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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


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    1. Philippine Economic Outlook Dr. Roberto F. de Ocampo President Makati Shangri-La 21 February 2006

    2. Outline of Presentation • 2005 Philippine Economic Performance • Analysis of Economic Performance • Outlook for 2006

    3. 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

    4. Economic Performance Indicators • Surprising, resilient GDP growth Growth Rates Source: NEDA

    5. Economic Performance Indicators • Slower growth in most Asian countries GDP Growth Rates for Selected Asian Countries Source: NEDA, Ateneo

    6. Economic Performance Indicators • Strengthening Peso Philippine Peso – US Dollar Exchange Rate Source: BSP

    7. Economic Performance Indicators • OFW Remittances on the rise Remittances from Overseas Workers 25% Increase In Millions of US$ Source: BSP

    8. Economic Performance Indicators • Budget Deficit under control RP Government Budget Deficit In Billions of Philippine Pesos Source: BSP

    9. Economic Performance Indicators • Stock market is rebounding Philippine Stock Exchange Indicators In Millions of Philippine Pesos PSE Composite Index Source: PSE

    10. Economic Performance Indicators • T-Bill spreads falling 3 Month Treasury Bill Rates Source: BSP

    11. Economic Performance Indicators • Inflation easing Monthly Inflation Rates 2000-2005 Source: BSP

    12. 2006: Looking Up? • Improved credit ratings outlook • Increased tax collections from 12% VAT • Improvement in agricultural outlook • Better export potential • Local business optimism

    13. 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?

    14. 2006: Challenges Remain • Need to improve investment climate

    15. Economic Performance Indicators • Limited FDI inflows Net Foreign Direct Investments In Millions of US$ Source: BSP

    16. 2006: Challenges Remain • Need to improve investment climate • Currency appreciation may be difficult to sustain

    17. Strength of Currency • Change in BSP Regulations • Entry of portfolio funds to select stocks in the market

    18. Economic Performance Indicators • Return of Portfolio Investors Net Inflows of Portfolio Investments In Millions of US$ Source: BSP

    19. Strength of Currency • Change in BSP Regulations • Entry of portfolio funds to select stocks in the market • Excess global liquidity looking for Asian investments

    20. 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

    21. Economic Performance Indicators • Seasonal fluctuations due to OFW Remittances Philippine Peso – US Dollar Exchange Rate Philippine Pesos Source: BSP

    22. 2006: Challenges Remain • Need to improve investment climate • Strengthening currency may difficult to sustain • Higher taxes may lower consumer demand

    23. Low Overall Competitiveness

    24. Why is Growth not Being Felt? • Slow growth in agriculture • Falling investments • Low job generation • High inflation caused by oil and VAT

    25. Potential Growth Drivers • Improved VAT collections/fiscal reforms • Infrastructure development • Power sector privatization • Mining • Booming sectors: • BPO / IT outsourcing • Tourism • Finance

    26. Potential Growth Challenges • Tax revenue leakage • Slow infrastructure development • Opposition to mining investments • Slow privatization

    27. Potential Risks • Oil shock • Bird flu pandemic • Continuing political problems

    28. 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

    29. Outlook for 2006 • Political crisis overhang • Stable growth • India as model for development

    30. Philippine Economic Outlook Dr. Roberto F. de Ocampo President Makati Shangri-La 21 February 2006