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Cielito F. HabitoUSAID TRADE Project

Investment-Grade Philippines:Breaking Out

PHILIPPINE BUSINESS CONFERENCEManila Hotel

OCTOBER 22, 2013

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Investment Growth, 2004-2009Gross Domestic Capital FormationAverage Annual Growth Rate (%)

2010-13> 10.6

S1-2013>12.7

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How Is The Economy Doing?The PiTiK Test

The Essential Yardsticks (P-T-K):

Price Stability(Presyo)

Jobs (Trabaho)

Incomes (Kita)

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The Economy In Q2-2013Good News: 2 out of 3

Prices:Slowed down to 2.8% in 2013 vs.3.2% in 2012; Aug 2.1% (Food: 1.8%)

Jobs:July 2013 unemployment rose to 7.3%from last years 7.0%; 620,000 additionaljobs, but 155,000 additional unemployed;underemployment persistently high at 19.2%

Incomes/Output: GDP grew 7.5%, upfrom previous years 6.5% growth

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Then and Now

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Signs of a Take-Off

PiTiK Test: Then and Now

Source: NSCB

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Taking Off Where It Matters

Source: NSCB

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Growth Drivers in 2013 andBeyond

Election Spending: A consistent stimulus

Government spending: Full throttle; PPPs

finally coming on stream; stronger revenues

Governance: Improvements are taking hold

Private domestic investment: Up from a

decade of stagnation; FDI picking up

Fitch, S&P & Moodys: Investment GradeRating

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Remittances: Steady growth

Gaming Investments: Philippines as the new

Macau? Tourism: More fun in the Philippines

Mindanao: Peace agreement will unleash

new growth potentials New manufacturing investments

China: No longer factory of the world

Growth Drivers in 2013 andBeyond

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Reality Check:Much work remains

Source: ADB

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Our trade with ASEAN is largely intra-

industry in nature (we trade in products

belonging to the same industries)

Electronics: We export intermediatecomponents but import finished products

We sell Thailand motor vehicle parts; they sell usmotor vehicles

Our trade relationships in Asean are largely

complementary rather than competitive;

opportunities lie in regional (and global)

value chains

Whos Afraid of the ASEAN

Economic Community

2015?

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ASEAN Economic CommunityObservations

Aggregate regional impacts will be positive

Some economies/sectors will gain more

than others (a few may be hurt) AEC is forcing us to do the right things!

There will be winners and losers within

economiesMust be clearly identified

Find creative ways for winners to

compensate the losers

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Ruchir Sharma: Breakout Nations

PH: New economy to

watch!

Move over, BRICS; TIP(Turkey, Indonesia &

Philippines) is here

Sharma: Quality ofpolitical leadership

crucial to becoming a

breakout nation