Philippine EconomicPhilippine EconomicPerformance and ProspectsPerformance and Prospects

Secretary Romulo L. NeriNational Economic and Development

Authority

The Philippines: The Philippines: Making Things HappenMaking Things Happen

Mid-Year Economic BriefingMid-Year Economic Briefing05 September 200605 September 2006

Presentation OutlinePresentation OutlineI. What has been achieved so

far?II. What are the numbers telling

us?III. What is the next wave of policy

agenda?

I. What Has Been Achieved So I. What Has Been Achieved So Far?Far?

Macroeconomic PerformanceMacroeconomic Performance(growth rates, in (growth rates, in percent)percent)

Source: NSCB

6.55.36.65.8GNP

6.16.75.76.4 Services

5.14.74.55.8 Industry

5.20.76.72.1 Agriculture

5.64.85.55.4GDP

2006200520062005

1st Semester2nd Quarter

Growth in GDP and GNP, 1998Q1 – Growth in GDP and GNP, 1998Q1 – 20061H20061H

Source: NSCB

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1998 1999 2000 2001 2002 2003 2004 2005 1H06

GNP GDP

Agriculture, Fishery & Forestry Agriculture, Fishery & Forestry (Growth rates, in percent)(Growth rates, in percent)

Source: NSCB

22ndnd Quarter Quarter

20042004 20052005 20062006

Agri, Fishery, Forestry

4.9 2.1 6.7

Agriculture 4.6 1.3 5.2

Palay 11.0 1.8 10.3

Corn 15.5 -10.1 49.2

Coconut, copra -1.3 3.1 0.2

Sugarcane 34.9 -25.4 3.4

Banana 3.0 12.4 9.7

Other crops -2.4 3.2 -3.2

Livestock 0.7 1.7 3.6

Poultry 0.9 2.5 1.6

Agri services 20.9 4.1 6.8

Fishery 6.0 4.8 11.0

Forestry 80.2 -10.6 10.0

Industry Industry (Growth Rates, in percent)(Growth Rates, in percent)

Source: NSCB

4.02.73.43.2Elect., Gas and Water

-0.42.3-3.84.5Construction

6.45.46.55.8Manufacturing

2.74.83.513.6Mining and Quarrying

5.14.74.55.8INDUSTRY

2006200520062005

1st Semester2nd Quarter

Services Services (Growth Rates, in percent)(Growth Rates, in percent)

2006200520062005

3.2

5.8

5.3

12.15.8

8.76.7

1st Semester

2.7

6.8

3.9

11.75.9

7.06.4

2nd Quarter

4.75.8O. Dwellings & R. Estate

6.56.0Private Services

3.84.4Government Services

12.210.0Finance5.25.2Trade

5.44.1Transport., Comm., Stor.

6.15.7SERVICES

Source: NSCB

Expenditure Expenditure (Growth Rates, in percent)(Growth Rates, in percent)

  2nd Qtr 1st Sem

  2005 2006 2005200

6

Personal Consumption 4.8 5.2 4.9 5.4

Government Consumption 12.4 0.4 7.5 3.9

Capital Formation -4.1 -5.8 -6.6 -3.8

Exports 1.6 22.3 1.5 17.5

Imports 2.6 4.0 0.3 2.5

Source: NSCB

Exports now Exports now surgingsurging

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

Time

Re

al G

ro

wth

Ra

te (

in p

erc

en

t)

2000 2001 2002 2003 2004 2005 2006

Source: NSCB

Foreign investment flowsForeign investment flows

150

250

350

450

550

650

750

J an-May '04 J an-May '05 J an-May '06

FOREIGN DIRECT FOREIGN DIRECT INVESTMENT, net (US$M)INVESTMENT, net (US$M)

100

300

500

700

900

1100

1300

1500

1700

1900

2100

J an-Jul '05 Jan-Jul '06Source: BSP

FOREIGN PORTFOLIO FOREIGN PORTFOLIO INVESTMENTS, net INVESTMENTS, net

(US$M)(US$M)

Strong inflows from Overseas Filipino Strong inflows from Overseas Filipino Workers Workers

Sources: BSP and POEA

5.16

5.96

4.8

5

5.2

5.4

5.6

5.8

6

6.2

1st half 2005 1st half 2006

OFW Remittance

(in US$ Billion)

Foreign currency reserves at historic Foreign currency reserves at historic highhigh

Gross International ReservesGross International Reserves(levels, in billion)(levels, in billion)

Source: BSP

12

13

14

15

16

17

18

19

20

21

22

2000 2001 2002 2003 2004 2005 Jul-06

GIR

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

Imp

ort

Co

ve

r

GIRImport Cover

The peso gains strengthThe peso gains strength

5051525354555657

F-

04

A-

04

J -

04

A-

04

O-

04

D-

04

F-

05

A-

05

J -

05

A-

05

O-

05

D-

05

F-

06

A-

06

J -

06

PHP:

US$

1

Source: BSP

Source: NSO

5

10

15

20

25

30

35

40

45

Ret

ail Pe

trol

uem

(Ph

p)

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Infl

atio

n

Retail Petroleum (wtd ave) Headline Inflation Food Core Inflation

Inflation is subsidingInflation is subsidingMonthly Inflation, 2004-2005

( in percent)

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005 2006

91-day T-bill Rate Overnight RRP Rate Bank Lending Rate

Stable and low interest rate Stable and low interest rate environmentenvironment

II. What Are The Numbers Telling II. What Are The Numbers Telling Us?Us?

Performance is on track; full-Performance is on track; full-year targets within reach.year targets within reach.

DBCC Macroeconomic Assumptions

Actual Performance

Dubai Oil (US$/bbl) 62.0- 64.0 62.5 (Jan – Jul)

Inflation 6.9 - 7.0% 7.0% (Jan – Jul)

Exchange Rate (P/$) 51 – 53 52.1 (Jan – Jul)

OFW inflows (g.r.) 10% 15.4% (Jan – Jun)

91-day T-bill rate 6.4 – 6.5% 5.4% (Jan – Aug)

Exports (g.r.) 10.0 16.8 (Jan – Jun)

MACROECONOMIC TARGETS MACROECONOMIC TARGETS (2006) (2006)

(Growth Rates, in percent)(Growth Rates, in percent)

Sources: MTPDP, DBCC

MTPDP 2004-2010

DBCC approved as of 20 September 2005

DBCC approved as of 27 March 2006

DBCCApprovedAs of Aug 2006

GNP 6.5-7.5 5.9-6.9 5.9-6.5 5.9-6.5GDP 6.3-7.3 5.7-6.6 5.5-6.2 5.5-6.1 Agriculture

4.2-5.2 4.0-5.0 3.5-4.0 3.4-3.9

Industry 7.2-8.2 5.1-6.1 5.4-6.2 5.4-6.2 Services 6.5-7.5 6.7-7.7 6.4-7.0 6.3-7.0

III. What Is The Next WaveIII. What Is The Next WaveOf Policy Agenda?Of Policy Agenda?

Policy DirectionsPolicy Directions• Develop the countryside through the

super regions• Increase infrastructure spending • Increase export competitiveness to

capture a bigger share in international trade

• Improve labor competitiveness and productivity

• Develop micro, small and medium enterprises

• Continue fiscal consolidation • Reforms for good governance

Philippine EconomicPhilippine EconomicPerformance and ProspectsPerformance and Prospects

Secretary Romulo L. NeriNational Economic and Development

Authority

The Philippines: The Philippines: Making Things HappenMaking Things Happen

Mid-Year Economic BriefingMid-Year Economic Briefing05 September 200605 September 2006