The Philippine Economy on the Road to Recovery Dr. Bernardo M. Villegas

No Great Depression Black Thursday 1929 Stock Market Crash Passive Federal Reserve System Ignorance of Keynesian Pump Priming Panic in the Banking Sector Unemployment Rate of 25% Complete Dominance of the US Economy in the World World Financial Market Illiquid

No Great Depression Black Monday 2008 Real Estate Bubble Proactive Federal Reserve System US Government Pump Priming No Panic in the Banking Sector No Crash in the Stock Market Unemployment Rate Manageable Countervailing Power of Emerging Markets Liquidity of Sovereign Funds Massive intervention of European governments

Traditional Engines of Growth: GDP Growth Rates of Major Economies F – forecasts Source: World Economic Outlook Database, IMF, April 2009; WEO Update July 2009

Traditional Engines of Growth: GDP Growth Rates F – forecasts Source: World Economic Outlook Update, IMF, July 2009

The Most Powerful Economies in the World *n/a – not available Source: IMF, World Economic Outlook Database, April 2009; World Economic Outlook Update, July 2009

Asia: The Most Dynamic Region GDP Growth Rates * *Upgraded by IMF to -1.8 in early August 2009

Emerging Engines of Growth BRICA Emerging Engines of Growth

Emerging Engines of Growth The Next Eleven Emerging Engines of Growth

Asia: The Most Dynamic Region Selected Sunrise Industries in Asia Agribusiness Mining Triple Ts: Transport, Telecom, and Tourism Infrastructures Automobiles Consumer durables IT-enabled and IT services Logistics and retailing Health care and medical tourism Education Construction and real estate Four Fs: Food, Fashion, Furniture, Fun

The Philippine Economy Threats Net factor income may be slightly lower as the recession in OFWs’ host countries will affect remittances and deployment growth Slowdown in consumer spending Industry sector on a slowdown in 2009 and 2010 Slowdown in exports Higher government deficit Higher trade deficit Depreciating Peso

The Philippine Economy Opportunities Increase in domestic tourism Expansion in mining and energy investments Pump priming in infrastructure spending Expansion in low- and medium-costs housing and office buildings Increase in demand for BPO services Medical tourism and retirement villages

MACROECONOMIC FORECASTS The Philippine Economy MACROECONOMIC FORECASTS 98a 07a 08a 09f 10f Inflation (ave) 9.7 2.8 9.3 3.3 4.0 Peso/$ Rate 41.1 46.1 44.5 49.50 51.50 $ Reserves (Months of Imp) 5.9 5.5 6.8 GDP Growth -0.6 7.1 4.5 2.5 Source: UA&P/BEC Estimates, June 24, 2009

MACROECONOMIC FORECASTS The Philippine Economy MACROECONOMIC FORECASTS 98a 07a 08a 09f 10f Consumption 3.5 5.7 4.7 3.3 4.0 Government -1.9 6.1 5.9 6.5 6.0 Investments -16.3 12.4 1.7 -10.0 GDP Growth -0.6 7.1 3.9 2.5 Source: UA&P/BEC Estimates, June 24, 2009

FINANCIAL MARKETS FORECASTS The Philippine Economy FINANCIAL MARKETS FORECASTS 98a 07a 08f 09f 10f Inflation (ave) 9.7 2.8 9.3 3.3 4.0 91-Day T-bills 15.3 3.6 4.6 4.4 10-yr T-Bond (ave) - 7.1 8.1 7.5 7.6 PhP/$ Rate 41.1 46.1 44.5 49.50 51.50 Source: UA&P/BEC Estimates, June 24, 2009

The Philippine Economy INDUSTRY FORECASTS Source: UA&P-BEC Estimates, June 18, 2009

AGRICULTURAL FORECASTS The Philippine Economy AGRICULTURAL FORECASTS Source: *NSCB; UA&P-CFA Estimates, July 14, 2009

Estimated 2009 Gross Domestic Regional Product (GRDP) GRDP (P) Share (%) Per Capita ($) Per Capita Rank METRO MANILA 2.9 Trillion 35.9% 5,293 1 CALABARZON 895.8 Billion 11.1% 1,610 6 CENTRAL LUZON 617.8 7.6% 1,296 9 CENTRAL VISAYAS 572.8 7.1% 1,738 5 WESTERN VISAYAS 564.3 7.0% 1,586 7 NORTHERN MINDANAO 400.3 5.0% 1,965 3 DAVAO 371.8 4.6% 1,804 4 SOCCSKSARGEN 274.8 3.4% 1,443 8 ILOCOS 226.2 2.8% 932 13 BICOL 209.8 2.6% 782 16 ZAMBOANGA PENINSULA 195.3 2.4% 1,194 11 EASTERN VISAYAS 183.9 2.3% 882 15 MIMAROPA 176.3 2.2% 1,261 10 CORDILLERA 163.8 2.0% 2,065 2 CAGAYAN VALLEY 144.8 1.8% 913 14 CARAGA 121.6 1.5% 1,015 12 ARMM 69.3 0.9% 418 17 Philippines 8.1 Trillion 100.0% 1,834   Slide 3: GRDP Source: NSCB, BEC estimates 18

Growth Rates By Region (%) PHILIPPINES 4.29 MIMAROPA *6.08 NORTHERN MINDANAO *5.56 CAR 5.46 DAVAO REGION *5.12 CENTRAL VISAYAS 5.11 METRO MANILA 4.85 SOCCSKSARGEN *4.77 ZAMBOANGA P. *4.62 CAGAYAN VALLEY 4.59 WESTERN VISAYAS 4.45 ILOCOS SOUTHERN LUZON *4.05 ARMM *3.97 BICOL 3.84 EASTERN VISAYAS 3.82 CALABARZON *3.65 CENTRAL LUZON *3.35 CARAGA **3.06 *average of 02-06 only due to regional reconfiguration **1996-2006 Source: NSCB, NSO , BEC Estimates, Growth rates from 1995-2006

The Philippine Economy on the Road to Recovery Thank you.