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Philippine Economic Outlook . Dr. Roberto F. de Ocampo President Makati Shangri-La 21 February 2006. Outline of Presentation. 2005 Philippine Economic Performance Analysis of Economic Performance Outlook for 2006. 2005: A Challenging Year. Protracted Political Crisis

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philippine economic outlook

Philippine Economic Outlook

Dr. Roberto F. de Ocampo

President

Makati Shangri-La

21 February 2006

outline of presentation
Outline of Presentation
  • 2005 Philippine Economic Performance
  • Analysis of Economic Performance
  • Outlook for 2006
2005 a challenging year
2005: A Challenging Year
  • Protracted Political Crisis
  • Fiscal Crisis from August 2004
  • Escalating Oil Prices
  • Sluggish Export Demand
  • Slow Recovery from El Nino in 2004
economic performance indicators
Economic Performance Indicators
  • Surprising, resilient GDP growth

Growth Rates

Source: NEDA

economic performance indicators5
Economic Performance Indicators
  • Slower growth in most Asian countries

GDP Growth Rates for Selected Asian Countries

Source: NEDA, Ateneo

economic performance indicators6
Economic Performance Indicators
  • Strengthening Peso

Philippine Peso – US Dollar Exchange Rate

Source: BSP

economic performance indicators7
Economic Performance Indicators
  • OFW Remittances on the rise

Remittances from Overseas Workers

25% Increase

In Millions of US$

Source: BSP

economic performance indicators8
Economic Performance Indicators
  • Budget Deficit under control

RP Government Budget Deficit

In Billions of Philippine Pesos

Source: BSP

economic performance indicators9
Economic Performance Indicators
  • Stock market is rebounding

Philippine Stock Exchange Indicators

In Millions of Philippine Pesos

PSE Composite Index

Source: PSE

economic performance indicators10
Economic Performance Indicators
  • T-Bill spreads falling

3 Month Treasury Bill Rates

Source: BSP

economic performance indicators11
Economic Performance Indicators
  • Inflation easing

Monthly Inflation Rates 2000-2005

Source: BSP

2006 looking up
2006: Looking Up?
  • Improved credit ratings outlook
  • Increased tax collections from 12% VAT
  • Improvement in agricultural outlook
  • Better export potential
  • Local business optimism
2006 questions remain
2006: Questions Remain
  • Are things as good as they seem?
  • If things are indeed going well, why is the economic growth not being felt by the general population?
2006 challenges remain
2006: Challenges Remain
  • Need to improve investment climate
economic performance indicators15
Economic Performance Indicators
  • Limited FDI inflows

Net Foreign Direct Investments

In Millions of US$

Source: BSP

2006 challenges remain16
2006: Challenges Remain
  • Need to improve investment climate
  • Currency appreciation may be difficult to sustain
strength of currency
Strength of Currency
  • Change in BSP Regulations
  • Entry of portfolio funds to select stocks in the market
economic performance indicators18
Economic Performance Indicators
  • Return of Portfolio Investors

Net Inflows of Portfolio Investments

In Millions of US$

Source: BSP

strength of currency19
Strength of Currency
  • Change in BSP Regulations
  • Entry of portfolio funds to select stocks in the market
  • Excess global liquidity looking for Asian investments
strength of currency20
Strength of Currency
  • Change in BSP Regulations
  • Entry of portfolio funds to select stocks in the market
  • Excess global liquidity looking for Asian investments
  • Seasonal surge in OFW remittances
economic performance indicators21
Economic Performance Indicators
  • Seasonal fluctuations due to OFW Remittances

Philippine Peso – US Dollar Exchange Rate

Philippine Pesos

Source: BSP

2006 challenges remain22
2006: Challenges Remain
  • Need to improve investment climate
  • Strengthening currency may difficult to sustain
  • Higher taxes may lower consumer demand
why is growth not being felt
Why is Growth not Being Felt?
  • Slow growth in agriculture
  • Falling investments
  • Low job generation
  • High inflation caused by oil and VAT
potential growth drivers
Potential Growth Drivers
  • Improved VAT collections/fiscal reforms
  • Infrastructure development
  • Power sector privatization
  • Mining
  • Booming sectors:
    • BPO / IT outsourcing
    • Tourism
    • Finance
potential growth challenges
Potential Growth Challenges
  • Tax revenue leakage
  • Slow infrastructure development
  • Opposition to mining investments
  • Slow privatization
potential risks
Potential Risks
  • Oil shock
  • Bird flu pandemic
  • Continuing political problems
political situation
Political Situation
  • Philippine Elections in 2007
  • Two major political forces at play:
    • Those pushing for midterm elections
    • Those pushing for parliamentary elections
  • Both options require at least one year of preparation
  • Critical date: June 2006
outlook for 2006
Outlook for 2006
  • Political crisis overhang
  • Stable growth
  • India as model for development
philippine economic outlook30

Philippine Economic Outlook

Dr. Roberto F. de Ocampo

President

Makati Shangri-La

21 February 2006

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