ECONOMIC BRIEFING

High Tech, High Touch, High Gear

ECONOMICECONOMIC

BRIEFINGBRIEFING

November 8, 2006November 8, 2006

UNIONBANKUNIONBANK


Economic Profile / Economic Profile / Basic Trends Basic Trends


5.1%

5.5%6.1%

4.7%4.4%

3.0%

4.4%3.4%

5.2%5.8%

4.7%

-0.6%

-7%

-5%

-3%

-1%

1%

3%

5%

7%

9%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F

Agriculture Industry

Services GDP Growth

4.6%5.2%

4.1%

6.1%5.7%

5.5%5.0%

4.8%4.2%

4.8%

6.5% 6.6% 6.3%

5.4%

0%

2%

4%

6%

8%

10%

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06

Agriculture Industry

Services GDP Growth

YEARLY GROWTHYEARLY GROWTH

QUARTERLY GROWTHQUARTERLY GROWTH

ECONOMIC PROFILEECONOMIC PROFILEAs of end 2005

GNP: PhP5.8 trillion or USD105 billionGDP: PhP5.4 trillion or USD98 billionPopulation: 85.3 millionGDP Per Capita: PhP63,463 or USD1,196Annual Per Capita Poverty Threshold: PhP12,267 Poverty Line: 24.7%

Industry, 32.6%

Services53.0%

Agriculture14.4%

STRUCTURE OF OUTPUTSTRUCTURE OF OUTPUT2005

Source of base data: National Economic & Development Authority

I. ECONOMY

A small, moderately growing A small, moderately growing economyeconomy


More than half of the country’s GDP comes from 3 regionsMore than half of the country’s GDP comes from 3 regions

AT CURRENT PRICES CUM.RANK % SHARE % SHARE

PHILIPPINES 100.0%

1 NCR METRO MANILA 31.9% 31.9%2 IVA CALABARZON 12.5% 44.3%3 III C. LUZON 8.5% 52.8%

4 VII C. VISAYAS 7.3% 60.1%5 VI W. VISAYAS 7.1% 67.2%6 X N. MINDANAO 4.8% 72.0%

7 XI DAVAO 4.6% 76.6%

8 XII SOCCSKSARGEN 3.5% 80.1%9 I ILOCOS 3.0% 83.1%10 V BICOL 2.8% 85.9%11 VIII MIMAROPA 2.8% 88.7%12 CAR ZAMBOANGA 2.7% 91.4%13 IX CORDILLERA 2.3% 93.6%14 IVB E. VISAYAS 2.2% 95.8%15 II CAGAYAN VALLEY 2.0% 97.8%16 XIII CARAGA 1.3% 99.1%17 ARMM MUSLIM MINDANAO 0.9% 100.0%

REGION

GROSS REGIONAL DOMESTIC PRODUCT

I. ECONOMY

Source of base data: NEDA


GROWTH RATES 02-03 03-04 04-05 AAGRREGION/YEAR (1995-2004)

4.7 6.2 5.0 4.1

NCR METRO MANILA 5.3 8.4 7.1 4.4CAR CORDILLERA 3.0 3.7 1.1 6.2I ILOCOS 3.5 5.4 6.0 3.9

II CAGAYAN VALLEY 1.3 10.4 -5.4 5.3III CENTRAL LUZON 3.6 1.8 2.9 2.8IVA CALABARZON 3.8 4.0 3.0 3.5

IVB MIMAROPA 11.0 4.1 6.5 7.8

V BICOL 5.4 5.7 5.0 3.8VI WESTERN VISAYAS 5.9 7.6 5.9 4.2VII CENTRAL VISAYAS 4.6 6.9 6.0 5.0VIII EASTERN VISAYAS 5.2 5.2 4.0 3.7IX ZAMBOANGA PENINSULA 4.5 4.1 7.2 4.6X NORTHERN MINDANAO 5.6 7.2 3.8 5.8XI DAVAO REGION 4.2 6.5 5.0 5.6XII SOCCSKSARGEN 3.8 5.8 2.3 5.1ARMM MUSLIM MINDANAO 2.6 5.2 3.9 3.9XIII CARAGA 0.9 3.1 3.5 2.8

GROSS REGIONAL DOMESTIC PRODUCT

PHILIPPINES

MIMAROPA, fastest growing MIMAROPA, fastest growing


I. ECONOMY


1 CALABARZON 13.8 1 M. MANILA 36.2 1 M. MANILA 45.42 C. LUZON 10.6 2 CALABARZON 14.4 2 CALABARZON 9.73 W. VISAYAS 9.6 3 C. LUZON 9.2 3 C. VISAYAS 7.7

4 N. MINDANAO 8.5 4 C. VISAYAS 6.7 4 C. LUZON 6.85 SOCCSKSARGEN 8.4 5 W. VISAYAS 5.8 5 W. VISAYAS 6.36 DAVAO REGION 6.9 6 N. MINDANAO 4.9 6 DAVAO 3.97 ILOCOS 6.5 7 CORDILLERA 4.3 7 N. MINDANAO 3.38 ZAMBOANGA P. 5.9 8 DAVAO 4.1 8 BICOL 2.89 C. VALLEY 5.1 9 SOCCSKSARGEN 3.2 9 ILOCOS 2.8

10 MIMAROPA 4.9 10 MIMAROPA 2.6 10 SOCCSKSARGEN 2.011 C. VISAYAS 4.5 11 E. VISAYAS 2.1 11 E. VISAYAS 1.912 E. VISAYAS 4.4 12 BICOL 1.7 12 ZAMBOANGA P. 1.813 BICOL 3.7 13 ILOCOS 1.4 13 C. VALLEY 1.614 CARAGA 3.0 14 ZAMBOANGA P. 1.3 14 CORDILLERA 1.315 ARMM 2.7 15 CARAGA 1.0 15 MIMAROPA 1.116 CORDILLERA 1.6 16 C. VALLEY 1.0 16 CARAGA 1.017 M. MANILA 0.0 17 ARMM 0.3 17 ARMM 0.7

REGIONAL CONTRIBUTION TO AGRICULTURE, INDUSTRY AND SERVICESAGRICULTURE INDUSTRY SERVICES

I. ECONOMY



348410 438 475

549624

718

828920

1,031

1,179

1,302

1,413

1,537

1,720 1,727

156 189 205 218 251 274 308 338 375 409469 513 550 592

654 676

184 2011621501361271151029488786960595448

0

250

500

750

1,000

1,250

1,500

1,750

2,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

NCRRegion IVPhilippines (Remainder) Average

GROSS REGIONAL DOMESTIC PRODUCT GROSS REGIONAL DOMESTIC PRODUCT NCR, REGION IV and PHILIPPINES (REMAINDER) AVERAGENCR, REGION IV and PHILIPPINES (REMAINDER) AVERAGE

1990 – 2005 at Current Prices1990 – 2005 at Current Prices

Source of base data: 2005 Philippine Statistical Yearbook

I. ECONOMY

In billion pesos


Miscellaneous15%

Transportation & Communication

9%

Household furnishing

3%Beverages

2%

Food53%

Household operations

9%

Tobacco2%

Clothing and Footwear

3% Fuel, light, water4%

PERSONAL CONSUMPTION EXPENDITURE PERSONAL CONSUMPTION EXPENDITURE BY PURPOSEBY PURPOSE

2005

Miscellaneous14%


5%


3%

Beverages2%

Food55%


10%

Tobacco3%


4%

Fuel, light, water4%

19961996


6%

Miscellaneous15%


3%

Beverages2%

Food53%


10%

Tobacco2%


4%Fuel, light, water

5%

20002000

Source of base data: NSCB

Consumption pattern remains almost the sameConsumption pattern remains almost the sameI. ECONOMY


Source of base data: 2005 Philippine Statistical Yearbook

Population growth projected to slow furtherPopulation growth projected to slow further

77

94

141

112

128135

120

103

85

2.1% 2.0%1.8%

1.6%1.4% 1.3%

0.9%1.1%

0

20

40

60

80

100

120

140

160

2000 2005 2010 2015 2020 2025 2030 2035 2040

0%

1%

2%

3%

4%

5%Population in millions CAGR

I. ECONOMY


Fiscal and External Fiscal and External Sectors Sectors


700796

850

282 320

590649

779

942 975

243 260336 361

410472 463 479 515

564 566627

259

350404

470513

712827

887

(16) (22)

(67)

0

(125)(160)

(186)

16

(200)(213)

(147)(136)

(112)

11 6 2

(50)

-1000

-800

-600

-400

-200

0

200

400

600

800

1000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F 2008F

-300

-200

-100

0

100

200

300

Revenues (LHS) Expenses (LHS) Budget Balance (RHS)

Sources of base data: NEDA & Bureau of the Treasury

In billion pesos

Fiscal deficit narrows Fiscal deficit narrows

-7%

-5%

-3%

-1%

1%

3%

5%

7%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Deficit / GDP Deficit / GNP

I. ECONOMY


15.6%

14.5%13.9%

13.3%

17.4%

16.1%15.5%

14.8%

11.9%

17.0%16.9%

12.5% 12.5% 12.4%

16.7%

13.3%

19.4%

14.5%14.6%14.3%

15.4%

18.9%

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06

Tax Revenues / GDP Total Revenues / GDP

84.1%74.2%

76.2%

89.4%

74.3%68.3%

64.3%64.2%

70.8%

88.0%

80.7%

58.9%

67.7%

64.6%66.2%

73.8%74.6%

59.2%51.1% 53.4%

56.6%60.8% 61.5%

66.7%73.1%

0%

30%

60%

90%

120%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06

Total NG + Contingent Debt/GNP

Total NG Debt/GNP

Sources of data: Department of Finance, BIR, BSP

Fiscal dynamics improveFiscal dynamics improveI. ECONOMY

Total External Debt US$55.3 BOf which: Short-Term US$ 6.1 B % of Total 11.10% Medium-to long-term US$49.2 B % of Total 88.90%Ave Maturity of MLT Debt (years), orig maturity 17.6 Public 20 Private 10.2Ave Maturity (years), remaining maturity 10.7 Public 12.4 Private 5.5

Average Maturity for MLT Debt as of end-Mar 2006


631

4,107

(3,364)

1,359

3,586

(280)

2,400 2,128

111663

(206)(513)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1Q06

Capital and Financial Account

Current Account

Balance of Payments

Source of data: Bangko Sentral ng Pilipinas

In million USD

I. ECONOMY Comfortable BoPComfortable BoP


8.2 8.8 9.8 11.413.5

17.420.5

25.2

29.5

35.038.1

32.135.2 35.8

41.2

23.026.7

39.6

5%8% 11%

16% 19%

29%

18%

9%

-16%

9%4%2%

17%19%

23%

10%

-10

0

10

20

30

40

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06

-20%

0%

20%

40%

60%

80%

100%

Exports, in USD billion

Year-on-Year Growth

Source of base data: National Statistical & Coordination Board

+16.2%

Mineral Products

2%

Petroleum1%

Agro-Based Products

5%Garments

6%

Others20%

Electronics66%

III. WEAK LINKS

BREAKDOWN OF EXPORTS BREAKDOWN OF EXPORTS

Exports seen to slow in 2007Exports seen to slow in 2007

High Tech, High Touch, High GearSource of base data: National Statistical & Coordination Board

12 1215

18 17

27

3236

30 3134 33 35

29

45

26

39

44

(20)

(10)

0

10

20

30

40

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06

-20%

-10%

0%

10%

20%

30%

40%

50%

Imports (USD bn)Year-on-Year Growth

+ 9.6%

Mineral Fuel, 14.0%

Raw Materials,

40.7%

Capital Goods, 35.2%

Others, 2.5%Consumer

Goods , 7.6%

III. WEAK LINKS

Imports expected to slow as well Imports expected to slow as well

BREAKDOWN OF IMPORTS BREAKDOWN OF IMPORTS


140137 136

129 129126

119

100

105

110

115

120

125

130

135

140

145

1999 2000 2001 2002 2003 2004 2005

OIL IMPORT VOLUME, OIL IMPORT VOLUME, in million barrelsin million barrels

2,420

3,8763,372 3,273

3,761

4,714

6,276

2,369

3,262

100

1,100

2,100

3,100

4,100

5,100

6,100

7,100

1999 2000 2001 2002 2003 2004 2005 1H05 1H06

OIL IMPORT BILL, OIL IMPORT BILL, in million barrelsin million barrels

+38%+38%

+33%+33%

Declining on average by 3.5 million barrels per year

Source of base data: Department of Energy

Rising import billRising import billIII. WEAK LINKS


ENERGY SUPPLY MIXENERGY SUPPLY MIX

Increasing supply of alternative fuels Increasing supply of alternative fuels

Source : Department of Energy

Others7.7%

Geothermal 8.0%

Biomass 29.8%

Imported Oil45.4%

Imported Coal9.2%

Others15.2%

Geothermal 21.1%

Biomass 16.8%

Imported Oil37.3%

Imported Coal9.6%

20002000 20052005


Low foreign direct investmentsLow foreign direct investments

NET FOREIGN DIRECT INVESTMENTSNET FOREIGN DIRECT INVESTMENTSIn Million USD

1,453

1,733

150

487

743688

1,754

1,149 1,132

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1999 2000 2001 2002 2003 2004 2005 5M05 5M06

Source of base data: Bangko Sentral ng Pilipinas


0

100

200

300

400

500

600

700

800

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06

0

100

200

300

400

500

600Inflows Outflows Net Flows

0

100

200

300

400

500

600

700

800

900

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

0

100

200

300

400

500

600Inflows Outflows Net Flows

Lower portfolio inflowsLower portfolio inflows


1,191

1,993

0

500

1,000

1,500

2,000

2,500

9M05 9M06

NET FOREIGN PORTFOLIO INVESTMENTSNET FOREIGN PORTFOLIO INVESTMENTSIn Million USD


15.0 15.7 16.2

18.5

21.2

17.0

14.9

8.8

11.810.8

16.4

0

5

10

15

20

25

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06

GROSS INTERNATIONAL RESERVESGROSS INTERNATIONAL RESERVES


6.7

11.3 11.4

13.9 14.4

17.8

20.7

11.810.0

8.0

12.8

0

5

10

15

20

25

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06

Forex reserves hit all-time high Forex reserves hit all-time high

In billion USD

NET INTERNATIONAL RESERVESNET INTERNATIONAL RESERVESIn billion USD

4.5

3.93.64.14.04.0

3.53.7

3.1

2.0

3.2

0

1

2

3

4

5

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jul-06

IMPORT COVER (x)IMPORT COVER (x)

I. ECONOMY


Rating companies on wait-and-see Rating companies on wait-and-see

Source of base data: Bloomberg

FITCH RATINGSOutlook Action

13-Feb-06 BB Stable Upgrade11-Jul-05 BB Negative Downgrade26-May-05 BB Stable Upgrade7-Dec-04 BB Negative Downgrade12-Jun-03 BB Stable Downgrade25-Nov-02 BB+ Negative Downgrade15-Mar-01 BB+ Stable Maintain21-Sep-00 BB+ Stable

MOODYS INVESTORS SERVICEOutlook Action

10-Feb-06 B1 Negative Maintain13-Jul-05 B1 Negative Downgrade16-Feb-05 B1 Stable Downgrade27-Jan-04 Ba2 Negative Downgrade29-Sep-03 Ba1 Negative Downgrade8-Jan-03 Ba1 Stable Maintain3-Feb-02 Ba1 Stable Upgrade

27-Oct-00 Ba1 Negative

STANDARD & POORSOutlook Action

9-Feb-06 BB- Stable Upgrade11-Jul-05 BB- Negative Downgrade17-Jan-05 BB- Stable Downgrade29-Jul-04 BB Stable Maintain24-Apr-03 BB Stable Upgrade28-Oct-02 BB+ Negative Downgrade4-Apr-02 BB+ Stable Upgrade19-Oct-00 BB+ Negative

SOVEREIGN RATINGS


MOODYS -MOODYS - Achievement of the 2006 budget Achievement of the 2006 budget targets for P75 billion in additional VAT revenue targets for P75 billion in additional VAT revenue and of fiscal deficit to around 2.1% of GDPand of fiscal deficit to around 2.1% of GDP

What could change the outlook up?What could change the outlook up?

SOVEREIGN RATINGS


Aaa Aa1 Aa2 Aa3

MOODY’S RATINGSMOODY’S RATINGS

A1 A2

China

A3

HK

Baa1 Baa2 Baa3 Ba1

S&P RATINGSS&P RATINGS

Ba2

Philippines

Ba3

Korea

B1 B2 B3

India

MalaysiaIndonesia

MexicoBrazil

Singapore

Caa1 Caa2Caa3

Thailand

BB-AAA AA- A+AA+ A A- BBB+ BBB BBB- BB+ BB B+

Poland

B B- CCC+CCC CCC-

HK Philippines

Indonesia

CzechSingapore

ThailandTurkeyBrazil

China EcuadorKorea

Russia

ArgentinaPoland

EcuadorRussia

Argentina

Vietnam

Vietnam

Turkey

AA

IndiaMalaysia

Czech

SOVEREIGN RATINGS


Bright SpotsBright Spots


WORKERS’ REMITTANCES AND MIGRANT TRANSFERS

2005 Estimated

Remittance

Remittances as share of GDP,

2004

Growth

Rate (1990-2005)

1 India 21,727 3.1% 14%2 China 21,283 1.3% 36%3 Mexico 18,955 2.7% 13%4 Philippines 13,379 13.5% 16%5 France 12,650 0.6% 8%6 Spain 6,859 0.7% 8%7 Belgium 6,840 2.0% 4%8 Germany 6,497 0.2% 2%9 United Kingdom 6,350 0.3% 8%10 Morocco 4,724 8.4% 6%

Source: Global Economic Prospects 2006: Economic Implications of Remittances and Migration, World Bank.

In million USD, (Estimates include both coursed and not coursed through the banking system)

Filipino remittances, fourth largest in the worldFilipino remittances, fourth largest in the world

II. BRIGHT SPOTS


7,368

6,050 6,031

8,544

10,689

7,019 7,006

6,0495,742

6,7957,640

0

2,000

4,000

6,000

8,000

10,000

12,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06

+15.8%

Rising importance of remittances Rising importance of remittances

OFW REMITTANCESOFW REMITTANCESIn Billion USD

10.3%10.1%9.3%9.2%

8.8%7.9%

8.5%8.7%

10.3%9.1%

0%

2%

4%

6%

8%

10%

12%

1997 1998 1999 2000 2001 2002 2003 2004 2005 1H06

OFW REMITTANCES / GNPOFW REMITTANCES / GNP


II. BRIGHT SPOTS


METRO MANILA 19.6%SOUTHERN LUZON 18.9%ILOCOS 12.6%

CENTRAL LUZON 12.0%WESTERN VISAYAS 9.4%CAGAYAN VALLEY 4.9%CENTRAL VISAYAS 4.1%ZAMBOANGA 2.9%BICOL 2.7%DAVAO 2.6%SOCCSKSARGEN 2.4%CARAGA 2.0%CAR 2.0%ARMM 1.9%EASTERN VISAYAS 1.8%NORTHERN MINDANAO 1.3%

DISTRIBUTION OF OFW BENEFICIARIESTO PHILIPPINE REGIONS

II. BRIGHT SPOTS

Source: University of Asia & the Pacific


Increasing rate of labor migrationIncreasing rate of labor migration

62

69 70 70 72 74 72

7882

5554

31

37 39

5157

38

6058

2932

37

0

10

20

30

40

50

60

70

80

90

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

Source of base data: Philippine Overseas Employment Authority

AVERAGE MONTHLY OFW DEPLOYMENTAVERAGE MONTHLY OFW DEPLOYMENTIn Thousands

I. ECONOMY


820

1,430

2,290

3,330

4,050

5,070

5,670

120 180 320580

990

1,680

2,700

5901,000

1,610

740

60 80 190 3504501680

1,000

2,000

3,000

4,000

5,000

6,000

2004 2005 2006 2007 2008 2009 2010

Customer Contact Back OfficeSoftware Development Medical TranscriptionAnimation Engineering DesignOther Data Transcription Legal TranscriptionDigital Content

BREAKDOWN OF CYBER-SERVICES REVENUESBREAKDOWN OF CYBER-SERVICES REVENUESIn million USD

Source of base data: www.pes.com.ph, CICT

Cyber-services projected to become another major dollar earnerCyber-services projected to become another major dollar earner

2,100

4,900

6,600

9,100

1,300

3,300

11,700

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004E 2005E 2006F 2007F 2008F 2009F 2010F

CYBER-SERVICES REVENUESCYBER-SERVICES REVENUESIn million USD

II. BRIGHT SPOTS


28,000

26,000

12,600

6,500

3,0001,300

2,100

6,6004,900

3,300

0

5,000

10,000

15,000

20,000

25,000

30,000

2004 2005 2006F 2007F 2008F

India Philippines

CYBER-SERVICES REVENUESCYBER-SERVICES REVENUESIn million USD

Source of base data: www.bpoindia.org, www.pes.org.ph

Philippines’ cyber-services, 1/3 the size of IndiaPhilippines’ cyber-services, 1/3 the size of India

II. BRIGHT SPOTS


VISITOR ARRIVALS VISITOR ARRIVALS In millionsIn millions

1.0 1.0

1.2

1.4

1.6

1.8

2.02.2 2.1 2.2

2.0

1.81.9 1.9

2.3

2.6

1.51.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 7M05 7M06

Growing number of visitor arrivalsGrowing number of visitor arrivals

II. BRIGHT SPOTS

Source of base data: Department of Tourism


AVERAGE LAND VALUE – MAKATI CBD & ORTIGAS CENTERAVERAGE LAND VALUE – MAKATI CBD & ORTIGAS CENTER

Land value, office rents on the rise since 2002Land value, office rents on the rise since 2002

II. BRIGHT SPOTS

OFFICE RENTS – MAKATI CBDOFFICE RENTS – MAKATI CBD


OFFICE VACANCY RATE – MAKATI CBDOFFICE VACANCY RATE – MAKATI CBD

Vacancy rates on downtrendVacancy rates on downtrend

II. BRIGHT SPOTS

RESIDENTIAL VACANCY RATES – MAKATI CBD


585,482

495,400

343,138

290,468

240,152214,793

190,278202,298229,349

180,240

0

100,000

200,000

300,000

400,000

500,000

600,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Cars Utility VehiclesTrucks Buses

Motorcycles/Tricycles

NEW MOTOR VEHICLES REGISTERED BY TYPENEW MOTOR VEHICLES REGISTERED BY TYPE

Motorcycle / tricycle sales rapidly growing Motorcycle / tricycle sales rapidly growing

Source of base data : Land Transportation Office

II. BRIGHT SPOTS


159,393

845

186,248

29,759 26,898

94,382

59,416

22,816

34,749

120,010

19,25426,990 23,197

39,13828,477

11,1216,546

24,68422,89118,02618,46913,836

77,292

25,48816,037

53,20559,176

20,45923,498945

0

40,000

80,000

120,000

160,000

200,000

NCR CAR REG 1 REG 2 REG 3 REG 4 REG 5 REG 6 REG 7 REG 8 REG 9 REG 10

REG 11

REG 12

REG 13

2003 2004

NEW VEHICLE REGISTRATION BY REGION (ALL TYPES)NEW VEHICLE REGISTRATION BY REGION (ALL TYPES)

58,946

253

99,511

28,15425,062

48,883 49,725

21,882

29,802

59,551

18,900

25,43119,321

32,881

25,164

10,771

6,175

20,68017,14014,51016,84413,365

41,037

20,64315,235

43,432

34,203

18,55122,124

364

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

NCR CAR REG 1 REG 2 REG 3 REG 4 REG 5 REG 6 REG 7 REG 8 REG 9 REG 10

REG 11

REG 12

REG 13

2003 2004

NEW MOTORCYCLE/TRICYCLE REGISTRATION BY REGIONNEW MOTORCYCLE/TRICYCLE REGISTRATION BY REGION

Source of base data : Land Transportation Office

NCR, C. Luzon & C. Visayas, biggest buyers of vehicles NCR, C. Luzon & C. Visayas, biggest buyers of vehicles

II. BRIGHT SPOTS


Huge potential in mining Huge potential in mining

II. BRIGHT SPOTS

11 11 12 11 10 10 10 11 10 11 10

1518 18 20

-20

-15

-10

-5

0

5

10

15

20

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-60%

-40%

-20%

0%

20%

40%

60%

Mining GVA, in bn pesosYear-on-Year Growth

Source of base data : NEDA

As at the end 2005, a total of 24 mining projects were identified, which have attracted USD339.7

million in FDI and created over 5,000 jobs.


Growing SectorsGrowing Sectors

RemittanceRemittance Cyber ServicesCyber Services Tourism / Medical TourismTourism / Medical Tourism TelecommunicationsTelecommunications Construction / Real EstateConstruction / Real Estate Low-end VehiclesLow-end Vehicles EducationEducation WellnessWellness InfrastructureInfrastructure PowerPower MiningMining


Weak LinksWeak Links


CUSTOMER LOAN GROWTHCUSTOMER LOAN GROWTH

Economic upcycle, “Property & middle-market boom”

Period of excess capacity & deleveraging

Rapid expansion of FCDU loans; Continued trade liberalization; Several cuts in reserve requirement

Weak loan growthWeak loan growth

4.3%0.7%

3.8%3.0%0.4%-1.9%

7.2%

0.4%

-4.9%

26.5%

52.0%

40.7%

28.4%

38.2%

19.5%

9.3%

33.7%

-10%

0%

10%

20%

30%

40%

50%

60%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 J ul-06


Nine years of weak loan growth

III. WEAK LINKS


Sources of base data: PDIC & BSP

1,348 1,3541,452 1,424 1,430 1,473 1,529 1,539 1,568

1841601451249610097

233228

0

500

1,000

1,500

2,000

1998 1999 2000 2001 2002 2003 2004 2005 Jul-06

Total Loans (Net of IBCL)Consumer Loans (Credit Cards, Mortgage, Auto)

Flat overall loan level, growing consumer Flat overall loan level, growing consumer financefinance

In Billion Pesos

14.9%14.8%

12.0%10.9%

10.1%8.7%

6.6%7.4%7.2%

0%

5%

10%

15%

20%

1998 1999 2000 2001 2002 2003 2004 2005 Jun-06

CONSUMER LOANS / TOTAL LOANSCONSUMER LOANS / TOTAL LOANS

High Tech, High Touch, High GearSource of base data: Bangko Sentral ng Pilipinas

Declining, but still huge, non-performing Declining, but still huge, non-performing assetsassets

19 23 24 25 28 34

74

160

195

246

282

245 246227

160

137

20

0

50

100

150

200

250

300

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 J un-06

NON-PERFORMING LOANSNON-PERFORMING LOANSIn Billion Pesos

6 11 1118

48

98

128

159

183

202211

195 192

911

0

50

100

150

200

250

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Jun-06

7

GROSS ROPOAGROSS ROPOAIn Billion Pesos

III. WEAK LINKS


III. WEAK LINKS

183 180 181 190203 215 224 221 225

237 244 253 263277

292

-0.4%-1.7%

0.7%

5.0%6.8%

5.6%4.2%

5.6%3.5%2.9%

5.1%

1.6%

5.6%

-1.1%

4.2%

-100

-50

0

50

100

150

200

250

300

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Manufacturing GVA, in bn pesosYear-on-Year Growth

Modest growth in manufacturingModest growth in manufacturing


Others22%

Chemicals6%

Footwear4%

Products of Petroleum &

Coal12%

Electrical Machinery

13%

Basic Metals3%

Food Manufactures

40%

BREAKDOWN OF GROSS VALUE ADDED BREAKDOWN OF GROSS VALUE ADDED


110111115109109

115117116109106105

118110114114114113111111

106107104104106109111116114

109119117116

105107105114114113115115113

118

95 95 97 99108

127126118

(100)

(50)

0

50

100

150

Ap

r-0

2

Ma

y-0

2

Ju

n-0

2

Ju

l-0

2

Au

g-0

2

Se

p-0

2

Oct-

02

No

v-0

2

De

c-0

2

Ja

n-0

3

Fe

b-0

3

Ma

r-0

3

Ap

r-0

3

Ma

y-0

3

Ju

n-0

3

Ju

l-0

3

Au

g-0

3

Se

p-0

3

Oct-

03

No

v-0

3

De

c-0

3

Ja

n-0

4

Fe

b-0

4

Ma

r-0

4

Ap

r-0

4

Ma

y-0

4

Ju

n-0

4

Ju

l-0

4

Au

g-0

4

Se

p-0

4

Oct-

04

No

v-0

4

De

c-0

4

Ja

n-0

5

Fe

b-0

5

Ma

r-0

5

Ap

r-0

5

Ma

y-0

5

Ju

n-0

5

Ju

l-0

5

Au

g-0

5

Se

p-0

5

Oct-

05

No

v-0

5

De

c-0

5

Ja

n-0

6

Fe

b-0

6

Ma

r-0

6

Ap

r-0

6

Ma

y-0

6

-30%

-20%

-10%

0%

10%

20%

30%

40%

Index Year-on-Year Growth

VOLUME OF PRODUCTION INDEX 1994=100VOLUME OF PRODUCTION INDEX 1994=100

Source of base data: National Statistical Coordination Board

III. WEAK LINKS

Production remains in negative territoryProduction remains in negative territory


8080808080808080808080808080808080 8080

808079

808080

7979

78797878

797979797979

80

777777

75

80

85

Jan

-03

Feb

-03

Mar-

03

Ap

r-03

May-0

3

Ju

n-0

3

Ju

l-03

Au

g-0

3

Sep

-03

Oct-

03

No

v-0

3

Dec-0

3

Jan

-04

Feb

-04

Mar-

04

Ap

r-04

May-0

4

Ju

n-0

4

Ju

l-04

Au

g-0

4

Sep

-04

Oct-

04

No

v-0

4

Dec-0

4

Jan

-05

Feb

-05

Mar-

05

Ap

r-05

May-0

5

Ju

n-0

5

Ju

l-05

Au

g-0

5

Sep

-05

Oct-

05

No

v-0

5

Dec-0

5

Jan

-06

Feb

-06

Mar-

06

Ap

r-06

May-0

6

Food Manufacturing Textile Manufacturing

Total Manufacturing

Source of base data: National Statistical Coordination Board

AVERAGE CAPACITY UTILIZATIONAVERAGE CAPACITY UTILIZATION

III. WEAK LINKS

Excess capacity remainsExcess capacity remains


Declining share to GDPDeclining share to GDP

3.7 3.7 3.7 3.8 3.94.0

4.2 4.3 4.44.7 4.7

5.35.0

4.24.54.5

1

2

3

4

5

6

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

WATER TRANSPORT GROSS VALUE ADDEDWATER TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos

% SHARE TO GDP % SHARE TO GDP

0.6%

0.5%0.5%

0.4%0.4%

0.4%0.4%

0.5%0.5%0.5%0.5%0.5%0.5%0.5%0.5%0.5%

0%

1%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source : NEDA

III. WEAK LINKS


A small and barely growing sector A small and barely growing sector

1.5

1.0 1.0

1.21.3

1.41.3

1.51.6

1.5

0.0

0.5

1.0

1.5

2.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

AIR TRANSPORT GROSS VALUE ADDEDAIR TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos


0.17%0.17%

0.11%0.11%

0.13% 0.12% 0.13% 0.11% 0.13%0.13%

0%

0%

0%

0%

0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source of base data : NEDA

26.0 26.827.8

29.1 29.5 30.331.9

34.032.5

24.8

1

6

11

16

21

26

31

36

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

2.9%2.9% 3.0% 3.0%

3.0% 2.9% 2.9% 3.0%3.0%

2.7%

0%

1%

2%

3%

4%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

LAND TRANSPORT GROSS VALUE ADDEDLAND TRANSPORT GROSS VALUE ADDEDAt Constant Prices, In billion pesos


III. WEAK LINKS


Ships and trains lose share to air Ships and trains lose share to air transporttransport

37.940.0

41.444.1 43.2 44.4 43.7

49.151.7

40.4

49.6

53.0

10

20

30

40

50

60

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

3.93.9

4.4

5.1

3.9

5.65.3

3.73.3

4.6

3.3

0

1

2

3

4

5

6

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

SHIPS : PASSENGER TRAFFICSHIPS : PASSENGER TRAFFICIn millions

18.0

19.0

22.3

20.6

21.9 22.1 21.9 22.1

18.4

16.6

22.9

10

12

14

16

18

20

22

24

26

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

AIR TRANSPORT : PASSENGER TRAFFICAIR TRANSPORT : PASSENGER TRAFFIC TRAINS : PASSENGER TRAFFICTRAINS : PASSENGER TRAFFICIn millions In millions

III. WEAK LINKS


0

20

40

60

80

100

120

140

160

180

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

5

10

15

20

25

30

35

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

In metric tons

in thousands in thousands

FREIGHT SERVICE WAS FREIGHT SERVICE WAS NOT OPERATIONAL NOT OPERATIONAL SINCE 1998SINCE 1998

AIR TRANSPORT: CARGO TONS MOVEMENTAIR TRANSPORT: CARGO TONS MOVEMENTTRAINS: FREIGHT TONS LOADEDTRAINS: FREIGHT TONS LOADED

SHIPPING: CARGO THROUGHPUTSHIPPING: CARGO THROUGHPUT

III. WEAK LINKS


PricesPrices


Source of base data: Bloomberg

0

10

20

30

40

50

60

70

80

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sep-06

Brent NYMEX Dubai

CRUDE OIL PRICE, USD per barrelCRUDE OIL PRICE, USD per barrel

Crude oil price increase eases Crude oil price increase eases

… because of rising US inventories, slowing economic growth, & diminishing political tensions

IV. PRICES


6.9%

3.0%

7.6%

6.0%3.5%

6.8%

4.0%

6.5%

8.7%

5.6%

7.5%

5.2%6.1%

7.3%6.0%5.8%

9.9%9.9%

15.3%

13.1%12.4%

10.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 8M06

Inflation Rate 91-day T-Bill

Sources of base data: Bangko Sentral ng Pilipinas, Bloomberg

IV. PRICES

Negative real interest rate Negative real interest rate


TREASURY BILL RATESTREASURY BILL RATES2003 to 2006, Monthly Figures – Auction Results2003 to 2006, Monthly Figures – Auction Results

IV. PRICES

TREASURY NOTE / BOND RATESTREASURY NOTE / BOND RATES2003 to 2006, Weekly Figures – Mart Rates2003 to 2006, Weekly Figures – Mart Rates

Low interest rate environmentLow interest rate environment


51.19

51.25

50

51

52

53

54

55

56

57

58

Jan-03

Mar-03

May-03

Jul-03

Sep-03

Nov-03

Jan-04

Mar-04

May-04

Jul-04

Sep-04

Nov-04

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

aop USD/Php Rate eop USD/Php Rate

25.5127.12 26.42 25.71 26.22

29.47

40.8939.09

44.19

50.99 51.6054.20

56.04 55.09

0

5

10

15

20

25

30

35

40

45

50

55

60

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

aop USD/Php Rate eop USD/Php Rate

Source of data: Bangko Sentral ng Pilipinas

YEARLYYEARLY

MONTHLYMONTHLY

IV. PRICESAppreciating pesoAppreciating peso

ECONOMIC BRIEFING

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