Philippine Economic Briefing 2015 Accountancy Week Regulators’ Forum July 15, 2015.

Philippine Economic Briefing

2015 Accountancy WeekRegulators’ Forum

July 15, 2015

OutlineI. The World EconomyII. The Philippines’ Major Trading Partners:

Japan, U.S. and EuropeIII. Two Major Developments in Asia

A. China Losing Its Grip as Factory of the World

B. ASEAN IntegrationIV. The Philippine EconomyV. Choosing Candidates for 2016

World Economic OutlookGDP Growth

Countries 2013 2014Projections

2015 2016 2017

World Output 2.3% 2.6% 3.0% 3.3% 3.3%

USA 1.9% 2.4% 3.2% 2.4% 2.4%

Europe & Central Asia

-0.1% 2.4% 3% 3.6% 4.0%

Japan 1.3% 0.2% 1.2% 1.6% 1.2%

East Asia & Pacific

7.2% 6.9% 6.7% 6.7% 6.7%

Middle East & North Africa

3.6% 3.0% 3.3% 3.6% 3.9%

U.S. Quarterly GDP Growth

(2009-2015)

Headwinds:U.S. Debt & Bankruptcies

• In 2007 - $9 trillion• As of July 14, 2015- $18.31 trillion• Since Sept. 30, 2012 growing at the rate

of $2.15 billion per day.• US Debt /GDP: 105%• As of Dec. 2014, a total of 47 cities and

municipalities in the US 13 have filed for bankruptcies since Jan. 2010 (ex. Detroit, Vallejo, Stockton, San Bernardino, etc.)

Map of Cities and Municipalities who filed for Bankruptcy since 2010

6Cities, towns and counties are shown in red. Utility authorities and other municipalities are displayed in gray.

The City of Detroit became the largest city in U.S. history to file for bankruptcy in Nov. 2013 with a total debt/deficit of $18.5 Billion



2015 2016 2017

World Output 2.3% 2.6% 3.0% 3.3% 3.3%

USA 1.9% 2.4% 3.2% 2.4% 2.4%


-0.1% 2.4% 3% 3.6% 4.0%

Japan 1.3% 0.2% 1.2% 1.6% 1.2%

East Asia & Pacific

7.2% 6.9% 6.7% 6.7% 6.7%


3.6% 3.0% 3.3% 3.6% 3.9%

Crisis Situations In Some EU Members2015 Updates

Country Debt as % of GDP

Unemployment Rate

Portugal 130% 13%

Ireland 110% 9.7%

Italy 132% 12%

Greece 177% 26%

Spain 98% 23%

2015 UpdatesCountry Debt as %

of GDPUnemploym

ent Rate

Portugal 130% 13%Ireland 110% 9.7%Italy 132% 12%Greece 177% 26%Spain 98% 23%

Source: The New York Times

Timeline: Double Bankruptcy of the Greek

Economy• 2008 – Global economic crisis;• 2009 – Greece admits understating its

deficit figures for years raising red flags on the soundness of Greece’s finances;

• Spring, 2010 – Greece moved towards bankruptcy after it was shut out of borrowings from the financial markets;

• Late 2010 – IMF, European Central Bank and European Commission bails out Greece with a $264 billion loan


Economy• 2010 to 2015 – Greece implements

deep budget cuts, steep tax increases, streamlining of government, end tax evasion and tries to improve the business environment;

• 2015 – In spite of the $264 billion bail out package: a) GDP has shrunk by 25% in 5 years, b) unemployment rises to 26% and c) closure of cash-strapped banks


Economy• July 13, 2015 – Greece and its creditors

have reached an agreement for another bail out amounting to $96 billion in exchange for the reforms in VAT system, improve long-term viability of social security system, automatic spending cuts, and privatization of government assets estimated at $50 billion.



2015 2016 2017

World Output 2.3% 2.6% 3.0% 3.3% 3.3%

USA 1.9% 2.4% 3.2% 2.4% 2.4%


-0.1% 2.4% 3% 3.6% 4.0%

Japan 1.3% 0.2% 1.2% 1.6% 1.2%

East Asia & Pacific

7.2% 6.9% 6.7% 6.7% 6.7%


3.6% 3.0% 3.3% 3.6% 3.9%

Japanese Economy• Economy grew at an annualized

pace of 3.9% in Q1 of 2015;• Growth was heavily driven by a

temporary build up of inventories and business investments;

• The weakened yen is helping drive exports up;

• Tourism is on the rise



2015 2016 2017

World Output 2.3% 2.6% 3.0% 3.3% 3.3%

USA 1.9% 2.4% 3.2% 2.4% 2.4%


-0.1% 2.4% 3% 3.6% 4.0%

Japan 1.3% 0.2% 1.2% 1.6% 1.2%

East Asia & Pacific

7.2% 6.9% 6.7% 6.7% 6.7%


3.6% 3.0% 3.3% 3.6% 3.9%

Two Important Developments

in Asia

China is losing its grip as the factory of the world.a) Decrease in labor productivity;b) Increase in labor cost.

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Asian Labor CostsFactory workers’ wages in emerging Asia

Implications of China Losing Its Manufacturing Crown

Foreign Manufacturers

In China

Low Labor Cost• Myanmar• Cambodia• Laos

Cost-Effective Manufacturers

• Philippines• Thailand• Vietnam• Indonesia

Sophisticated Manufacturers

• Singapore• Malaysia

Two Important Developments

in Asia 2015 ASEAN integration (Brunei,

Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam)

Implications of ASEAN Integration

Free flow of goods by eliminating import tariffs, facilitating trade, and enhancing trade agreements in place.


Free flow of services across member countries particularly business and professional services, construction, distribution, education, environmental services, health care, maritime transport, telecommunications and tourism.


Freer flow of investments; Integrated capital markets


Freer flow of labor through mutual recognition agreements initially on seven professions, namely, medical, dental, nursing, accountancy, engineering, architectural services, and surveying.

•Labor mobility in ASEAN is already happening.

•However, the bulk of labor mobility in ASEAN is happening for non-skilled workers.

Skilled Labor Movement Have

been limited in the Ff. Areas:• Business visitors• Contractual service suppliers• Intra-company transferees

• Largely to send their personnel (professionals and executives) temporarily to other countries to provide services.

• The above are all covered under the Movement of Natural Persons (MNP) signed in 2012.

Benefits of Labor Mobility if Managed well• Migrants themselves in terms of higher

wages and opportunities to acquire skills and experience.

• Host countries by addressing labor shortages, boosting growth and knowledge transfers.

• Sending countries thru financial remittances and knowledge transfers.

The Philippine Economy

ROLLER COASTER RIDE

Inclusive growth?

Unemployment level – 6% - 7%

Underemployment – 17.5%

Poverty level – 24% - 19%

Not yet.

What influenced the growth- poverty reduction linkage

across Asia? (Habito ADBI Study, 2009)

•Quality of governance

•Public expenditures on health and education

•Contribution of agriculture to economic growth

Credit Rating Agency Date

Fitch Ratings March 2013

Standard & Poor’s May 2013

Japan Credit Rating Agency

May 2013

Moody’s Investors Service

Oct. 2013

Philippines Secures Investment

Grade Rating in 2013

GDP Growth5 year Ave. GDP Growth of 5.1%

6.8% for 2013

6.1% for 20145.2% for Q1 2015

Selected Economic Data

% of GDPDeficit 1.4% in 2013

0.6% in 2014

Debt 44.3% in 201345.4% in 2014

Inflation Rate

2.5% year to date

3% for 2013, 4.1% for 2014

Gross Int’l Reserves

(US$ Billion)US$80.86 B equivalent to 10.6 months of imports as of May 2015

Improvements in Ease in Doing

Business and Corruption Index World Bank Ranking in Ease in Doing

Business Index - from 133 in Year 2013 to 109 in Year 2014 and 95 in 2015 out of 189 countries;

Transparency International Corruption Perception Index - from 129 in Year 2011, 105 in Year 2012 and 94 in 2013, 85 in 2014 out of 177 countries.

Economic drivers for 2015 and onwards

• Gross capital formation has picked up

• While the 1Q 2015 started with a low level of infrastructure budget releases, this has picked up in the 2nd Q. Expected to be sustained till 2016.

• Remittances continue growth - $26.924 billion at the end of 2014 from $25.351 billion in 2013

• BPO Industry

BPO Industry(Voice & Non-voice)

BPO Industry major driver of real estate industry development and consumer purchases including food purchases 24/7.

2010

2011 2012 2013

2014

2016

$ Values $9 B $11 B $13.5 B $15.5B $18.4 B

$25 B

Employ-ment

530,000

640,000

790,000 900,000

1.03 million

1.3 million


• Gross capital formation has picked up • Government spending shifts to high gear.• Remittances continue its growth. Estimated at

$25.5illion in 2014• BPO Industry• China’s waning appeal. Industrialization

prospects?

Economic drivers for 2015 and onwards • Gross capital formation has picked

up • Government spending shifts to high

gear ,• Remittances continue growth.

Estimated at $25.5 billion in 2014• BPO Industry• China’s waning appeal.

Industrialization prospects? • Credit rating upgrade to investment

grade

Gaming investments: Philippines as the new Macau?


Gaming Investments

SM GroupSino-American Gaming Investment GroupMacau Resources GroupCaesar’s Entertainment Corp.Others

Gaming investments: Philippines as the new Macau?

Food manufactures - driven by growing population, rising incomes; Halal products (with growing Islamic markets worldwide)

The “Pot of Gold” at the bottom of the Philippine population pyramid;


Forecasts: 2015

• Prices as reflected in the Inflation rate

➔More of the same (2-4%) • Jobs: ➔Marginal improvement at 93-94% ➔Unemployment (6.5%)➔Underemployment (18%)• Income: ➔Prudent GDP growth projection (for

planning purposes): 6.0%

GDP Projections for the Philippines

2015 2016ADB 6.4% 6.3%World Bank 6.5% 6.5%IMF 6.6% 6.4%OECD 6.2% 6.2%NEDA/BSP 7-8% 7.5-8.5%

GDP Projections for the Philippines

2015 2016ADB 6.4% 6.3%World Bank 6.5% 6.5%IMF 6.2% 6.4%OECD 6.2% 6.2%NEDA/BSP 6-6.5% 7.5-8.5%

Choosing The Right Candidate

for 2016

Gloria Macapagal Arroyo 2001 - 2010

Benigno “Noynoy” C. Aquino Jr. 2010 - Present

Ferdinand E. Marcos1965-1986

Ma. Corazon “Cory” C. Aquino

1986 - 1992

Fidel V. Ramos 1992 - 1998

Joseph. E. Estrada 1998 - 2001

AGSB Mission“ We believe that expertise without integrity is empty,

integrity without expertise is ineffectual, and expertise and

integrity without service is irrelevant.”

Candidates’ Profile Matrix

Jejomar Binay

Mar Roxas Grace Poe

Expertise

Integrity

Service

Ave. Score

Score: 4 = Major Strength 3 = Minor Strength

2 = Minor Weakness1 = Major Weakness

Candidates’ Profile Matrix

Rodrigo Duterte

Vilma Santos

Joseph Estrada

Expertise

Integrity

Service

Ave. Score

Score: 4 = Major Strength 3 = Minor Strength

2 = Minor Weakness1 = Major Weakness

“ In looking for people to hire, you look for three qualities: Integrity, Intelligence and Energy. And if you do not have the first, the other two will kill you.”

- Warren Buffet

Thank You!

Philippine Economic Briefing 2015 Accountancy Week Regulators’ Forum July 15, 2015.

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Transcript of Philippine Economic Briefing 2015 Accountancy Week Regulators’ Forum July 15, 2015.