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  • CONSENSUS FORECAST

    PHILIPPINES 2 CALENDAR 11 NOTES 13

    Contributors ARNE POHLMAN Chief Economist ARMANDO CICCARELLI Head of Research RICARDO ACEVES Senior Economist RICARD TORNÉ Senior Economist

    OLGA COSCODAN Economist CARL KELLY Economist TERESA KERSTING Economist DIRINA MANÇELLARI Economist

    ANGELA BOUZANIS Economist CECILIA SIMKIEVICH Economist MIRIAM DOWD Editor

    PUBLICATION DATE 24 March 2015 FORECASTS COLLECTED 18 March - 23 March 2015

    INFORMATION AVAILABLE Up to and including 23 March 2015 NEXT EDITION 28 April 2015

    Philippines • April 2015

  • FOCUSECONOMICS Philippines

    FocusEconomics Consensus Forecast | 2

    April 2015

    Philippines

    EXTERNAL SECTOR | Remittances growth slows to six-year low in January In January, cash remittances from Overseas Filipino Workers (OFW) increased 0.5% over the same month of the previous year, reaching USD 1.8 billion. The print came in below December’s 6.6% expansion and marked the slowest pace of growth since January 2009. The overall trend stabilized as remittances totaled USD 24.4 billion in the 12 months up to January, which was virtually in line with December’s print that had marked a record high. The increase represented a 5.5% expansion over the same period of the previous year but fell short of December’s 5.9% rise.

    Remittances, which accounted for approximately 8.5% of GDP in 2014, are an important source of income for many Filipino families and thus a key driver of private consumption. According to the Central Bank, land-based workers accounted for the largest share of remittances, while a smaller proportion of remittances came from sea-based workers. Remittances mainly came from the United States, Saudi Arabia and the United Arab Emirates.

    Outlook improves

    LONG-TERM TRENDS | 3-year averages

    Teresa Kersting Economist

    Philippines

    2011-13 2014-16 2017-19 Population (million): 95.0 101.4 107.6 GDP (USD bn): 237 307 411 GDP per capita (USD): 2,485 3,027 3,812 GDP growth (%): 5.9 6.3 6.1 Fiscal Balance (% of GDP): -2.3 -1.3 -1.4 Public Debt (% of GDP): 51.0 44.7 43.6 Inflation (%): 3.6 3.5 3.5 Current Account (% of GDP): 3.3 4.1 2.8 External Debt (% of GDP): 25.7 18.9 14.4

    • The Philippines recorded a strong expansion in the final quarter of last year, pushing full-year GDP growth to 6.1%. The result suggests that the economy is solidly back on track following Q3’s slowdown. The Q4 acceleration resulted from a rebound in public spending, strong exports and robust private consumption. The government’s focus remains on improving the country’s underdeveloped transport, power and energy infrastructures, which is also crucial to attracting increased foreign direct investment (FDI). Even though implementation of several approved infrastructure projects is behind schedule, companies’ interest in the government’s public-private-partnership is promising. In addition, several policy changes to boost FDI are currently under discussion.

    • FocusEconomics Consensus Forecast panelists now assess the Philippines’ economic prospects more positively on expectations that GDP growth will benefit from low oil prices and be sustained by solid private and public spending. Panelists expect the economy to expand 6.4% in 2015, which is up 0.1 percentage points from last month’s estimate. For 2016, the panel sees GDP growing 6.3%.

    • Inflation inched up from January’s seventeen-month low of 2.4% to 2.5% in February. Inflationary pressures remained subdued in recent months, owing mainly to weak fuel prices and lower food price inflation. Panelists expect inflation to average 2.9% in 2015, which is down 0.2 percentage points from last month’s projection. In 2016, they forecast average inflation of 3.5%.

    OFW Remittances | USD billion and variation in %

    Note: Monthly OFW remittances in USD billion and annual variation in %. Source: Central Bank of the Philippines (BSP).

    0.0

    3.0

    6.0

    9.0

    12.0

    1.6

    1.8

    2.0

    2.2

    2.4

    Jan-13 Jul-13 Jan-14 Jul-14 Jan-15

    Monthly OFW remittances in USD bn (left scale)

    Year-on-year (right scale)

    %

  • FOCUSECONOMICS Philippines

    FocusEconomics Consensus Forecast | 3

    April 2015

    FocusEconomics Consensus Forecast panelists expect private consumption to grow 5.8% in 2015, which is down 0.1 percentage points from last month’s projection. For 2016, the panel expects private consumption to expand 5.7%.

    The government expects growth between 7.0% and 8.0% in 2015 and 2016. FocusEconomics Consensus Forecast panelists expect economic growth to reach 6.4% in 2015, which is up 0.1 percentage points from last month’s forecast. For 2016, panelists expect growth of 6.3%.

    MONETARY SECTOR | Inflation inches up in February In February, consumer prices rose 0.14% over the previous month, coming in below January’s 0.36% rise. February’s increase reflects that higher prices for housing, electricity, gas and other fuels as well as transport slightly offset lower prices for food items.

    Annual inflation inched up from January’s 2.4%, which had marked the lowest level in 17 months, to 2.5% in February. Meanwhile, annual average inflation, which is the reference rate used by the Central Bank as a guide for monetary policy, in February stood at 3.9%, which was a bit down from January’s 4.0% and marked a seven-month low. Thus, average inflation in February rested just slightly below the upper bound of the Central Bank’s target range.

    The monthly core inflation index, which excludes volatile items such as food and oil, in February rose 0.4% over the previous month, coming in below January’s 0.6% rise. Finally, annual core inflation rose from January’s 2.2% to 2.5% in February.

    The Central Bank’s target inflation rate is 3.0% plus/minus 1.0 percentage points for 2015. FocusEconomics Consensus Forecast panelists expect annual inflation to average 2.9% in 2015, which is down 0.2 percentage points from last month’s forecast. For 2016, the panel expects inflation to average 3.5%.

    EXTERNAL SECTOR | Exports contract again in January In January, exports shrunk 0.5% over the same month last year, coming in above December’s 3.2% contraction that had represented the first contraction since April 2013.

    January’s drop resulted from falling exports of manufactures, which fell 1.6% in annual terms, coming in above December’s 3.2% decrease that had marked the largest drop in 17 months. Exports of electronic products—classified as a sub-category of manufactures—grew from December’s 9.9% increase to a 14.6% annual expansion in January. According to the Philippine Statistics Authority, electronic products account for the largest share of the total exports revenue. Exports of agro-based products rebounded from December’s sizable 24.9% contraction to a 12.9% expansion in January.

    In December (the latest month for which data are available), imports fell 10.6% in annual terms, coming in marginally up from November’s 10.8% decrease. Meanwhile, the trade balance improved and tallied a USD 68 million deficit in December (December 2013: USD 485 million deficit).

    FocusEconomics Consensus Forecast panelists see exports rising 1.8% in 2015 and then accelerating to a 8.3% expansion in 2016. FocusEconomics Consensus Forecast panelists expect the trade deficit to reach USD 5.6 billion in 2015 and USD 5.5 billion in 2016.

    Inflation | Consumer Price Index

    Note: Annual and monthly variation of consumer price index in %. Source: National Statistics Office (NSO).

    2.0

    3.0

    4.0

    5.0

    -0.5

    0.0

    0.5

    1.0

    Feb-13 Aug-13 Feb-14 Aug-14 Feb-15

    Month-on-month (left scale)

    Year-on-year (right scale)

    %%

    Merchandise Exports | in %

    Note: Year-on-year and annual average variation in %. Source: National Statistics Office (NSO) and FocusEconomics calculations.

    -20

    -10

    0

    10

    20

    30

    40

    Jan-13 Jul-13 Jan-14 Jul-14 Jan-15

    %

    Year-on-year Annual average

  • FOCUSECONOMICS Philippines

    FocusEconomics Consensus Forecast | 4

    April 2015

    Economic Indicators | 2010 - 2019

    Annual Data 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Real Sector Population (million) 92.6 94.2 95.8 97.5 99.4 101.4 103.5 105.5 107.6 109.8 GDP per capita (USD) 2,157 2,381 2,613 2,790 2,862 3,000 3,219 3,500 3,812 4,124 GDP (USD bn) 200 224 250 272 285 304 333 369 410 453 GDP (PHP bn) 9,003 9,708 10,567 11,548 12,634 13,907 15,261 16,747 18,356 20,116 Economic Growth (Nom. GDP, ann. var. in %) 12.2 7.8 8.8 9.3 9.4 9.3 9.7 9.7 9.6 9.6 Economic Growth (GDP, annual var. in %) 7.6 3.7 6.8 7.2 6.1 6.4 6.3 6.2 6.1 6.1 Private Consumption (ann. var. in %) 3.4 5.6 6.6 5.7 5.4 5.8 5.7 5.5 5.6 5.6 Fixed Investment (annual variation in %) 19.1 -1.9 10.8 11.9 8.6 7.0 6.8 6.3 6.1 6.1 Manufacturing (annual variation in %) 11.2 4.7 5.4 10.3 8.1 8.2 7.0 6.1 5.9 5.9 Unemployment (% of active population, aop) 7.4 7.0 7.0 7.1 6.8 6.7 6.7 6.7 6.6 6.6 Fiscal Balance (% of GDP) -3.5 -2.0 -2.3 -1.4 -0.6 -1.6 -1.8 -1.5 -1.3 -1.3 Public Debt (% of GDP) 52.4 51.0 51.5 49.2 45.4 44.8 44.0 44.0 43.7 43.3 Monetary and Financial Sector Money (annual variation of M2 in %) 10.4 7.0 9.4 33.5 10.5 - - - - - Inflation (CPI, annual variation in %, eop) 3.6 4.2 3.0 4.1 2.7 - - - - - Inflation (CPI, annual variation in %, aop) 3.8 4.7 3.2 2.9 4.2 2.9 3.5 3.5 3.5 3.5 Inflation