Staying the Course: Gaining Momentum for Sustained Growth

7/30/2019 Staying the Course: Gaining Momentum for Sustained Growth

1/16

Joint Foreign Chambers Meeting with the Governor

30 August 2013

Staying the Course:Gaining Momentum for Sustained Growth


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Key Macro Indicators

2002-2006

Ave

2007-2011

Ave 2012 2013Sustained growth

momentumReal GDP growth (2000=100) 5.1 4.6 6.8 7.6 (H1)

Manageable inflation Headline inflation (2006=100) 4.4 4.8 3.2 2.9 (Jan-Jul)

Improving fiscal

position Fiscal balance (% of GDP) -3.3 -2.1 -2.3 -2.5 (Q1)Ample liquidity and

credit supportive of

economic activity

Domestic Liquidity (% of GDP) 42.9 48.0 49.0 47.6 (Q1)

Domestic Credits* (% of GDP) 53.9 48.4 50.5 51.7 (Q1)

Sound and stable

banking system

Non-performing loans

(% of total loans) U/KBs**11.1 3.2 2.8 2.8 (May)

Capital Adequacy Ratio (consolidated

basis)*** - U/KBs17.8 16.5 18.4 n.a.

Robust externalprofile

Current Account Balance

(% of GDP)1.6 4.0 2.8 5.3 (Q1)

GIR (in months of imports of goods and

services)3.9 8.4 11.9 12.0 (end-Jul)

External debt (% of GDP)**** 58.4 31.6 24.1 22.8 (end-Mar)

External debt service burden ****

(% of exports of goods, receipts of

services & income)

14.7 9.6 7.4 9.6 (Jan-Apr)

Philippines sustains economic improvements

*Computed using Net Domestic Credit (NDC)

** Data for 2012 and May 2013 are computed as prescribed under BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as loss and

fully provisioned.***Computation based on the combined reports of parent bank (head office and branches) and its subsidiaries engaged in financial undertakings but excluding insurance; also excludes trust

department

**** External debt ratios for 2002-2011 are based on BPM5 concept while 2012 and Q1 2013 data are based on BPM6 concept.


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Year Structural/Policy Reforms in the Philippine Economy

1993 Creation of the Bangko Sentral ng Pilipinas

1994 Liberalization of foreign bank entry

1995 Liberalization of the telecommunications industry

1997 Privatization of water services (MWSS)

1998 Deregulation of the oil industry; Adoption of consolidated bank supervision

2000 Passage of the Philippine E-Commerce Act

2001 Liberalization of the power sector (EPIRA)

2002 Adoption by BSP of Inflation Targeting Framework; Passage of the Special Purpose Vehicle Act

2003 Passage of the Government Procurement Reform Act

2004 Passage of the Securitization Act or Republic Act 9267; Adoption of Basel 2

2005 Passage of expanded value-added tax (E-VAT)

2006 Establishment of the Wholesale Electricity Spot Market (WESM)

2007 Full implementation of risk-based bank supervision

2009

Privatization of the National Transmission Corporation (TransCo) and National Power Corporations (NPC)

assets

2011Issuance of the guidelines on the adoption of Philippine Financial Reporting Standards (PFRS) 9; Adoption

of phased-in migration to Basel III

2013 Implementation of the revised excise tax rates on alcohol and tobacco (Sin tax)

Philippines institutes critical reforms


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3.1 4.4 2.9 3.6

5.06.7

4.8 5.26.6

4.21.1

7.6

3.6

6.8 7.6

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Q1

Fourth consecutive quarter that the GDP has been expanding above 7 percent

PH remains fastest growing economy among emerging economies in the ASEAN region

Rebalancing in composition of growth, from consumption-driven to investment-led and

industrialized

Real GDP Growth (%)

Average: 4.7%

Economic growth in Q2 2013 remains robust

Source: National Statistical Coordination Board

2013H1


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2.5%

July

Inflation remains low and stable, within target

Headline Inflation (%), 2006=100

Monetary policy keptinflation in 2012 at3.2%, well-within

target

YTD 2013 inflation of2.9%

Inflation projected tosettle within 3-5 %

target range in 2013

and 2014, and 2-4%

target range in 2015


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6

Aug 2013:

3.50%

22 Aug: 1.55%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jan

Feb

Mar

Apr

MayJunJul

Aug

SepOct

Nov

DecJan

Feb

Mar

Apr

MayJunJul

Aug

SepOct

Nov

DecJan

Feb

Mar

Apr

MayJunJul

Aug

SepOct

Nov

DecJan

Feb

Mar

Apr

MayJunJul

Aug

SepOct

Nov

DecJan

Feb

Mar

Apr

MayJunJul

Aug

2009 2010 2011 2012 2013

Overnight RRP

364-day T-bill Rates

(Secondary Market Rates)

BSP maintains key policyrates

Previous rate cuts work their way

through the economy Effective policy balance

between safeguarding price

stability and supporting

economic growth

Market rates remain lowgiven low BSP policy rates

and benign inflation

expectations

Domestic Interest Rates (in percent)


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7

Credit conditions continue to supporteconomic growth

Average Lending Rate and Bank Outstanding Loans (net of RRPs)(in percent, January 2009-June 2013)

June: 5.6 %

June: 12.3 %


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8

0

2

4

6

8

10

12

14

16

18

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

RatiosinPerc

ent(%)

LevelsinPh

PBillions

Levels in PhP Bi llions Growth Rate

in percent

Banking system is sound and stableASSETS GROWTH: U/KBs

2001 May 2013

CAPITAL ADEQUACY RATIO (CAR) :U/KBs

2001-2012

NPL COVERAGE RATIO*:U/KBs

As of May 2013

14.8%

P7,754.0BMay 2013:

P3,685 B

2.8%

2.50%

2.60%

2.70%

2.80%

2.90%

3.00%3.10%

3.20%

3.30%

0

1,000

2,000

3,000

4,000

May 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13

Total loan portfolio, gross Gross NPL ratio

In billion PHP

TOTAL LOAN PORTFOLIO and GROSS NPL RATIO* :U/KBs, May 2012-May 2013

* Starting January 2013, figures are computed as prescribed under BSP Circular No. 772. Gross NPL represents the actual level of NPLwithout any adjustment for loans treated as loss and fully provisioned.


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9

US$1.535 B

-10

-5

0

5

10

15

20

Current Account Capital & Fin'l Account Balance of Payments

0

5

10

15

20

25

30

0

2

4

68

10

12

14

16

18

20

22 Cash Remittances thru banks (RHS)

Growth Rate (LHS)

In billion US$ In percent

External payments position remains robust

BOP surplus for Q1

2013 at US$1.5 billion

Current accountsurplus from resilient

OF remittances, strongBPO earnings, and

rising tourism receipts

Overseas Filipinos Remittances

2004 June 2013 (in billion US$)

* Data for 2004-2010 based on BPM5; 2011 onwards based on BPM6

Balance of Payments*2004 Q1 2013 (in billion US$)

US$ 10.7B

5.6%

in billion US$


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10

Foreign exchange reserves could cover 12 months worth of imports of goods and

payments of services and income Reserves are equal to 8.0 times the countrys short-term external debt based on original

maturity

FX reserves provide ample buffer againstexternal shocks

Strong build-up of foreign exchange reserves continues to provide buffer from external shocks

FX reserves continue to grow

0

10

20

30

40

50

60

70

80

90

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

2

4

6

8

10

12

14

GIR (lhs) Import Cover (rhs)

in billion US$ monthsGIR Jul 13: US$83.2 B

Import Cover Jul 13: 12.0 months

GIR 2004: US$16.2 B

Import Cover 2004: 3.6 months


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Medium &

Long Term

83.4%

Short Term

16.6%

External debt dynamics continue to improve

No. of Years

Total MLT Debt 20.3

Public Sector 22.0

Private Sector 10.5

External debt ratios have declined significantly over the last 8 years

Medium to Long-Term External DebtBy maturity profileAs of Q1 2013

Short-term debt accounts for only about 16.6% ofexternal debtAs of Q1 2013


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Peso moves broadly in line with regional trend

Peso USD Daily Average Exchange RateJanuary 2009 August 2013

40

42

44

46

48

50

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

PhP44.64/US$1*(29 Aug13)

Cum2009** 2010 2011 2012 2013 2001-2013

Korean Won -3.7 10.78 -0.5 15.2 2.3 8.8 -0.7 -25.7 8.2 2.7 -2.0 7.7 -4.1 19.1

Thai Baht (Onshore) -1.9 2.6 8.8 1.8 -5.1 15.7 5.2 -2.9 4.1 10.7 -3.9 3.0 -4.8 33.3

Singaporean Dollar -6.0 6.4 2.1 4.2 -2.0 8.7 5.9 1.1 1.8 8.7 -0.6 6.1 -4.4 31.8

Indian Rupee -3.3 0.6 5.2 5.0 -3.5 1.8 12.3 -19.2 4.9 3.6 -15.2 -3.1 -18.8 -29.9

Indonesian Rupiah -7.0 16.2 6.3 -9.2 -5.7 9.5 -4.5 -15.4 18.2 4.7 -0.4 -5.9 -10.3 -3.5

Philippine Peso -3.2 -3.1 -4.0 -1.4 6.0 8.3 18.8 -13.1 2.9 5.4 0.9 6.8 -8.3 15.9Japanese Yen -13.1 10.8 10.8 4.5 -12.9 -1.0 5.2 23.9 -2.6 14.2 4.0 -10.9 -11.6 21.3

Malaysian Ringgit 0.0 0.0 0.0 0.0 0.6 7.3 6.2 -4.3 1.2 11.2 -2.9 3.5 -7.8 14.8

Chinese Yuan 0.0 0.0 0.0 0.0 2.6 3.4 6.9 7.0 0.0 3.4 4.2 1.0 1.8 30.2

New Taiwan Dollar -5.3 0.9 2.0 7.0 -3.4 0.9 0.2 -0.9 2.5 9.9 -3.8 4.3 -3.1 11.2

*Last done deal in the afternoon session.

**Negative value represents depreciation of the currency against the USD.

***Closing prices except for Phillipine peso. Source:Bloomberg

20022001 2008*2006

`

Year-to-Date Changes in Selected Dollar Rates (As of 29 August 2013)

Appreciation/(-Depreciation), In Percent

2003 2004 2005 2007


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a/ Based on projectionsadopted by theDevelopmentBudget CoordinatingCommittee (DBCC) on 3 July 2013b/ Based on BSP projectionspresented duringthe Monetary Board meetingon 16 May 20131/ Cash remittances coursed through banksr/ revised

Actual Projections

2012 2013 2013

GDP Growth (%, 2000=100) 6.8 7.6 (H1) 6.0 7.0 a/

Headline Inflation (%, 2006=100) 3.2 2.9 (Jan-Jul) 3.0 5.0 a/

Exports Growth (%)Based on the BPM6 concept

Based on NSO data20.9

7.9

7.9 (Q1)

-4.4 (Jan-Jun)

11.0 a/

Imports Growth (%)

Based on the BPM6 concept

Based on NSO data

11.3

2.7

-8.2 (Q1)

-3.8 (Jan-Jun)

13.0 a/

OF Remittances 1/

Amount (US$ Bn)

Growth Rate21.4

6.3

10.7 (Jan-Jun)

5.6

22.5b/

5.0 b/

Current Account

(US$ Bn) 7.1 3.4 (Q1) 7.0 b/

Balance of Payments

(US$ Bn) 9.2 2.6 (Jan-Jun) 4.4b/

GIR (US$ Bn) 83.8 83.2 (Jan-Jul) r/ 87.0 r/

Sound Fundamentals:

2013 Macroeconomic Outlook


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A more protracted recession in the euro area

Longer growth slowdown in several key emerging market

economies

Volatility in asset markets and capital flow reversal

affecting emerging markets

Challenges ahead


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On monetary stability: sustain appropriate monetary policy stance

Continued vigilance over inflation dynamics to safeguard non-inflationary

growthOn financial stability: continue to initiate key reforms

Implement macroprudential measures to minimize systemic risks

Enhance corporate governance framework

Support capital market development

Sustain advocacies on microfinance, financial inclusion and consumer

protection

On external sector stability: strengthen resilience to external shocks

Maintain market-determined exchange rate

Keep comfortable level of reserves and ensure manageable external debt

profile

BSP policy directions


16/16

Joint Foreign Chambers Meeting with the Governor

30 August 2013

Staying the Course:Gaining Momentum for Sustained Growth

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Staying the Course: Gaining Momentum for Sustained Growth