 338.6 334.3 330.9 331.2 323.4 334.3 Non-Plantation 335.9 334.3 334.3 336.6 341.4 338.6 334.3 330.9 331.2 323.4 334.3Regions Outside NCR

Plantation 240.0 247.7 240.6 241.2 240.0 250.5 247.7 244.8 245.5 243.3 240.6 Non-Plantation 229.5 223.5 224.7 228.5 225.9 225.1 223.5 230.0 228.2 227.0 224.7

Notes:1

2

3

P Preliminary

Sources: Philippine Overseas Employment Administration (POEA), National Wages and Productivity Commission (NWPC), National Conciliation and Mediation Board (NCMB),

Starting 10 November 1990, adjustments in the minimum legislated wage rates are being determined by the Regional Tripartite Wages Productiviity Board. Starting 2010, real terms is computed using 2006 as base year.

Department of Labor and Employment (DOLE) - Bureau of Local Employment (BLE) and Philippine Statistics Authority (PSA)

Starting April 2016 round, the Labor Force Survey (LFS) adopted the 2013 Master Sample Design, with a sample size of approximately 44,000 households as well as the population projections based on the 2010 Census of Population and Housing (2010 CPH). Meanwhile, previous survey rounds were derived using 2000 CPH population projection. Starting January 2017 round, Computer Aided Personal Interviewing (CAPI) using Tablet was utilized in the LFS enumeration. Details may not add up to totals due to rounding.

Ave/Total Q1 Q2 Q3

Source of data for both nominal and real wage rates is the National Wages and Productivity Commission. It includes basic minimum wage and cost of living allowance (COLA). Starting 2006, annual figures reflects December data. Figures outside NCR represent the highest nominal regional rates in a given category and its corresponding value in real terms.

2015 2016Q4

2017

3 CASH OPERATIONS OF THE NATIONAL GOVERNMENT for periods indicated in billion pesos

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr JulRevenues 470.5 615.2 519.2 504.0 479.0 622.0 545.8 549.2 532.4 644.0 625.1 671.7 Ratio to GDP 15.5 18.5 16.3 13.3 14.6 17.2 15.7 13.4 14.9 16.3 16.4 15.1

Tax 403.7 489.4 462.7 459.8 425.3 557.6 489.7 507.7 480.0 589.0 570.0 611.8Non-tax 66.9 125.8 56.6 44.2 53.6 64.4 56.1 41.4 52.4 55.0 55.1 59.9

Expenditures 504.0 567.9 558.5 600.1 591.5 629.8 639.2 688.9 615.4 715.5 683.7 809.2 Ratio to GDP 16.6 17.1 17.5 15.9 18.1 17.4 18.3 16.8 17.2 18.1 17.9 18.2

Interest Payments 100.6 55.5 99.6 53.6 102.6 51.1 96.1 54.7 97.9 53.7 97.4 61.6Equity 0.1 0.2 . 0.4 8.2 0.3 . 3.2 0.0 3.2 . 2.1Net Lending 2.2 0.4 1.8 5.2 3.5 0.6 -0.4 11.6 -1.7 0.4 -4.1 1.2Subsidy 3.7 40.3 11.8 22.2 8.2 28.4 45.8 20.8 19.7 38.6 25.4 47.5Allotment to LGUs 97.1 96.8 96.8 96.8 121.7 108.5 108.1 111.5 122.4 151.3 128.3 128.2Tax Expenditures 5.6 1.9 0.5 5.6 0.1 3.5 0.9 7.8 0.2 1.4 0.7 1.2Others 294.7 372.8 347.9 416.2 347.1 437.6 388.8 479.3 377.0 466.9 436.1 567.5

Surplus/Deficit (-) -33.5 47.3 -39.3 -96.1 -112.5 -7.8 -93.4 -139.7 -83.0 -71.5 -58.6 -137.6 Ratio to GDP -1.1 1.4 -1.2 -2.5 -3.4 -0.2 -2.7 -3.4 -2.3 -1.8 -1.5 -3.1Primary Balance 67.1 102.8 60.3 -42.5 -9.9 43.3 2.7 -85.0 14.9 -17.8 38.8 -76.0 Ratio to GDP 2.2 3.1 1.9 -1.1 -0.3 1.2 0.1 -2.1 0.4 -0.4 1.0 -1.7

Financing 1 -9.3 24.8 60.7 16.7 86.3 25.0 109.1 0.5 87.4 261.4 106.0 209.133.5 -47.3 39.3 96.1 112.5 7.8 93.4 139.7 83.0 71.5 58.6

External Borrowings 22.6 28.2 -0.6 14.5 14.6 -7.4 -5.6 -25.8 29.8 -1.6 9.3 -9.9Domestic Borrowings -31.9 -3.5 61.3 2.2 71.6 32.4 114.7 26.3 57.7 263.0 96.6 219.0

Total Change in Cash: Deposit/Withdrawal (-) 30.7 29.8 23.4 -85.5 -116.3 -9.2 -15.7 -116.4 50.5 126.3 -24.0 102.7

Budgetary -42.8 72.0 21.4 -79.4 -26.2 17.2 15.7 -139.2 4.5 189.9 47.4 71.6Non-Budgetary Accounts 2 73.6 -42.2 2.0 -6.1 -90.1 -26.4 -31.4 22.7 46.0 -63.6 -71.4 31.1

1 Availment less repayment2 Refers to accounts not included in the NG budget, e.g., sale, purchase or redemption of government securities, but included in the cash operations report to

show the complete relations in the movements of the cash accounts.. rounds off to zero- not available

Note: Details may not add up to total due to rounding offSource: Bureau of the Treasury

201720162015

4 CONSUMER PRICE INDEX IN THE PHILIPPINESfor periods indicated(2006=100)Quarterly Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ALL ITEMS 141.1 141.3 141.5 142.2 142.7 143.4 144.4 145.7 147.2 147.9 148.9 150.5FOOD AND NON-ALCHOLIC BEVERAGES 156.9 156.4 157.3 158.5 159.4 160.0 161.6 164.0 165.5 166.1 167.2 169.6

FOOD ITEMS 158.8 158.2 159.2 160.5 161.4 162.0 163.7 166.2 167.9 168.3 169.5 172.1ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 180.5 181.8 182.6 184.8 189.3 191.8 193.6 196.4 200.7 203.6 205.8 209.1NON-FOOD 129.4 130.0 129.8 129.9 130.1 130.8 131.3 131.9 133.2 133.9 134.9 136.0CLOTHING AND FOOTWEAR 135.4 136.0 136.6 137.2 138.0 139.1 140.1 140.8 141.8 142.3 142.9 143.4HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 129.4 130.1 128.7 128.1 128.1 128.8 129.0 129.6 131.8 132.8 132.8 134.7

ELECTRICITY, GAS AND OTHER FUELS 134.1 134.9 129.5 126.5 124.7 125.7 125.3 126.3 132.2 134.2 132.2 137.8FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 130.2 130.8 131.1 131.5 132.2 132.9 133.9 134.6 135.3 135.9 136.4 137.0HEALTH 138.6 138.9 139.5 140.2 141.2 142.2 143.2 143.8 144.9 145.6 146.6 146.9TRANSPORT 126.8 127.8 127.6 128.1 127.2 127.8 127.6 129.2 130.6 131.4 133.1 133.9

OPERATION OF PERSONAL TRANSPORT EQUIPMENT 119.8 122.7 120.5 119.5 116.7 119.7 119.5 121.3 124.6 123.8 124.5 128.2COMMUNICATION 92.6 92.6 92.7 92.7 92.7 92.8 92.8 92.8 92.9 93.0 93.1 93.2RECREATION AND CULTURE 114.8 115.1 115.5 115.8 116.1 116.9 117.5 117.8 118.2 118.5 119.1 119.6EDUCATION 152.6 154.4 158.1 158.1 158.1 159.0 160.9 161.0 161.0 162.1 164.6 164.6RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 129.6 129.9 130.3 130.9 131.7 132.7 133.4 133.8 134.4 134.8 136.3 137.6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ALL ITEMS 0.2 0.1 0.1 0.5 0.4 0.5 0.7 0.9 1.0 0.5 0.7 1.1FOOD AND NON-ALCHOLIC BEVERAGES 0.3 -0.3 0.6 0.8 0.6 0.4 1.0 1.5 0.9 0.4 0.7 1.4

FOOD ITEMS 0.3 -0.4 0.6 0.8 0.6 0.4 1.0 1.5 1.0 0.2 0.7 1.5ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 1.5 0.7 0.4 1.2 2.4 1.3 0.9 1.4 2.2 1.4 1.1 1.6NON-FOOD 0.2 0.5 -0.2 0.1 0.2 0.5 0.4 0.5 1.0 0.5 0.7 0.8CLOTHING AND FOOTWEAR 1.0 0.4 0.4 0.4 0.6 0.8 0.7 0.5 0.7 0.4 0.4 0.3HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -0.2 0.5 -1.1 -0.5 0.0 0.5 0.2 0.5 1.7 0.8 0.0 1.4

ELECTRICITY, GAS AND OTHER FUELS -3.3 0.6 -4.0 -2.3 -1.4 0.8 -0.3 0.8 4.7 1.5 -1.5 4.2FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.6 0.5 0.2 0.3 0.5 0.5 0.8 0.5 0.5 0.4 0.4 0.4HEALTH 0.7 0.2 0.4 0.5 0.7 0.7 0.7 0.4 0.8 0.5 0.7 0.2TRANSPORT -0.1 0.8 -0.2 0.4 -0.7 0.5 -0.2 1.3 1.1 0.6 1.3 0.6

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -6.3 2.4 -1.8 -0.8 -2.3 2.6 -0.2 1.5 2.7 -0.6 0.6 3.0COMMUNICATION -0.1 0.0 0.1 0.0 0.0 0.1 0.0 0.0 0.1 0.1 0.1 0.1RECREATION AND CULTURE 0.2 0.3 0.3 0.3 0.3 0.7 0.5 0.3 0.3 0.3 0.5 0.4EDUCATION 0.0 1.2 2.4 0.0 0.0 0.6 1.2 0.1 0.0 0.7 1.5 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 0.3 0.2 0.3 0.5 0.6 0.8 0.5 0.3 0.4 0.3 1.1 1.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


FOOD ITEMS 5.0 3.1 1.1 1.3 1.6 2.4 2.8 3.6 4.0 3.9 3.5 3.5ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 4.0 3.8 3.7 3.9 4.9 5.5 6.0 6.3 6.0 6.2 6.3 6.5NON-FOOD 0.6 0.5 0.1 0.5 0.5 0.6 1.2 1.5 2.4 2.4 2.7 3.1CLOTHING AND FOOTWEAR 3.1 2.6 2.3 2.3 1.9 2.3 2.6 2.6 2.8 2.3 2.0 1.8HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -1.1 -1.1 -1.7 -1.2 -1.0 -1.0 0.2 1.2 2.9 3.1 2.9 3.9

ELECTRICITY, GAS AND OTHER FUELS -8.7 -8.2 -9.8 -8.8 -7.0 -6.8 -3.2 -0.2 6.0 6.8 5.5 9.1FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.2 2.1 1.7 1.6 1.5 1.6 2.1 2.4 2.3 2.3 1.9 1.8HEALTH 2.7 2.3 1.7 1.8 1.9 2.4 2.7 2.6 2.6 2.4 2.4 2.2TRANSPORT -0.7 0.0 -0.5 0.9 0.3 0.0 0.0 0.9 2.7 2.8 4.3 3.6

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -10.5 -8.6 -9.7 -6.6 -2.6 -2.4 -0.8 1.5 6.8 3.4 4.2 5.7COMMUNICATION -0.1 -0.1 0.0 0.0 0.1 0.2 0.1 0.1 0.2 0.2 0.3 0.4RECREATION AND CULTURE 1.1 1.1 1.0 1.0 1.1 1.6 1.7 1.7 1.8 1.4 1.4 1.5EDUCATION 5.1 4.7 3.6 3.6 3.6 3.0 1.8 1.8 1.8 1.9 2.3 2.2RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 1.6 1.2 1.2 1.3 1.6 2.2 2.4 2.2 2.1 1.6 2.2 2.8


2017

2017

20172015Year-on-Year Change (in percent)

2016

Quarter-on-Quarter Change (in percent)

2016

2016

2015

2015

4a CONSUMER PRICE INDEX IN METRO MANILAfor periods indicated(2006=100)Quarterly Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4





Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ALL ITEMS 0.5 0.0 0.2 0.2 -0.1 0.5 0.8 1.0 1.1 0.6 1.4 1.7FOOD AND NON-ALCHOLIC BEVERAGES 0.0 -0.8 1.4 1.2 0.1 0.7 1.7 2.8 1.1 0.5 0.6 2.0

FOOD ITEMS -0.1 -0.9 1.5 1.3 0.1 0.7 1.8 2.9 1.1 0.5 0.6 2.1ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 0.8 0.5 0.3 0.1 1.4 1.5 1.7 0.6 2.8 3.0 1.3 0.6NON-FOOD 0.7 0.3 -0.3 -0.4 -0.2 0.4 0.3 0.2 1.1 0.5 1.9 1.5CLOTHING AND FOOTWEAR 1.1 0.4 0.8 0.1 0.4 1.3 0.9 0.3 1.0 0.5 0.5 0.1HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 0.6 0.2 -1.5 -1.0 -0.4 0.1 0.0 -0.1 1.7 0.6 0.3 2.0

ELECTRICITY, GAS AND OTHER FUELS -3.0 -1.2 -9.0 -4.4 -1.3 -0.3 -0.5 -0.8 8.0 2.1 -4.9 8.5FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.1 0.1 0.1 0.0 0.2 0.2 0.8 0.5 0.4 0.9 0.3 0.5HEALTH 1.2 0.1 1.1 0.0 0.2 0.5 0.3 0.3 1.1 0.6 1.6 0.1TRANSPORT 2.5 0.6 -0.4 0.2 -0.8 -0.1 0.0 1.3 1.9 0.0 7.4 0.8

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -5.9 2.0 -2.2 -0.9 -2.9 2.9 -0.1 2.0 2.9 -1.0 0.5 3.9COMMUNICATION 0.0 0.1 0.1 0.0 0.0 0.1 0.0 0.0 0.4 0.3 0.1 0.1RECREATION AND CULTURE 0.5 0.5 0.7 0.3 0.2 1.4 1.6 0.2 0.6 0.2 1.3 0.9EDUCATION 0.0 1.8 3.6 0.0 0.0 0.9 1.8 0.0 0.0 0.6 1.1 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 0.2 0.0 0.2 0.0 0.3 0.6 0.2 0.2 0.5 0.6 3.2 2.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


FOOD ITEMS 4.6 2.1 0.8 1.7 1.9 3.6 3.9 5.7 6.7 6.5 5.3 4.4ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 2.6 2.2 2.1 1.7 2.3 3.3 4.8 5.4 6.8 8.4 7.9 7.9NON-FOOD 0.7 0.4 0.1 0.3 -0.6 -0.5 0.2 0.7 2.0 2.1 3.7 5.0CLOTHING AND FOOTWEAR 3.8 3.1 2.9 2.3 1.6 2.6 2.7 3.0 3.6 2.8 2.3 2.1HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -1.1 -1.5 -2.0 -1.6 -2.7 -2.8 -1.3 -0.4 1.7 2.2 2.5 4.6

ELECTRICITY, GAS AND OTHER FUELS -11.6 -13.1 -17.3 -16.6 -15.1 -14.4 -6.4 -2.9 6.3 8.8 4.0 13.8FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.1 1.4 0.7 0.2 0.4 0.6 1.3 1.8 2.0 2.6 2.1 2.0HEALTH 4.0 3.6 2.5 2.4 1.4 1.8 1.0 1.2 2.1 2.2 3.6 3.4TRANSPORT 0.8 1.4 1.0 2.8 -0.4 -1.1 -0.7 0.4 3.1 3.2 10.8 10.2

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -11.3 -9.4 -10.6 -7.0 -4.0 -3.2 -1.1 1.9 7.9 3.9 4.6 6.5COMMUNICATION 0.0 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.5 0.7 0.8 1.0RECREATION AND CULTURE 2.2 2.1 2.0 2.0 1.8 2.7 3.6 3.4 3.7 2.5 2.3 3.1EDUCATION 5.7 5.6 5.5 5.5 5.5 4.5 2.6 2.6 2.6 2.4 1.7 1.7RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 1.2 0.5 0.4 0.4 0.6 1.2 1.1 1.3 1.5 1.4 4.5 6.9

2017

2017


2016

Quarter-on-Quarter Change (in percent)

2016

2016

2015

2015


4b CONSUMER PRICE INDEX IN AREAS OUTSIDE METRO MANILAfor periods indicated(2006=100)Quarterly Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4





Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ALL ITEMS 0.2 0.1 0.2 0.5 0.5 0.5 0.6 0.9 1.0 0.4 0.5 1.0FOOD AND NON-ALCHOLIC BEVERAGES 0.3 -0.2 0.4 0.8 0.6 0.3 0.9 1.2 0.9 0.3 0.7 1.3

FOOD ITEMS 0.3 -0.2 0.4 0.8 0.6 0.3 0.9 1.3 1.0 0.2 0.8 1.3ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 1.6 0.8 0.4 1.4 2.6 1.3 0.8 1.7 2.0 1.3 1.0 1.7NON-FOOD -0.1 0.5 -0.1 0.2 0.2 0.7 0.5 0.5 1.0 0.6 0.2 0.6CLOTHING AND FOOTWEAR 0.9 0.4 0.3 0.6 0.7 0.6 0.7 0.5 0.6 0.3 0.4 0.4HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -0.5 0.7 -0.9 -0.3 0.2 0.7 0.3 0.6 1.7 0.8 -0.1 1.2

ELECTRICITY, GAS AND OTHER FUELS -3.5 1.2 -2.6 -1.7 -1.5 1.2 -0.4 1.2 3.8 1.4 -0.6 3.1FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 0.8 0.5 0.3 0.5 0.6 0.7 0.7 0.5 0.5 0.3 0.4 0.5HEALTH 0.4 0.3 0.3 0.6 0.9 0.8 0.9 0.4 0.7 0.4 0.4 0.3TRANSPORT -0.8 0.9 -0.2 0.5 -0.7 0.6 -0.2 1.2 0.8 0.8 -0.3 0.4

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -6.5 2.5 -1.6 -0.8 -2.2 2.5 -0.2 1.3 2.7 -0.5 0.6 2.6COMMUNICATION -0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.1 0.2RECREATION AND CULTURE 0.2 0.1 0.3 0.2 0.3 0.4 0.2 0.2 0.3 0.2 0.3 0.3EDUCATION 0.0 1.0 2.0 0.1 0.0 0.5 1.0 0.1 0.0 0.8 1.6 0.0RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 0.4 0.2 0.4 0.8 0.6 0.8 0.7 0.4 0.4 0.2 0.3 0.3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


FOOD ITEMS 5.0 3.3 1.1 1.3 1.6 2.1 2.6 3.1 3.6 3.5 3.3 3.4ALCOHOLIC BEVERAGES, TOBACCO AND NARCOTICS 4.2 4.1 3.9 4.3 5.3 5.8 6.2 6.5 5.9 5.9 6.1 6.2NON-FOOD 0.5 0.5 0.1 0.6 0.9 1.1 1.6 1.9 2.6 2.6 2.3 2.4CLOTHING AND FOOTWEAR 2.8 2.5 2.1 2.3 2.0 2.2 2.6 2.5 2.5 2.2 1.9 1.8HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -1.2 -0.9 -1.6 -1.0 -0.3 -0.3 0.9 1.8 3.3 3.5 3.1 3.7

ELECTRICITY, GAS AND OTHER FUELS -8.0 -6.7 -7.6 -6.6 -4.6 -4.6 -2.4 0.5 5.9 6.2 6.0 7.9FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTING MAINTENANCE OF THE HOUSE 2.3 2.3 2.1 2.1 1.9 2.0 2.5 2.6 2.5 2.1 1.8 1.8HEALTH 2.2 1.9 1.5 1.6 2.0 2.6 3.1 3.0 2.8 2.4 2.0 1.8TRANSPORT -1.1 -0.4 -0.9 0.5 0.5 0.2 0.3 1.0 2.5 2.7 2.6 1.8

OPERATION OF PERSONAL TRANSPORT EQUIPMENT -10.2 -8.4 -9.3 -6.4 -2.1 -2.1 -0.7 1.4 6.4 3.3 4.1 5.5COMMUNICATION -0.2 -0.2 -0.1 -0.1 0.0 0.1 0.1 0.1 0.1 0.0 0.1 0.3RECREATION AND CULTURE 0.9 0.8 0.7 0.7 0.8 1.1 1.1 1.1 1.1 0.9 1.0 1.0EDUCATION 4.9 4.4 3.0 3.1 3.1 2.6 1.6 1.6 1.6 1.8 2.5 2.4RESTAURANTS AND MISCELLANEOUS GOODS AND SERVICES 1.7 1.5 1.5 1.7 2.0 2.6 2.9 2.5 2.3 1.7 1.3 1.2

2017

2017Quarter-on-Quarter Change (in percent)

2016

2016

2015

2015



2016

5 MONETARY INDICATORS (DCS CONCEPT: SRF-Based) 1

as of periods indicated

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r

A. Liquidity

1. M4 (2+7) 10,031.8 10,254.7 10,459.2 11,214.6 11,288.2 11,658.4 12,052.5 12,488.0

2. M3 : Broad Money Liabilities (3+6) 8,542.0 8,728.1 8,860.7 9,506.0 9,544.7 9,898.2 10,173.6 10,637.4% to GDP 63.0 63.0 62.6 65.6 64.6 65.5 65.8 67.3

3. M2 (4+5) 8,219.0 8,412.6 8,525.7 9,140.4 9,189.7 9,532.3 9,772.7 10,211.3% to GDP 60.6 60.7 60.2 63.1 62.2 63.0 63.2 64.6

4. M1: Currency Outside Depository Corporations and Transferable Deposits (Narrow Money ) 2,712.4 2,794.2 2,858.8 3,069.5 3,113.4 3,241.1 3,335.5 3,562.3% to GDP 20.0 20.2 20.2 21.2 21.1 21.4 21.6 22.5

Currency Outside Depository Corporations (Currency in Circulation) 766.3 776.9 795.6 921.0 888.1 901.1 926.1 1,059.2 Transferable Deposits (Demand Deposits) 1,946.1 2,017.3 2,063.2 2,148.5 2,225.3 2,340.1 2,409.4 2,503.1

5. Other deposits included in broad money 5,506.6 5,618.4 5,666.9 6,071.0 6,076.3 6,291.2 6,437.2 6,649.0 Savings Deposits 3,702.9 3,824.2 3,898.5 4,100.8 4,083.7 4,187.5 4,268.0 4,407.1 Time Deposits 1,803.7 1,794.1 1,768.4 1,970.2 1,992.6 2,103.6 2,169.2 2,241.9

6. Securities Other Than Shares Included in Broad Money (Deposit Substitutes) 323.0 315.5 335.0 365.5 355.0 365.8 400.9 426.1

7. Transferable & Other Deposits in Foreign Currency (FCDU Deposits-Residents) 1,489.8 1,526.7 1,598.6 1,708.6 1,743.5 1,760.2 1,878.9 1,850.6

8. Liabilities Excluded from Broad-Money (Other Liabilities) 2,144.4 2,374.9 2,642.8 2,294.3 2,494.9 2,380.7 2,484.6 2,372.9

B. Domestic Claims 8,075.9 8,332.2 8,608.4 9,199.9 9,405.0 9,622.8 10,037.1 10,457.81. Net Claims on Central Government 1,447.1 1,414.7 1,490.5 1,603.0 1,664.6 1,614.8 1,638.9 1,635.0

Claims on Central Government 2,066.8 2,043.1 2,108.8 2,097.0 2,206.5 2,314.3 2,311.3 2,399.8Less: Liabilities to Central Government 619.7 628.4 618.3 494.0 541.9 699.5 672.4 764.8

2. Claims on Other Sectors 6,628.8 6,917.5 7,117.9 7,596.8 7,740.4 8,008.0 8,398.2 8,822.8Claims on Other Financial Corporations 689.9 722.7 724.0 770.8 792.7 780.2 836.0 925.0Claims on State and Local Government 77.8 80.5 81.9 82.8 82.5 85.3 80.5 81.0Claims on Public Nonfinancial Corporations 282.1 286.8 277.2 256.8 257.4 265.0 303.9 284.6Claims on Private Sector 5,578.9 5,827.5 6,034.8 6,486.4 6,607.8 6,877.5 7,177.8 7,532.1

C. Net Foreign Assets 4,100.3 4,297.4 4,493.7 4,309.0 4,378.1 4,416.3 4,500.0 4,403.11. Bangko Sentral ng Pilipinas 3,778.5 3,970.4 4,136.4 3,946.6 3,992.3 4,031.5 4,042.2 4,003.6

Claims on Non-residents 3,852.5 4,045.5 4,214.3 4,023.8 4,071.3 4,111.9 4,124.7 4,084.7 Less: Liabilities to Non-residents 74.0 75.1 77.9 77.2 79.0 80.4 82.4 81.1

2. Other Depository Corporations 321.8 327.0 357.3 362.4 385.7 384.8 457.8 399.6Claims on Non-residents 1,070.9 1,108.2 1,134.4 1,211.6 1,229.5 1,245.9 1,304.2 1,296.0Less: Liabilities to Non-residents 749.1 781.2 777.2 849.3 843.7 861.2 846.4 896.4

1 Based on the Standardized Report Forms (SRFs), a unified framework for reporting monetary and financial statistics to the International Monetary Fund.p Preliminary

Note : Details may not add up to totals due to rounding.Source : Bangko Sentral ng Pilipinas

LEVELS (in billion pesos)2016 2017

6 SELECTED DOMESTIC INTEREST RATESfor periods indicated; in percent per annum

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

3.2 2.7 2.4 2.5 1.7 0.6 1 1.1 1.5 2 2.5 3.2 3.1 3.1Interbank Call Loans 2.5266 2.5225 2.5241 2.5291 2.5289 2.5293 2.5247 2.5074 2.5354 2.5851 2.5824 2.9203 0.0266 0.8225 1.9241 1.5291 1.4289 1.0293 0.5247 0.0074 -0.6646 -0.5149 -0.5176 -0.3797Savings Deposits 0.7170 0.6720 0.7210 0.7270 0.7370 0.7140 0.7290 0.6990 0.6890 0.6650 0.6980 0.6880 -1.7830 -1.0280 0.12100 -0.2730 -0.3630 -0.7860 -1.2710 -1.8010 -2.5110 -2.4350 -2.4020 -2.6120Time Deposits (All Maturities) 1.3760 1.5220 1.4720 1.6290 1.6120 1.5210 1.4450 1.5770 1.6880 1.7530 1.7890 1.9720 -1.1240 -0.1780 0.8720 0.6290 0.5120 0.0210 -0.5550 -0.9230 -1.5120 -1.3470 -1.3110 -1.3280

Lending Rates

6.8698 6.9390 6.9376 6.7607 6.8407 6.7760 6.6280 6.4397 6.5050 6.4571 6.4772 6.5299 4.3698 5.2390 6.3376 5.7607 5.7407 5.2760 4.6280 3.9397 3.3050 3.3571 3.3772 3.22994.5031 4.5183 4.5025 4.3579 4.4055 4.4067 4.2788 4.1097 4.2013 4.1736 4.0875 4.0874 2.0031 2.8183 3.9025 3.3579 3.3055 2.9067 2.2788 1.6097 1.0013 1.0736 0.9875 0.78745.4240 5.5150 5.6250 5.7390 5.6310 5.6240 5.6840 5.6290 5.5410 5.6220 5.6560 5.6920 2.9240 3.8150 5.0250 4.7390 4.5310 4.1240 3.6840 3.1290 2.3410 2.5220 2.5560 2.3920

Bangko Sentral Rates 3

… … … … … .. .. .. .. .. .. .. … … … … … .. .. .. .. .. .. ..4.0000 4.0000 4.0000 4.0000 4.0000 3.4902 3.0000 3.0000 3.0000 3.0000 3.0000 3.0000 1.5000 2.3000 3.4000 3.0000 2.9000 1.9902 1.0000 0.5000 -0.2000 -0.1000 -0.1000 -0.3000

… … … … … 2.5000 2.5000 2.5000 2.5000 2.5000 2.5000 2.5000 … … … … … 1.0000 0.5000 0.0000 -0.7000 -0.6000 -0.6000 -0.8000

7-Day … … … … … 2.5000 2.5000 2.7882 3.0160 3.1759 3.3057 3.3881 … … … … … 1.0000 0.5000 0.2882 -0.1840 0.0759 0.2057 0.088128-Day … … … … … 2.5000 2.5129 2.9071 3.3812 3.4639 3.4935 3.4929 … … … … … 1.0000 0.5129 0.4071 0.1812 0.3639 0.3935 0.1929

Rate on Government Securities Treasury Bills, All Maturities 1.6910 2.0780 1.9980 1.7440 1.6130 1.6990 1.5050 1.5630 2.3640 2.5000 2.4770 2.4040 -0.8090 0.3780 1.3980 0.7440 0.5130 0.1990 -0.4950 -0.9370 -0.8360 -0.6000 -0.6230 -0.8960

1.4690 1.9400 1.8610 1.7100 1.5550 1.5970 1.4160 1.4400 2.1790 2.2060 2.1280 2.0340 -1.0310 0.2400 1.2610 0.7100 0.4550 0.0970 -0.5840 -1.0600 -1.0210 -0.8940 -0.9720 -1.26601.7290 2.2070 2.0140 1.6970 1.5800 1.6540 1.4520 1.6890 2.3800 2.5370 2.5480 2.4970 -0.7710 0.5070 1.4140 0.6970 0.4800 0.1540 -0.5480 -0.8110 -0.8200 -0.5630 -0.5520 -0.80301.9480 2.2630 2.2000 1.8970 1.7230 1.8570 1.6790 1.8800 2.7100 2.9090 2.9360 2.8780 -0.5520 0.5630 1.6000 0.8970 0.6230 0.3570 -0.3210 -0.6200 -0.4900 -0.1910 -0.1640 -0.4220

Government Securities in the Secondary Market 4 2.4 1.2 0.4 1.5 1.1 1.9 2.3 2.6 3.4 2.7 3.43-Month 2.2714 2.0765 1.6817 2.6667 1.7650 1.7567 1.5857 2.0755 2.9696 2.8139 2.0251 2.4316 -0.1286 0.8765 1.2817 1.1667 0.6650 -0.1433 -0.7143 -0.5245 -0.4304 0.1139 -1.3749 -0.86846-Month 2.5795 2.1980 1.7967 2.9183 1.8950 1.5949 1.2931 2.9464 2.4222 2.4615 2.4988 3.3075 0.1795 0.9980 1.3967 1.4183 0.7950 -0.3051 -1.0069 0.3464 -0.9778 -0.2385 -0.9012 0.00751-Year 2.6886 2.4297 2.5467 2.3710 1.7313 2.1671 2.0107 2.4520 2.6708 3.2257 2.8674 3.0320 0.2886 1.2297 2.1467 0.8710 0.6313 0.2671 -0.2893 -0.1480 -0.7292 0.5257 -0.5326 -0.26802-Year 3.1959 2.6999 2.6143 3.9847 3.4700 2.3877 2.2855 3.8676 3.2500 3.8718 3.7821 3.9864 0.7959 1.4999 2.2143 2.4847 2.3700 0.4877 -0.0145 1.2676 -0.1500 1.1718 0.3821 0.68643-Year 3.4136 3.0281 3.1016 3.6625 3.6900 3.0660 3.2925 3.5170 4.0988 3.8916 3.6651 4.2977 1.0136 1.8281 2.7016 2.1625 2.5900 1.1660 0.9925 0.9170 0.6988 1.1916 0.2651 0.99774-Year 3.5864 3.7717 3.7263 3.8750 3.2332 3.3067 2.8798 3.8814 4.2500 4.0321 4.5768 4.9211 1.1864 2.5717 3.3263 2.3750 2.1332 1.4067 0.5798 1.2814 0.8500 1.3321 1.1768 1.62115-Year 3.8273 3.8900 3.4923 3.9250 3.4583 2.8997 3.6321 4.7426 4.2577 4.0336 4.6375 4.7437 1.4273 2.6900 3.0923 2.4250 2.3583 0.9997 1.3321 2.1426 0.8577 1.3336 1.2375 1.44377-Year 3.8932 3.7189 4.1617 4.5853 4.2283 2.9197 3.4483 4.8857 5.0625 4.9171 4.3206 5.3279 1.4932 2.5189 3.7617 3.0853 3.1283 1.0197 1.1483 2.2857 1.6625 2.2171 0.9206 2.027910-Year 4.0614 4.3550 3.7995 4.1000 4.6900 4.2183 3.6455 4.6281 5.0554 4.6691 4.6085 5.6986 1.6614 3.1550 3.3995 2.6000 3.5900 2.3183 1.3455 2.0281 1.6554 1.9691 1.2085 2.398620-Year 4.9850 4.6511 5.1350 5.5217 5.2317 4.2415 4.6482 5.3771 5.0302 5.0844 5.1479 5.7038 2.5850 3.4511 4.7350 4.0217 4.1317 2.3415 2.3482 2.7771 1.6302 2.3844 1.7479 2.403825-Year 4.7659 .. 4.7280 4.8916 .. .. .. .. .. .. .. .. 2.3659 .. 4.3280 3.3916 .. .. .. .. .. .. .. ..

1 Nominal interest rate less inflation rate2 Refers to the weighted average interest rate of reporting commercial banks' interest incomes on their outstanding peso-denominated loans3 Beginning 3 June 2016, the BSP shifted its monetary operations to an interest rate corridor (IRC) system. The repurchase (RP) and Special Deposit Account (SDA) windows were replaced by standing overnight lending and overnight deposit facilities, respectively.

The reverse repurchase (RRP) facility was modified to a purely overnight RRP. In addition, the term deposit facility (TDF) will serve as the main tool for absorbing liquidity. Starting 3 June 2016, the interest rates for these facilities were set as follows: 3.5 percent in the OLF(a reduction from 6.0 percent); 3.0 percent in the overnight RRP rate (an adjustment from 4.0 percent); and 2.5 percent in the ODF (no change from the previous SDA rate). The OLF and ODF will serve as the upper bound and lower bound, respectively, of the IRC system.

4 End of Period; (For Q1 2013 to Q1 2015, data refers to PDST-F while for Q2 2015 to present, it refers to PDST-R2)p Preliminaryr Revised

- Not Available .. No Transaction/No Quotation/No Issue ... Blank

Source: Bangko Sentral ng Pilipinas

REAL INTEREST RATES 1NOMINAL INTEREST RATES

2017

HighLow

364-Day

Overnight Lending Facility (OLF)Overnight RRPOvernight Deposit Facility (ODF)Term Deposit Auction Facility (TDF)

2015

91-Day182-Day

All Maturities 2

201620152016 2017

7 NUMBER OF FINANCIAL INSTITUTIONS 1


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 p/

T o t a l 28,331 28,319 28,293 28,471 27,502 27,657 27,889 28,393 28,535 28,547 28,711 Head Offices 6,721 6,685 6,625 6,576 6,329 6,297 6,280 6,253 6,247 6,218 6,210 Branches/Agencies 21,610 21,634 21,668 21,895 21,173 21,360 21,609 22,140 22,288 22,329 22,501

Banks 10,456 10,528 10,538 10,756 10,849 10,936 11,024 11,178 11,278 11,393 11,571 Head Offices 646 638 634 632 622 618 613 602 599 595 592 Branches/Agencies 9,810 9,890 9,904 10,124 10,227 10,318 10,411 10,576 10,679 10,798 10,979

Universal and Commercial Banks 5,901 5,946 5,946 6,060 6,094 6,133 6,147 6,237 6,286 6,331 6,403 Head Offices 36 36 36 40 41 41 41 42 42 42 43 Branches/Agencies 5,865 5,910 5,910 6,020 6,053 6,092 6,106 6,195 6,244 6,289 6,360

Thrift Banks 1,927 2,013 1,999 2,086 2,130 2,124 2,180 2,176 2,211 2,246 2,330 Head Offices 69 70 69 68 66 64 64 60 59 58 57 Branches/Agencies 1,858 1,943 1,930 2,018 2,064 2,060 2,116 2,116 2,152 2,188 2,273

Savings and Mortgage Banks 1,317 1,386 1,356 1,517 1,545 1,548 1,562 1,585 1,618 1,649 1,728 Head Offices 28 29 28 28 27 26 26 25 25 25 24 Branches/Agencies 1,289 1,357 1,328 1,489 1,518 1,522 1,536 1,560 1,593 1,624 1,704

Private Development Banks 408 416 417 338 355 363 404 402 405 409 414 Head Offices 19 19 19 18 18 18 19 18 18 17 17 Branches/Agencies 389 397 398 320 337 345 385 384 387 392 397

Stock Savings and Loan Assns. 171 180 195 200 199 182 184 183 184 184 184 Head Offices 18 18 18 18 17 16 16 15 15 15 15 Branches/Agencies 153 162 177 182 182 166 168 168 169 169 169

Microfinance Banks 31 31 31 31 31 31 30 6 4 4 4 Head Offices 4 4 4 4 4 4 3 2 1 1 1 Branches/Agencies 27 27 27 27 27 27 27 4 3 3 3

Rural Banks 2,628 2,569 2,593 2,610 2,625 2,679 2,697 2,765 2,781 2,816 2,838 Head Offices 541 532 529 524 515 513 508 500 498 495 492 Branches/Agencies 2,087 2,037 2,064 2,086 2,110 2,166 2,189 2,265 2,283 2,321 2,346

Non-Banks 17,875 17,791 17,755 17,715 16,653 16,721 16,865 17,215 17,257 17,154 17,140 Head Offices 6,075 6,047 5,991 5,944 5,707 5,679 5,667 5,651 5,648 5,623 5,618 Branches/Agencies 11,800 11,744 11,764 11,771 10,946 11,042 11,198 11,564 11,609 11,531 11,522

Investment Houses 25 25 25 25 26 26 26 25 25 25 25 Head Offices 15 15 15 15 16 16 16 15 15 15 15 Branches/Agencies 10 10 10 10 10 10 10 10 10 10 10

Finance Companies 88 88 110 110 118 118 127 129 152 153 161 Head Offices 20 20 22 22 22 22 22 22 23 23 23 Branches/Agencies 68 68 88 88 96 96 105 107 129 130 138

ABB Forex Corporations - - 5 5 5 5 5 5 5 5 5 Head Offices - - 5 5 5 5 5 5 5 5 5 Branches/Agencies - - - - - - - - - - -

Investment Companies 2 2 2 2 2 2 2 1 1 1 1 Head Offices 2 2 2 2 2 2 2 1 1 1 1 Branches/Agencies - - - - - - - - - - -

Securities Dealers/Brokers 13 13 13 13 13 13 13 12 12 12 13 Head Offices 13 13 13 13 13 13 13 12 12 12 13 Branches/Agencies - - - - - - - - - - -

Pawnshops 17,426 17,340 17,278 17,238 16,170 16,237 16,372 16,723 16,740 16,637 16,613 Head Offices 5,835 5,807 5,745 5,698 5,460 5,432 5,420 5,407 5,401 5,378 5,371 Branches/Agencies 11,591 11,533 11,533 11,540 10,710 10,805 10,952 11,316 11,339 11,259 11,242

Lending Investors 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - -

Non-Stock Savings and Loan Assns. 199 201 200 200 199 200 200 199 198 197 197 Head Offices 71 71 70 70 69 69 69 68 67 65 65 Branches/Agencies 128 130 130 130 130 131 131 131 131 132 132

Private Insurance Companies 2 99 99 99 99 97 97 97 97 97 97 97 Head Offices 96 96 96 96 97 97 97 97 97 97 97 Branches/Agencies 3 3 3 3 - - - - - - -

Government Non-Banks 4 4 4 4 4 4 4 4 4 4 4 Head Offices 4 4 4 4 4 4 4 4 4 4 4 Branches/Agencies - - - - - - - - - - -

Venture Capital Corporations - - - - - - - - - - - Head Offices - - - - - - - - - - -Branches/Agencies - - - - - - - - - - -

Credit Card Companies 3 3 3 3 3 3 3 3 4 4 4 Head Offices 3 3 3 3 3 3 3 3 4 4 4 Branches/Agencies - - - - - - - - - - -

Other Non-Bank with QBF 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - -

Electronic Money Issuer 4 4 4 4 4 4 4 4 5 5 5 Head Offices 4 4 4 4 4 4 4 4 5 5 5 Branches/Agencies - - - - - - - - - - -

Remittance Agent 1 1 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 1 1 Branches/Agencies - - - - - - - - - - -

Credit Granting Entities 9 9 9 9 9 9 9 9 9 9 9 Head Offices 9 9 9 9 9 9 9 9 9 9 9 Branches/Agencies - - - - - - - - - - -

Trust Corporations - - - - - - - 1 2 2 3 Head Offices - - - - - - - 1 2 2 3 Branches/Agencies - - - - - - - - - - -

1 Refers to the number of financial establishments which includes the head offices and branches; excludes the Bangko Sentral ng Pilipinas Starting Q4 2009, data include other banking offices per Circular 505 and 624 dated 22 December 2005 and 13 October 2008, respectively. (Other banking offices refer to any office or place of business in the Philippines other than the head office, branch or extension offfice, which primarily engages in banking activities other than the acceptance of deposits and/or servicing of withdrawals thru tellers or other authorized personnel.)2 Covers only the head offices and their foreign branches.3 Trust Corporations started only on December 2016.r Rivised_ zero or nilSource: Bangko Sentral ng Pilipinas

2015 2016 2017

8 TOTAL RESOURCES OF THE PHILIPPINE FINANCIAL SYSTEM 1

as of periods indicatedin billion pesos

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r Q1 r Q2 r Q3 r Q4 p

T o t a l 14,322.0 14,453.5 14,779.2 15,492.6 15,670.1 16,074.8 16,357.4 17,242.8 17,587.1 17,998.6 18,404.9 18,963.6 Banks 11,374.2 11,502.7 11,863.2 12,406.3 12,529.9 12,865.9 13,117.1 13,914.2 14,118.0 14,577.4 14,959.8 15,518.5 Universal and Commercial Banks 10,238.9 10,327.9 10,670.8 11,159.2 11,254.8 11,578.5 11,810.5 12,560.5 12,730.2 13,150.5 13,532.6 14,053.8 Thrift Banks 899.3 964.7 979.6 1,034.1 1,055.1 1,064.0 1,080.4 1,122.0 1,149.5 1,182.6 1,176.5 1,213.9 Rural Banks 236.0 210.1 212.8 213.0 220.0 223.4 226.3 231.7 238.3 244.2 250.7 250.7 a

Non-Banks 2 2,947.8 2,950.7 2,916.0 3,086.3 3,140.2 3,208.8 3,240.3 3,328.6 3,469.1 3,421.2 3,445.1 3,445.1 a

1 Excludes the Bangko Sentral ng Pilipinas; amount includes allowance for probable losses.2 Includes Investment Houses, Finance Companies, Investment Companies, Securities Dealers/Brokers, Pawnshops, Lending Investors, Non Stocks Savings and Loan Associations, Credit Card Companies (which are under BSP supervision), and Private and Government Insurance Companies (i.e., SSS and GSIS).a As of end-September 2017p PreliminaryNotes: Data on Non-Banks are based on Consolidated Statement of Condition (CSOC).

Data on Rural Banks were based on CSOC up to March 2010. Data from April 2010 onwards are based on FRP. Details may not add up to total due to rounding off.Source: Bangko Sentral ng Pilipinas

20172016

(3)

2015

Institutions

(1)(2)

9 NON-PERFORMING LOANS (NPL), TOTAL LOANS AND LOAN LOSS PROVISIONS OF THE BANKING SYSTEM 1/

end-of-periodin billion pesos

Non-Performing Loans 2 Gross Non-Performing Loans 3 Net Non-Performing Loans 3 Total Loans Loan Loss Provisions

UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total

2006 117.410 20.550 9.045 147.005 2073.698 249.993 83.234 2406.925 97.031 10.138 3.820 110.9892007 97.634 20.231 9.841 127.706 2195.110 295.499 100.215 2590.824 91.123 9.560 3.587 104.2702008 88.191 20.107 9.563 117.861 2502.662 303.632 95.892 2902.186 88.201 10.774 3.636 102.6112009 80.912 23.396 10.157 114.465 2725.200 321.742 97.534 3144.476 90.898 12.097 3.952 106.947

2010Mar 81.382 25.189 9.363 115.934 2531.003 320.902 99.346 2951.251 91.982 12.702 4.380 109.064Jun 87.668 25.868 9.491 123.027 2682.230 326.275 100.778 3109.283 95.394 13.723 4.603 113.720Sep 83.141 28.177 9.417 120.735 2670.645 343.058 97.794 3111.497 97.379 14.500 4.533 116.412Dec 80.215 26.323 10.249 116.787 2802.041 359.484 103.695 3265.220 95.040 14.123 5.102 114.265

2011Mar 82.410 25.911 11.838 120.159 2759.938 354.660 117.155 3231.753 99.197 16.645 5.970 121.812Jun 74.143 22.746 12.198 109.087 3030.631 367.867 119.701 3518.199 93.548 13.420 6.113 113.081Sep 74.326 22.699 12.127 109.152 3021.051 364.469 121.659 3507.179 91.944 13.618 6.296 111.858Dec 71.938 21.953 12.263 106.154 3222.105 383.731 120.963 3726.799 90.903 12.946 6.176 110.025

2012Mar 106.354 26.090 13.940 146.384 18.918 11.550 7.470 37.938 3192.496 402.540 123.740 3718.776 124.968 18.170 7.690 150.828Jun 102.098 24.360 14.370 140.828 11.393 9.530 7.350 28.273 3388.091 432.990 124.870 3945.951 127.269 18.270 8.230 153.769Sep 103.420 25.830 14.800 144.050 13.224 11.340 7.060 31.624 3444.161 410.520 128.780 3983.461 128.598 18.560 9.000 156.158Dec 100.610 26.530 15.850 142.990 11.310 12.220 6.910 30.440 3650.760 449.260 128.580 4228.600 128.460 18.090 10.220 156.770

2013Mar 99.357 26.930 17.250 143.537 16.245 12.240 8.073 36.558 3625.043 439.240 129.473 4193.756 127.487 18.960 10.420 156.867Jun 100.912 27.840 15.910 144.662 14.569 12.320 7.420 34.309 3760.891 468.830 128.740 4358.461 131.291 20.130 9.750 161.171Sep 100.638 28.895 16.400 145.933 16.497 13.088 7.870 37.455 3922.085 490.705 126.790 4539.580 131.338 20.199 9.740 161.277Dec 90.509 27.729 17.306 135.544 8.050 12.291 8.250 28.591 4256.963 508.199 131.788 4896.950 130.440 20.107 10.327 160.874

2014Mar 93.323 27.057 18.114 138.494 9.939 13.146 8.800 31.885 4329.734 547.791 137.889 5015.414 131.790 18.771 10.612 161.173Jun 94.798 27.165 17.867 139.830 12.437 12.931 8.895 34.263 4513.288 562.850 132.888 5209.026 133.317 19.088 10.240 162.645Sep 96.181 26.049 16.476 138.706 14.129 11.572 8.257 33.958 4704.656 575.778 134.611 5415.045 133.708 19.375 9.486 162.569Dec 93.055 25.373 16.402 134.830 15.289 11.346 8.104 34.739 5117.884 576.057 138.436 5832.377 132.542 19.468 9.563 161.573

2015Mar 97.365 27.293 16.758 141.416 18.093 12.116 8.407 38.616 4991.914 600.981 139.144 5732.039 134.544 20.460 9.646 164.650Jun 94.122 29.954 14.254 138.330 15.356 14.141 6.501 35.998 5110.488 638.154 119.780 5868.422 134.924 21.456 8.910 165.290Sep 95.241 30.503 13.997 139.741 18.006 14.300 5.998 38.304 5244.589 668.457 121.416 6034.462 133.090 22.036 9.196 164.322Dec 91.598 31.199 13.706 136.503 21.672 14.692 5.513 41.877 5719.665 689.019 118.711 6527.395 129.220 23.045 9.381 161.646

2016Mar 97.112 34.346 14.215 145.673 29.065 16.288 5.741 51.094 5659.766 728.258 122.708 6510.732 129.193 25.001 9.739 163.933Jun 98.198 36.158 14.473 148.829 30.689 17.388 5.576 53.653 5940.313 731.832 126.088 6798.233 130.708 25.617 10.178 166.503Sep 98.398 37.414 14.380 150.192 28.399 18.049 5.157 51.605 6144.623 745.564 128.012 7018.199 133.465 26.440 10.499 170.404Dec 93.801 36.654 13.703 144.158 21.264 17.340 4.679 43.283 6706.311 778.133 127.674 7612.118 135.699 26.775 10.353 172.827

2017 p

Mar 99.712 40.069 14.399 154.180 24.465 20.104 5.015 49.584 6751.129 792.147 128.324 7671.601 138.546 27.883 10.667 177.096Jun 101.006 40.153 14.688 155.847 28.570 20.578 4.934 54.082 7089.734 802.118 129.954 8021.806 139.280 27.751 11.026 178.057Sep 105.360 40.320 14.675 160.355 44.052 23.773 5.882 73.707 7435.519 825.100 135.393 8396.012 143.486 28.179 11.408 183.073Dec 97.531 40.449 14.675 a 152.655 36.919 24.795 5.882 a 67.596 7867.078 860.303 135.393 a 8862.774 145.835 26.929 11.408 a 184.172

1 Data include banks under liquidation, foreign office transactions and interbank loans2 Starting Sept. 2002, for supervisory purposes, computation of NPL was based on BSP Circular No. 351 which defines total loans as gross of allowance for probable losses and interbank loans less loans classified as loss. This has been discontinued in 2013.

For comparability purposes, 2012 was revised based on the new definition (BSP Circular No. 772). 3 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned.

As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012.

a As of September 2017p Preliminary

Details may not add up due to rounding off.Source: Bangko Sentral ng Pilipinas

9 RATIO OF NON-PERFORMING LOANS (NPL) AND LOAN LOSS PROVISIONS 1

TO TOTAL LOANS OF THE BANKING SYSTEMend-of-period, in percent

UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total

2006 5.662 8.220 10.867 6.108 4.679 4.055 4.589 4.6112007 4.448 6.846 9.820 4.929 4.151 3.235 3.579 4.0252008 3.524 6.622 9.973 4.061 3.524 3.548 3.792 3.5362009 2.969 7.272 10.414 3.640 3.335 3.760 4.052 3.401

2010Mar 3.215 7.849 9.425 3.928 3.634 3.958 4.409 3.696Jun 3.268 7.928 9.418 3.957 3.557 4.206 4.567 3.657Sep 3.113 8.213 9.629 3.880 3.646 4.227 4.635 3.741Dec 2.863 7.322 9.884 3.577 3.392 3.929 4.920 3.499

2011Mar 2.986 7.306 10.105 3.718 3.594 4.693 5.096 3.769Jun 2.446 6.183 10.190 3.101 3.087 3.648 5.107 3.214Sep 2.460 6.228 9.968 3.112 3.043 3.736 5.175 3.189Dec 2.233 5.721 10.138 2.848 2.821 3.374 5.106 2.952

2012Mar 3.331 6.481 11.266 3.936 0.593 2.869 6.037 1.020 3.914 4.514 6.215 4.056Jun 3.013 5.626 11.508 3.569 0.336 2.201 5.886 0.717 3.756 4.219 6.591 3.897Sep 3.003 6.292 11.492 3.616 0.384 2.762 5.482 0.794 3.734 4.521 6.989 3.920Dec 2.756 5.905 12.327 3.381 0.310 2.720 5.374 0.720 3.519 4.027 7.948 3.707

2013Mar 2.741 6.131 13.323 3.423 0.448 2.787 6.235 0.872 3.517 4.317 8.048 3.740Jun 2.683 5.938 12.358 3.319 0.387 2.628 5.764 0.787 3.491 4.294 7.573 3.698Sep 2.566 5.888 12.935 3.215 0.421 2.667 6.207 0.825 3.349 4.116 7.682 3.553Dec 2.126 5.456 13.132 2.768 0.189 2.419 6.260 0.584 3.064 3.957 7.836 3.285

2014Mar 2.155 4.939 13.137 2.761 0.230 2.400 6.382 0.636 3.044 3.427 7.696 3.214Jun 2.100 4.826 13.445 2.684 0.276 2.297 6.694 0.658 2.954 3.391 7.706 3.122Sep 2.044 4.524 12.240 2.561 0.300 2.010 6.134 0.627 2.842 3.365 7.047 3.002Dec 1.818 4.405 11.848 2.312 0.299 1.970 5.854 0.596 2.590 3.380 6.908 2.770

2015Mar 1.950 4.541 12.044 2.467 0.362 2.016 6.042 0.674 2.695 3.404 6.932 2.872Jun 1.842 4.694 11.900 2.357 0.300 2.216 5.427 0.613 2.640 3.362 7.439 2.817Oct 1.816 4.563 11.528 2.316 0.343 2.139 4.940 0.635 2.538 3.297 7.574 2.723Dec 1.601 4.528 11.546 2.091 0.379 2.132 4.644 0.642 2.259 3.345 7.902 2.476

2016Mar 1.716 4.716 11.584 2.237 0.514 2.237 4.679 0.785 2.283 3.433 7.937 2.518Jun 1.653 4.941 11.478 2.189 0.517 2.376 4.422 0.789 2.200 3.500 8.072 2.449Sep 1.601 5.018 11.233 2.140 0.462 2.421 4.029 0.735 2.172 3.546 8.202 2.428Dec 1.399 4.711 10.733 1.894 0.317 2.228 3.665 0.569 2.023 3.441 8.109 2.270

2017 p

Mar 1.477 5.058 11.221 2.010 0.362 2.538 3.908 0.646 2.052 3.520 8.313 2.308Jun 1.425 5.006 11.303 1.943 0.403 2.566 3.797 0.674 1.965 3.460 8.485 2.220Sep 1.417 4.887 10.839 1.910 0.592 2.881 4.344 0.878 1.930 3.415 8.426 2.180Dec 1.240 4.702 10.839 a 1.722 0.469 2.882 4.344 a 0.763 1.854 3.130 8.426 a 2.078

1 Data include banks under liquidation, foreign office transactions and interbank loans2 Starting Sept. 2002, for supervisory purposes, computation of NPL was based on BSP Circular No. 351 which defines total loans as gross of allowance for probable losses and interbank loans less loans classified as loss. This has been discontinued in 2013.

For comparability purposes, 2012 was revised based on the new definition (BSP Circular No. 772). 3 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned.

As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012.

a As of September 2017p Preliminary

Details may not add up due to rounding off.Source: Bangko Sentral ng Pilipinas

Loan Loss Provisions/Total Loans NPL/Total Loans 2 Gross NPL/Total Loans 3 Net NPL/Total Loans 3

10 STOCK MARKET TRANSACTIONS volume in million shares, value in million pesos

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Volume 150,587 68,804 191,792 82,078 97,625 135,028 118,017 91,601 140,555 109,228 106,922 83,842 Financials 978 1,238 1,154 725 741 1,012 1,906 1,450 1,495 1,855 1,153 983 Industrial 10,913 6,133 11,872 5,550 6,153 6,410 11,122 5,345 9,604 8,541 16,459 6,358 Holding Firms 10,844 6,076 25,300 13,115 8,600 11,584 9,081 7,749 29,926 12,966 6,082 5,943 Property 12,138 8,586 7,757 16,680 10,446 11,770 20,015 12,974 22,113 26,847 23,255 13,482 Services 21,263 9,370 8,628 10,202 17,038 17,876 31,139 20,533 29,621 21,897 13,573 14,093 Mining & Oil 94,056 37,160 136,929 35,490 54,421 85,693 44,046 42,982 47,549 36,877 46,143 42,549 SME (in thousand shares) 393,244 239,362 149,843 315,570 222,462 681,589 708,473 565,685 247,653 243,479 257,034 433,790 ETF1/ (in thousand shares) 1,893 2,235 1,715 1,220 2,964 1,008 943 987 656 775 1,252 1,406

Value 641,594 553,577 517,832 438,408 407,066 524,669 576,329 421,435 436,165 557,722 509,397 455,081 Financials 74,595 88,404 66,529 43,993 51,044 81,396 78,796 64,291 62,314 97,069 68,694 65,770 Industrial 145,948 143,103 150,323 91,553 90,691 88,097 130,479 92,713 95,489 124,385 160,294 106,937 Holding Firms 174,325 136,336 108,947 119,313 98,158 141,840 145,256 106,019 107,784 117,477 92,603 110,078 Property 103,447 75,621 77,548 104,550 74,676 93,801 103,546 75,656 73,843 91,341 79,277 73,557 Services 111,491 85,432 94,494 67,320 74,501 94,777 96,593 64,268 76,891 109,909 86,868 76,297 Mining & Oil 27,328 21,899 17,914 8,583 15,738 17,146 16,669 15,622 17,704 15,513 19,889 18,926 SME (in thousand pesos) 4,226,414 2,498,500 1,876,456 2,957,202 1,927,800 7,488,170 4,868,616 2,748,376 2,061,918 1,931,746 1,621,230 3,338,479 ETF1/ (in thousand pesos) 234,748 282,800 200,392 139,155 331,093 123,996 120,654 116,416 78,599 97,128 150,269 177,323

Composite Index (end of period) 7940.49 7564.50 6893.98 6952.08 7262.30 7796.25 7629.73 6840.64 7311.72 7843.16 8171.43 8558.42

Sum of details may not add up to totals due to rounding.

p Preliminary data

1/ Starting 2 December 2013, trading of an Exchange Traded Fund commenced. ETF is an open-end investment company that trades its shares in the stock exchangeSource : Philippine Stock Exchange

201720162015

11 PHILIPPINES: BALANCE OF PAYMENTSin million US dollars

Growth (%)Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 2017 p

Current Account 786 -1329 -91 -566 -860 -211 1850 -3297 -482.9(Totals as percent of GNI) 0.9 -1.4 -0.1 -0.6 -1.0 -0.2 2.0 -3.2(Totals as percent of GDP) 1.1 -1.7 -0.1 -0.7 -1.2 -0.3 2.5 -3.8Export 26295 27034 28274 27303 28745 30189 31971 30234 10.7Import 25509 28363 28364 27868 29605 30400 30121 33531 20.3

Goods, Services, and Primary Income -5065 -7486 -6390 -6985 -7237 -6611 -4651 -10103 -44.6Export 20273 20701 21801 20719 22164 23593 25319 23238 12.2Import 25339 28186 28191 27704 29401 30204 29969 33341 20.3

Goods and Services -5703 -8181 -6927 -7695 -7918 -7539 -5351 -10888 -41.5(Totals as percent of GNI) -6.7 -8.8 -7.7 -7.7 -9.1 -7.9 -5.9 -10.5(Totals as percent of GDP) -8.2 -10.5 -9.4 -9.2 -11.1 -9.5 -7.1 -12.5Export 17887 18330 19370 18350 19723 20907 22673 20500 11.7Import 23590 26511 26297 26045 27641 28446 28024 31388 20.5

Goods -7833 -9516 -8989 -9210 -9683 -9737 -8647 -13123 -42.5(Totals as percent of GNI) -9.3 -10.2 -10.1 -9.3 -11.1 -10.2 -9.6 -12.7(Totals as percent of GDP) -11.3 -12.2 -12.1 -11.0 -13.5 -12.3 -11.5 -15.0Credit: Exports 9939 10388 11294 11113 11772 12214 12875 11337 2.0Debit: Imports 17772 19904 20283 20323 21456 21951 21523 24461 20.4

Services 2130 1335 2063 1515 1766 2198 3296 2236 47.6Credit: Exports 7948 7942 8076 7237 7951 8694 9797 9163 26.6Debit: Imports 5818 6607 6014 5722 6186 6495 6501 6927 21.1

Primary Income 638 695 537 710 681 928 700 785 10.5Credit: Receipts 2386 2370 2431 2369 2441 2686 2646 2738 15.6Debit: Payments 1748 1675 1894 1659 1760 1758 1946 1953 17.7

Secondary Income 5851 6157 6299 6420 6377 6400 6501 6806 6.0Credit: Receipts 6022 6333 6473 6583 6581 6596 6653 6996 6.3Debit: Payments 170 176 173 164 204 196 152 190 16.1

Capital Account 14 16 18 14 6 18 18 14 3.2Credit: Receipts 18 20 22 18 18 25 24 23 29.3Debit: Payments 3 4 4 4 13 7 6 9 123.4

Financial Account 450 -1842 478 1089 328 -945 442 -2033 -286.6Net Acquisition of Financial Assets 1258 1429 1066 1906 461 1263 2030 2776 45.7Net Incurrence of Liabilities 808 3271 588 816 132 2208 1588 4809 489.2

Direct Investment -1550 -2051 -811 -1471 -1480 -1868 -2117 -2646 -79.8Net Acquisition of Financial Assets -126 895 874 754 36 631 311 961 27.5Net Incurrence of Liabilities 1423 2946 1685 2226 1516 2499 2427 3607 62.1

Portfolio Investment 1446 880 -566 -279 3258 -129 875 -114 59.1Net Acquisition of Financial Assets 488 1247 -130 -389 614 455 988 1035 366.4Net Incurrence of Liabilities -958 367 436 -109 -2644 585 114 1149 1152.4

Financial Derivatives -3 59 -11 -78 -131 -6 45 41 152.7Net Acquisition of Financial Assets -155 -210 -191 -145 -286 -90 -70 -57 60.7Net Incurrence of Liabilities -152 -270 -180 -67 -155 -85 -116 -98 -46.2

Other Investment 556 -731 1866 2918 -1318 1058 1638 686 -76.5Net Acquisition of Financial Assets 1051 -503 513 1685 98 266 801 837 -50.3Net Incurrence of Liabilities 495 228 -1353 -1233 1416 -791 -837 150 112.2

NET UNCLASSIFIED ITEMS -561 314 1565 -427 188 -464 -2088 1754 510.7

OVERALL BOP POSITION -210 843 1014 -2068 -994 289 -662 505 124.4(Totals as percent of GNI) -0.2 0.9 1.1 -2.1 -1.1 0.3 -0.7 0.5(Totals as percent of GDP) -0.3 1.1 1.4 -2.5 -1.4 0.4 -0.9 0.6

Debit: Change in Reserve Assets -199 833 1025 -2079 -983 278 -651 494 123.8Credit: Change in Reserve Liabilities 11 -11 11 -10 11 -10 11 -10 0.3

Details may not add up to total due to rounding.p Preliminaryr Revised to reflect data updates from official data sources and post-audit adjustments. Rounds off to zeroTechnical Notes:1. Balance of Payments Statistics are based on the IMF's Balance of Payments and International Investment Position Manual, 6th Edition.2. Financial Account, including Reserve Assets, is calculated as sum of net acquisitions of financial assets less net incurrence of liabilities.3. Balances in the current and capital accounts are derived by deducting debit entries from credit entries.4. Balances in the financial account are derived by deducting net incurrence of liabilities from net acquisition of financial assets.5. Negative values of Net Acquisition of Financial Assets indicate withdrawal/disposal of financial assets; negative values of Net

Incurrence of Liabilities indicate repayment of liabilities.6. Overall BOP position is calculated as the change in the country's net international reserves (NIR), less non-economic transactions (revaluation

and gold monetization/demonetization). Alternatively, it can be derived by adding the current and capital account balances less financial account plus net unclassified items.

7. Net unclassified items is an offsetting account to the overstatement or understatement in either receipts or payments of the recorded BOP components vis-à-vis the overall BOP position.

8. Data on Deposit-taking corporations, except the central bank consist of transactions of commercial and thrift banks and offshore banking units (OBUs).


2016 r 2017 p

12 INTERNATIONAL RESERVES as of periods indicated in million US dollars

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec

Gross International Reserves 80,459 80,644 80,551 80,667 82,977 85,284 86,139 80,692 80,894 81,321 80,962 81,570

Gold 7,437 7,378 7,015 6,703 7,765 8,336 8,307 7,259 7,888 7,835 8,065 8,337 SDRs 1,168 1,190 1,188 1,173 1,193 1,184 1,182 1,138 1,149 1,178 1,198 1,211 Foreign Investments 70,565 70,647 70,800 71,739 71,379 73,295 73,850 68,290 67,677 68,160 65,371 65,815 Foreign Exchange 850 985 1,103 613 2,217 2,020 2,342 3,563 3,735 3,695 5,880 5,783 Reserve Position in the Fund 439 445 445 439 424 449 458 442 446 453 448 424

Net International Reserves 80,446 80,642 80,538 80,665 82,964 85,282 86,126 80,689 80,881 81,318 80,948 81,567

Details may not add up to total due to roundingSource: Bangko Sentral ng Pilipinas

2 0 1 5 2 0 1 6 2 0 1 7

13 EXCHANGE RATES OF THE PESOpesos per unit of foreign currencyperiod averages

2015 45.5028 0.3760 50.5291 69.5888 34.2412 33.1266 5.8697 11.7236 1.3308 0.0034 1.4340 0.0403 7.2423 12.1317 12.3892Jan 44.6044 0.3764 51.8185 67.5228 36.1260 33.3326 5.7531 12.4698 1.3627 0.0035 1.4109 0.0410 7.1705 11.8776 12.1439Feb 44.2214 0.3728 50.2159 67.7105 34.4404 32.6549 5.7028 12.2812 1.3575 0.0035 1.4017 0.0402 7.0756 11.7850 12.0397Mar 44.4457 0.3695 48.2323 66.6675 34.4120 32.3068 5.7290 12.1122 1.3638 0.0034 1.4139 0.0400 7.1198 11.8512 12.1011Apr 44.4136 0.3717 47.9446 66.4142 34.3952 32.9291 5.7303 12.2206 1.3660 0.0034 1.4340 0.0409 7.1605 11.8431 12.0921May 44.6106 0.3697 49.8209 68.9978 35.2446 33.4497 5.7545 12.4089 1.3334 0.0034 1.4578 0.0409 7.1904 11.8964 12.1456Jun 44.9831 0.3635 50.4958 70.0355 34.6977 33.4578 5.8023 12.0537 1.3345 0.0034 1.4560 0.0404 7.2488 11.9957 12.2476Jul 45.2649 0.3674 49.8437 70.4481 33.6277 33.2927 5.8396 11.9158 1.3212 0.0034 1.4535 0.0396 7.2911 12.0702 12.3242Aug 46.1420 0.3746 51.3555 71.9861 33.7471 33.0760 5.9513 11.4516 1.3053 0.0034 1.4373 0.0393 7.2960 12.3033 12.5633Sep 46.7504 0.3891 52.5457 71.7659 33.0060 33.0510 6.0323 10.8822 1.2991 0.0033 1.4330 0.0395 7.3395 12.4684 12.7301Oct 46.3609 0.3860 52.0504 71.0269 33.4019 33.0814 5.9821 10.8995 1.2978 0.0034 1.4287 0.0405 7.2971 12.3660 12.6235Nov 47.0067 0.3844 50.6537 71.5190 33.5722 33.3169 6.0650 10.9313 1.3159 0.0034 1.4422 0.0409 7.3878 12.5325 12.7995Dec 47.2303 0.3874 51.3725 70.9713 34.2240 33.5709 6.0936 11.0560 1.3129 0.0034 1.4392 0.0403 7.3302 12.5910 12.8606




Thai BahtUS Dollar Japanese Yen Euro Pound

SterlingSingapore

DollarHongkong

DollarMalaysian

RinggitAustralian

DollarNew Taiwan

DollarSouth

Korean WonIndonesian

RupiahChinese

Yuan Saudi Rial Emirati Dirham

13a EXCHANGE RATES OF THE PESOunits of foreign currency per pesoperiod averages





Saudi Rial Emirati Dirham

Australian Dollar

Chinese Yuan

South Korean Won

Malaysian Ringgit

Thailand Baht

Indonesian Rupiah

New Taiwan Dollar

Pound Sterling

Singapore Dollar

Hongkong DollarUS Dollar Japanese

Yen Euro

13b EFFECTIVE EXCHANGE RATE INDICES OF THE PESO1980 = 100period averages

Overall 1 Advanced 2 Developing 3 Overall Advanced Developing

2015 15.68 13.25 24.39 92.12 90.22 117.81Jan 15.63 13.22 24.30 95.00 94.32 120.30Feb 15.85 13.44 24.61 94.86 94.18 120.11Mar 15.93 13.60 24.61 94.28 93.73 119.27Apr 15.85 13.60 24.39 94.07 93.46 119.06May 15.75 13.46 24.30 92.87 91.48 118.28Jun 15.75 13.47 24.29 92.72 91.39 118.03Jul 15.76 13.44 24.35 91.80 90.76 116.61Aug 15.65 13.15 24.46 90.91 88.29 116.98Sep 15.51 12.84 24.50 89.59 85.57 116.69Oct 15.56 12.94 24.48 90.07 86.49 116.86Nov 15.48 12.99 24.20 90.11 87.48 115.98Dec 15.44 12.88 24.24 89.74 86.54 116.06



2 U.S., Japan, Euro Area, and Australia3 Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E.r Revised


Trading Partners Index Trading Partners Index

1 Australia, Euro Area, U.S., Japan, Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E.

N O M I N A L R E A L

14 TOTAL EXTERNAL DEBT 1/


in million US dollars

Medium & Medium & Trade Non-Trade Long- Term Trade Non-Trade Long- Term

Grand Total 2,968 11,250 58,150 72,368 a 2,498 11,777 58,823 73,098 a

Public Sector 574 36,657 b 37,231 287 37,223 b 37,510

Banks 574 3,450 4,025 287 3,428 3,716Bangko Sentral ng Pilipinas 1,339 c 1,339 1,347 c 1,347Others 574 2,111 2,685 287 2,082 2,369

Non-Banks 33,207 33,207 33,794 33,794NG and Others 33,207 33,207 33,794 33,794

Private Sector 2,968 10,676 21,493 35,136 2,498 11,489 21,601 35,588

Banks 10,484 3,608 14,092 11,297 4,131 15,428

Foreign Bank Branches 4,496 147 4,643 d 4,562 150 4,712 d

Domestic Banks 5,988 3,461 9,449 6,735 3,981 10,716

Non-Banks 2,968 191 17,885 e 21,044 2,498 192 17,469 e 20,160

1 Covers debt owed to non-residents, with classification by borrower based on primary obligor per covering loan/rescheduling agreement/document.

Exclusions

a Residents' holdings of Philippine debt papers issued offshore;Non-residents' holdings of peso-denominated debt securities

Inclusions

b Cumulative foreign exchange revaluation on US$-denominatedmulti-currency loans from Asian Development Bank and World Bank

c Accumulated SDR allocations from the IMFd "Due to Head Office/Branches Abroad" (DTHOBA) accounts of branches

and offshore banking units of foreign banks operating in the Philippines which are considered by BSP as "quasi-equity"

e Loans without BSP approval/registration which cannot be servicedusing foreign exchange from the banking system;Obligations under capital lease arrangements


30 September 2017 31 December 2017Short-term Total Short-term Total

30 September 2017 31 December 2017

17,241 15,9363,909 5,308

12,376 12,3421,175 1,170

-30 -291,183 1,190

3,290 3,614

15 SELECTED FOREIGN DEBT SERVICE INDICATORS

for periods indicatedin million US dollars

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Debt Service Burden (DSB) 1 2295 1473 1432 1989 2484 1356 1453 1755Principal 1572 954 716 1360 1764 836 777 1134Interest 723 519 716 629 720 519 676 622

Export Shipments (XS) 2 9939 10388 11294 11113 11772 12214 12925 11337

Exports of Goods and Receipts 24807 25553 26765 25750 r 27231 28463 30284 28471from Services and Income (XGSI) 2, 3

Current Account Receipts (CAR) 2 26295 27034 28274 27303 r 28745 30189 31971 30234

External Debt 77640 77721 76622 74763 73805 72493 72368 73098

Gross Domestic Product (GDP) 69225 77767 74081 83566 71564 79328 75060 87357

Gross National Income (GNI) 84648 93304 89393 99390 87264 95339 90477 103504

Ratios (%) :

DSB to XS 23.09 14.18 12.68 17.90 21.10 11.10 11.24 15.48

DSB to XGSI 9.25 5.76 5.35 7.72 9.12 4.76 4.80 6.17

DSB to CAR 8.73 5.45 5.06 7.28 8.64 4.49 4.54 5.81

DSB to GNI 2.71 1.58 1.60 2.00 2.85 1.42 1.61 1.70

External Debt to GDP 26.47 26.19 25.41 24.52 24.05 23.49 23.39 23.32

External Debt to GNI 21.88 21.68 21.07 20.37 19.98 19.52 19.44 19.41

1 Debt service burden represents principal and interest payments after rescheduling. In accordance with the internationally-accepted concept, debt service burden consists of (a) Principal and interest payments on fixed MLT credits including IMF credits, loans covered bythe Paris Club and Commercial Banks rescheduling, and New Money Facilities; and (b) Interest payments on fixed and revolving short-term liabilities of banks and non-banks but excludes (i) Prepayments of future years' maturities of foreign loans and (ii) Principal payments onfixed and revolving ST liabilities of banks and non-banks.

2 Based on the accounting principle under the Balance of Payments and International Investment Position Manual, Sixth edition (BPM6)3 Includes cash remittances of overseas Filipino workers that were coursed through and reported by commercial banks which are reflected

under Compensation of Employees in the Primary Income account and workers' remittances in the Secondary Income account.p Preliminaryr Revised

Source: BSP

2016 2017 p

16 SELECTED FOREIGN INTEREST RATESperiod averages; in percent

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

US Prime Rate 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2500 3.2841 3.5000 3.5000 3.5000 3.5119 3.7935 4.0455 4.2500 4.2976

US Discount Rate 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7500 0.7935 1.0000 1.0000 1.0000 1.0492 1.2935 1.5455 1.7500 1.7976

US Federal Funds Rate 0.1142 0.1649 0.1570 0.1722 0.1546 0.1140 0.0848 0.0802 0.0767 0.0780 0.0784 0.0930 0.0974 0.1151 0.1323 0.1574 0.3694 0.3831 0.3994 0.4491 0.6974 0.9486 1.1551 1.2015

LIBOR (90 days) 0.5141 0.4663 0.4239 0.3170 0.2917 0.2750 0.2614 0.2413 0.2358 0.2282 0.2343 0.2363 0.2603 0.2794 0.3142 0.4085 0.6248 0.6433 0.7853 0.9208 1.0684 1.2023 1.3150 1.4656

SIBOR (90 days)1 0.4375 0.4375 0.4120 0.4063 0.4063 0.4063 0.4063 0.4062 0.4033 0.4038 0.4055 0.4254 0.7503 0.8791 0.9613 1.0921 1.2369 1.0062 0.8807 0.9059 0.9529 0.9961 1.1101 1.1681

1 SIBOR data refers to SIBOR rates (in Singapore $)

Source: Bloomberg, Asian Wall Street Journal, Reuters

2016 2013 2015 2012 2017 2014

17 BALANCE SHEET OF THE BANGKO SENTRAL NG PILIPINASas of periods indicated

Mar Jun Sep Dec Mar Jun Sep Nov Dec Mar Jun Sep Nov u

Assets 4,134.4 4,180.5 4,296.4 4,309.0 4,405.5 4,591.3 4,760.7 4,598.8 4,559.1 4,612.7 4,664.3 4,678.2 4,601.34,134.4 4,180.5 4,296.4 4,309.0 4,405.5 4,591.3 4,760.7 4,598.8 4,559.1 4,612.7 4,664.3 4,678.2 4,601.3

International Reserves 3,581.1 3,622.1 3,753.7 3,782.4 3,798.6 3,991.3 4,158.0 4,033.8 3,998.0 4,044.1 4,083.7 4,096.0 4,024.1 Foreign Exchange Receivable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic Securities 223.0 223.1 223.4 222.6 224.0 224.2 224.8 224.0 223.2 224.5 224.4 225.1 224.9 Loans and Advances 85.1 85.3 85.7 84.7 163.5 154.5 151.7 151.8 151.1 151.2 155.8 156.1 152.6 Revaluation of International Reserves 35.9 36.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bank Premises and Other Fixed Assets 18.0 17.9 18.0 18.3 18.1 17.9 18.0 17.9 18.1 18.6 21.8 22.8 22.8 Derivative Instruments in a Gain Position 1.3 0.4 0.2 0.0 0.0 1.5 1.6 1.0 0.0 0.2 0.2 0.1 0.1 Other Assets 190.0 194.9 215.6 200.9 201.3 201.9 206.6 170.4 168.8 174.2 178.5 178.1 176.7

Liabilities 4,092.5 4,137.3 4,253.9 4,268.6 4,362.9 4,545.3 4,703.4 4,537.8 4,500.7 4,551.6 4,598.5 4,609.6 4,530.6

Currency Issue 809.7 798.6 817.3 1,005.2 930.5 931.4 942.1 1,009.5 1,124.2 1,046.1 1,071.1 1,090.7 1,159.6 Deposits 2,893.1 2,945.9 2,952.6 2,788.9 2,935.7 2,967.2 2,991.7 2,803.4 2,679.0 2,771.4 2,712.9 2,670.0 2,568.8 Reserve Deposits of Other Depository Corporations (ODCs) 1

1,277.7 1,324.4 1,373.3 1,456.2 1,427.0 1,393.5 1,559.4 1,523.0 1,631.6 1,686.7 1,742.1 1,787.0 1,742.0 Reserve Deposits of Other Financial Corporations (OFCs) 2 7.6 7.1 6.8 5.7 4.0 2.7 2.5 2.3 1.9 2.0 2.0 2.1 2.0 Overnight Deposit Facility 3 1,052.2 1,008.1 953.7 828.3 1,027.5 1,004.7 634.5 343.1 236.6 131.8 64.6 12.9 77.7 Term Deposit Facility 3 .. .. .. .. .. 90.1 330.1 486.5 529.2 576.6 376.9 347.9 272.6 Treasurer of the Philippines 4 478.6 528.0 544.1 426.8 336.3 332.2 318.1 302.0 136.9 227.6 379.8 346.9 307.7

Other Foreign Currency Deposits 0.0 0.0 0.0 0.0 0.5 0.1 0.1 0.1 0.1 0.1 1.1 1.1 0.0

Foreign Financial Institutions 43.7 44.4 39.3 39.3 108.7 111.1 111.1 111.1 111.1 111.1 114.4 114.3 114.3 Other Deposits 5 33.4 33.9 35.3 32.5 31.7 32.9 35.9 35.4 31.6 35.5 32.0 57.8 52.3

Foreign Loans Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Bonds Payable 22.8 22.6 23.9 23.6 23.5 23.5 24.8 25.8 24.9 25.7 25.2 26.0 26.1

Derivative Instruments in a Loss Position 0.0 0.0 0.0 0.1 1.8 0.0 0.0 0.8 0.0 0.1 0.0 0.1 0.1

Derivatives Liability 0.1 0.0 0.0 0.0 0.0 0.2 0.1 0.0 0.0 0.1 0.1 0.1 0.1

Allocation of SDRs 51.7 53.2 55.1 54.7 54.3 55.1 56.7 56.4 56.1 57.1 58.9 60.3 59.7

Revaluation of International Reserves 0.0 0.0 86.2 73.9 96.2 252.3 371.3 325.3 299.5 389.9 409.5 449.1 395.6 Reverse Repurchase Facility 3 304.8 306.3 308.5 311.7 309.8 305.0 305.0 305.0 305.1 249.7 305.0 296.7 305.0

Other Liabilities 10.2 10.8 10.1 10.4 10.9 10.5 11.6 11.5 11.9 11.5 15.8 16.8 15.6

Net Worth 41.9 43.2 42.5 40.4 42.6 46.0 57.3 61.0 58.4 61.1 65.7 68.5 70.7

Capital 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0

Surplus/Reserves -8.1 -6.8 -7.5 -9.6 -7.4 -4.0 7.3 11.0 8.4 11.1 15.7 18.5 20.7

Note: Details may not add up to total due to rounding.1 ODCs are deposit generating institutions other than the BSP such as universal and commercial banks (UB/KBs), specialized government banks (SGBs), thrift banks (TBs), rural banks (RBs)

and non-banks with quasi-banking functions (NBQBs).2 OFCs are trust units of banks.3 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively,

and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system. Includes accrued interest payables.4 Includes foreign currency deposits.5 Mostly GOCC deposits.u Based on the unaudited BSP Financial Statements prepared by the Financial Accounting Department of the BSP.

.. No transaction


201720162015LEVELS (in billion pesos)

18 INCOME POSITION OF THE BANGKO SENTRAL NG PILIPINAS

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Oct-Nov Q4 Jan-Nov FY Q1 Q2 Q3 Oct-Nov u Jan-Nov u

Revenues 15.299 16.083 11.806 13.556 56.744 13.167 20.533 23.422 8.559 12.869 65.681 69.991 12.557 20.091 15.504 10.877 59.029

Interest Income 8.454 9.735 10.226 10.787 39.202 11.495 11.503 11.698 7.871 12.130 42.567 46.826 13.140 14.346 14.861 10.696 53.043 International Reserves 6.111 7.333 7.639 8.068 29.151 8.824 9.026 9.342 7.032 10.543 34.224 37.735 10.801 11.753 12.138 8.825 43.517 Domestic Securities 0.941 1.021 1.147 1.240 4.349 1.052 1.023 0.967 0.611 0.926 3.653 3.968 1.016 1.297 1.402 0.941 4.656 Loans and Advances 0.424 0.417 0.438 0.418 1.697 0.438 0.501 0.417 0.263 0.401 1.619 1.757 0.407 0.405 0.405 0.278 1.495 Others 0.978 0.964 1.002 1.061 4.005 1.181 0.953 0.972 -0.035 0.260 3.071 3.366 0.916 0.891 0.916 0.652 3.375 Miscellaneous Income 6.672 5.584 1.184 2.511 15.951 1.263 9.037 11.522 0.651 0.683 22.473 22.505 -0.299 5.685 0.493 -0.158 5.721 Net Income from Branches 0.173 0.764 0.396 0.258 1.591 0.409 -0.007 0.202 0.037 0.056 0.641 0.660 -0.284 0.060 0.150 0.339 0.265

Expenses 17.308 18.538 17.993 19.206 73.045 16.684 18.146 16.993 12.438 19.371 64.261 71.194 15.588 19.811 15.529 10.080 61.008

Interest Expenses 12.022 12.240 12.325 12.202 48.789 11.550 10.986 10.858 6.944 10.226 40.338 43.620 10.010 9.254 8.746 5.253 33.263 Legal Reserve Deposits of Banks 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 National Government Deposits 2.205 2.651 2.614 2.544 10.014 1.828 1.498 1.495 0.915 1.301 5.736 6.122 1.221 1.968 1.693 1.121 6.003 Reverse Repurchase Facility 1 3.033 3.083 3.140 3.133 12.389 3.148 2.874 2.339 1.550 2.338 9.911 10.699 2.060 1.940 2.116 1.348 7.464 Overnight Deposit Facility 1 6.291 6.003 6.233 5.803 24.330 6.064 6.010 5.096 2.241 2.781 19.411 19.951 0.998 0.636 0.260 0.132 2.026 Term Deposit Facility 1 .. .. .. .. .. .. 0.085 1.386 1.843 3.217 3.314 4.688 5.131 4.073 3.969 2.159 15.332 Loans Payable and Other Foreign Currency Deposits 0.487 0.494 0.326 0.706 2.013 0.500 0.506 0.532 0.386 0.577 1.924 2.115 0.587 0.602 0.635 0.420 2.244 Other Liabilities 0.006 0.009 0.012 0.016 0.043 0.010 0.013 0.010 0.009 0.012 0.042 0.045 0.013 0.035 0.073 0.073 0.194 Cost of Minting/Printing of Currency 1.940 1.711 1.585 2.949 8.185 1.284 2.362 1.775 2.748 3.819 8.169 9.240 1.523 1.747 2.114 1.572 6.956 Taxes and Licenses 0.355 0.225 0.252 0.241 1.073 0.364 0.251 0.259 0.143 0.175 1.017 1.049 0.424 3.007 0.289 0.304 4.024 Others 2.991 4.362 3.831 3.814 14.998 3.486 4.547 4.101 2.603 5.151 14.737 17.285 3.631 5.803 4.380 2.951 16.765

Net Income/(Loss) Before Gain/(Loss) on FXR Fluctuations and Income Tax Expense/(Benefit) -2.009 -2.455 -6.187 -5.650 -16.301 -3.517 2.387 6.429 -3.879 -6.502 1.420 -1.203 -3.031 0.280 -0.025 0.797 -1.979

Gain/(Loss) on Foreign Exchange Rate Fluctuations 2 -1.176 3.496 5.333 3.897 11.550 3.673 0.878 4.145 8.970 10.428 17.666 19.124 4.695 4.615 3.480 2.532 15.322

Income Tax Expense/(Benefit) 0.000 0.000 0.002 -0.335 -0.333 0.000 0.000 0.002 0.000 0.105 0.002 0.107 0.000 0.013 0.033 0.031 0.077

Net Income/(Loss) After Tax -3.185 1.041 -0.856 -1.418 -4.418 0.156 3.265 10.572 5.091 3.821 19.084 17.814 1.664 4.882 3.422 3.298 13.266

Note: Details may not add up to total due to rounding.1 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively,

and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system.2 This represents realized gains or losses from fluctuations in FX rates arising from foreign currency-denominated transactions of the BSP, including: 1) rollover/re-investments of matured FX investments

with foreign financial institutions and FX-denominated government securities; 2) servicing of matured FX obligations of the BSP; and 3) maturity of derivatives instruments.u Based on the unaudited BSP Financial Statements prepared by the Financial Accounting Department of the BSP... No transaction


for periods indicated

201720162015LEVELS (in billion pesos)

Documents

Report on Economic and Financial Developments - bsp.gov.ph · The BSP maintains monetary policy settings in . Q4 2017. ... (TRAIN) bill on 19 December ... lower than the 66 bps in