1. Prospects for the Philippine economy 2017
Bernardo M. Villegas, Ph.D. (Harvard)
University Professor, UA&P

2. The Global Scenario U.S. Economy facing a Possible Recession
EU, except Spain, growing very slowly
BREXIT will aggravate EU problems
Japan in perpetual stagnation
China slowing down: possible hard landing
Emerging markets, especially Russia and Brazil, facing heavy debt burdens
The ASEAN Economic Community (AEC) assuming growth leadership together with India and Sri Lanka
Continuing turmoil in the Middle East and North Africa
Oil prices recovering but ceiling of US$50-$60 dollar per barrel
Moderate depreciation of Philippine peso
Demographic winter of developed countries, including Northeast Asia

3. ENGINES OF GROWTH FOR THE PHILIPPINE ECONOMY
Young Population
BPO Industry
Infrastructure
Domestic Tourism
OFWs
Public-Private Partnerships
Agriculture
Manufacturing
2017 – 2022

4. President Rodrigo Duterte’s 10-Point Socioeconomic Agenda
Continue and maintain current macroeconomic policies, including fiscal, monetary, and trade policies.
Institute progressive tax reform and more effective tax collection, indexing taxes to inflation.
Increase competitiveness and the ease of doing business.
Accelerate annual infrastructure spending to account for 5% of GDP, with Public-Private Partnerships playing a key role.
Promote rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism.

5. President Rodrigo Duterte’s 10-Point Socioeconomic Agenda
Ensure security of land tenure to encourage investments, and address bottlenecks in land management and titling agencies.
Invest in human capital development, including health and education systems, and match skills and training.
Promote science, technology, and the creative arts to enhance innovation and creative capacity.
Improve social protection programs, including the government's Conditional Cash Transfer program.
Strengthen implementation of the Responsible Parenthood and Reproductive Health Law.

6. ASEAN Foreign Direct Investment net inflows
Value in US$ million; share to total in percent
Country
2013
2014
2015
Share to total
Brunei Darussalam
725.5
568.2
171.3
0.1
Cambodia
1,274.9
1,726.5
1,701.0
1.4
Indonesia
18,443.8
21,810.4
16,916.8
14.0
Lao PDR
426.7
913.2
1,079.2
0.9
Malaysia
12,297.4
10,875.3
11,289.6
9.3
Myanmar
2,620.9
946.2
2,824.5
2.3
Philippines
3,859.8
5,814.6
5,724.2
4.7
Singapore
60,379.6
74,420.3
61,284.8
50.7
Thailand
15,936.0
3,720.2
8,027.5
6.6
Viet Nam
8,900.0
9,200.1
11,800.0
9.8
Total
124,864.5
129,995.1
120,818.8
100.0
ASEAN 6
111,642.0
117,209.0
103,414.2
85.6
CLMV
13,222.5
12,786.1
17,404.6
14.4
ASEAN 6 consists of Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand, while CLMV comprises Cambodia, Lao PDR, Myanmar and Viet Nam.
Source: ASEAN Secretariat as of October 2016

7. FDI ON UPTREND
In fact, the uptrend has been quite impressive, registering a 5-year CAGR of 40% and yoy of 25% despite the Duterte rhetoric.
Impressive FDI growth, but has shown weakness due to global factors. FDI has picked up in 2016 showing 25% growth for the first 9 months and has already topped 2015’s full year FDI. Key investors are Japan, Singapore, and US and in sectors like financial and insurance, manufacturing, and utilities.
Source: Bangko Sentral ng Pilipinas (BSP)
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017

8. WIDE FISCAL SPACE TO SUPPORT EXPANSION
In %
Despite the strong imports and weak exports, our CA surplus remains in positive territory, due to sustained growth of OFW and BPO remittances and we have room to go as far as our budget deficit is concerned compared to other countries.
The fiscal consolidation under the previous administration has provided ample fiscal room for the Duterte administration to pump prime the economy.
Sources: World Bank Open Data, The Economist Economic and Financial Indicators
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017

9. INFRA SPEND: WILL DU30 DELIVER?
The key risk for the current administration is execution. Would Duterte, action-oriented as his image conveys, be able to deliver? Is this doable when all the past administrations had much less?
The tax reform will produce P200BB in additional revenues, coming from automotive taxes and excise taxes on oil products
Reduced corruption and streamlining of approval processes for licenses and permits
The PPP process has been perfected by the Aquino administration and it’s now just a matter of execution
Sources: Department of Budget and Management, PSA
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017

10. SUFFICIENT RESERVES TO WEATHER FOREX VOLATILITY
Our GIR remains healthy and is able to cover almost 10 months worth of imports. Our import cover is higher than our ASEAN neighbor’s average of 6.2x.
Sources: World Bank, International Debt Statistics 2017
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017

11. LOWEST EXTERNAL DEBT TO GNI IN THE REGION
Our external debt is the lowest among our ASEAN peers at 22% of Gross National Income (CNI) versus Indonesia’s 37%, Thailand’s 35%, and Vietnam’s 42.5%.
Sources: World Bank, International Debt Statistics 2017
As cited in the Annual Economic and Capital Markets Briefing of First Metro Investment Corporation titled Riding the Wings of Change, January 5, 2017

12. Macroeconomic Forecasts
2014
2015
2016
2017f
Inflation Rate (Ave % change)
4.1
1.4
1.6
3.5
Peso-Dollar Rate (Year-end)
44.62
46.75
49.81
Gross Int'l Reserves ($B)
79.6
82.5
81.5
90.0
GDP Growth Rate
6.1
5.9
7.1 (3rd Qtr.)
7.5
Industry Sector
7.9
5.6
8.6
9.2
Services Sector
6.4
6.9
7.3
f-forecasts
*Various Sources

13. Financial Forecasts 2014 2015 2016 2017f Inflation Rate (Ave % change)
4.1
1.4
1.6
3.5
Peso-Dollar Rate (Year-end)
44.62
46.75
49.81
50.00 – 52.00
91 day T-bill rate (% p.a.)
2.1
10-year T-bond rate (% p.a.)
3.7
3.8
5.0
PSEi Level
7,230
7,400
6,841
8,000
f-forecasts
*Various Sources

14. Seven Key Industries Agribusiness Business Process Outsourcing
Creative Industries
Infrastructures (Airports, Power, Roads and Rail, Seaports, Telecoms, Water)
Manufacturing and Logistics
Mining
Tourism, Medical Travel and Retirement
Source: Arangkada Philippines 2010: A Business Perspective, Joint Foreign Chambers

15. Thank you.