The Philippine Economy:

Progress, Challenges, Strategies

ARSENIO M. BALISACAN

17-Feb-14 1

Malacañan Palace, 17 February 2014

Secretary of Socioeconomic Planning

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000 Real GDP at 2000 prices (Millions Php) Trend (HP Filter)

The Philippine economy has been growing robustly…

Source: Philippine Statistics Authority and National Economic and Development Authority

Strong macroeconomic fundamentals supported this

remarkable performance.

Sustainable fiscal and external position

Low and Stable inflation Favorable interest rate and

sound banking system

* end-November 2013, **Jan-Nov 2013, *** end-June 2013

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2005 2006 2007 2008 2009 2010 2011 2012 2013

Headline Inflation

Low-end Target

High-end Target

Note: High and low-end targets are based on the BSP publication on Inflation Targeting dated September 2013; Actual inflation figures are based on the 2006 CPI series.

* 2013 data is for the period Jan-Sep

52.7 44.1 37.1 31.3 32.6 30.1 27 24.1 21.9

1.9

4.4 4.8

2.1

5.6

4.5

3.1 2.8

4.6

0.0

2.0

4.0

6.0

0.0

20.0

40.0

60.0

2005 2006 2007 2008 2009 2010 2011 2012 2013*

 External Debt to GDP Ratio (LHS) Current Account to GDP Ratio (RHS)

* Fiscal balance to GDP as of September 2013; NG Debt to

GDP as of November

0

5

10

15

20

25

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010 2011 2012 2013

NPL Ratio,LHS*

Real interestrates, RHS**

CAR, RHS***

-4.00

-3.00

-2.00

-1.00

0.00

0.00

20.00

40.00

60.00

80.00

2005 2006 2007 2008 2009 2010 2011 2012 2013*

NG Debt to GDP (LHS) Fiscal Balance to GDP (RHS)

National Government’s Sectoral Spending (% of GDP)

The government has considerable fiscal space for making

investments to catalyze private ventures, provide public

goods and fund social programs

Source: Department of Budget and Management and Philippine Statistics Authority

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Health Education, Culture and Manpower Development Interest Payment Infrastructure and Other Capital Outlay

6.8-7.2% Unemployment Rate

26.3% (2009)

25.2% (2012) Poverty Rate

Where are we now?

PDP 2011-2016 Targets

7-8% Gross Domestic Product

22% Investment/GDP ratio

Poverty Incidence down to

16.6%

We are on track with respect to our economic targets. But we lag with

respect to our desired social outcomes.

Unemployment rate

7.0% (2012)

7.1% (2013)

Underemployment rate

20.0% (2012)

19.3% (2013)

20.3% (2012)

21.1% (2013)

Fixed Capital as ratio

to GDP

6.8% (2012)

7.2% (2013)

Real GDP Growth

• Good governance has proven to be an effective platform

upon which strategies should be implemented.

• Macroeconomic (fiscal, financial, external) and political

stability fuels positive expectations that lead to growth.

• Economic growth is necessary but not sufficient for poverty

reduction.

• Growth strategies need to have spatial and sectoral

dimensions to ensure inclusivity.

• Disasters can negate the gains and even push back

development.

6

Lessons Learned: Midterm Assessment

of PDP 2011-2016

GDP Growth Targets for 2014-2016

Indicator Baseline

(2012)

Annual Plan Targets

2014 2015 2016

Gross Domestic Product (%) 6.8 6.5 -7.5 7.0-8.0 7.5-8.5

GVA in agriculture, hunting,

fishery and forestry 2.8 (0.9)-0.1 2.0-3.0 2.5-3.5

GVA in industry 6.8 9.8-11.0 8.6-9.7 9.3-10.3

GVA in services 7.6 6.0-6.9 6.8-7.8 7.2-8.1

Employment Target for 2014-2016

Indicators Baseline

(2012)

Annual Plan targets

2014 2015 2016

Unemployment rate (in %) 7.0 6.7 - 6.9 6.6 - 6.8 6.5 - 6.7

Underemployment rate(% of

employed) 20.0 19.0 18.0 17.0

a/ cannot be computed due to changes in industry classifications. In January 2012, the Philippine Statistics Authority (PSA) started

to adopt the 2009 Philippine Standard Industrial Classification (PSIC)for the industry codes. Prior to this, the PSA used the 1994

PSIC.

Poverty Incidence Target for

2014-2016

Indicator Baseline

(2012)

Annual Plan Targets

2014 2015 2016

Poverty Incidence (% of

population) 25.2 23.0-25.0 20.0-23.0 18.0-20.0

Multidimensional Poverty (% of

population) 28.2 (2008) 20.0-22.0 18.0-20.0 16.0-18.0

Competitiveness

of productive

sectors

Major infrastructure projects to improve connectivity

between urban centers and regional growth hubs

Category 1: Provinces with the most number

of poor households

• Growth opportunities may be

present but the poor cannot

participate in the growth process

• In-migration; provinces attract

the poor from other places but

are unable to get jobs due to

lack of skills

Category 1: Provinces with the most number

of poor households

Strategy:

• Promote higher growth to create

more employment opportunities

• Upgrade skill sets of the poor,

undertake more aggressive

employment facilitation

• Begin with growth sectors: IT-

BPM, tourism, manufacturing,

and logistics

PROVINCE REGION NO. OF POOR

HOUSEHOLDS

1) Zamboanga del Sur Western Mindanao 170,181

2) Cebu Central Visayas 151,425

3) Pangasinan Ilocos 148,601

4) Negros Occidental Western Visayas 138,664

5) Camarines Sur Bicol 136,208

6) Leyte Eastern Visayas 132,377

7) Iloilo Western Visayas 122,770

8) Sulu ARMM 122,218

9) Quezon CALABARZON 122,139

10) Davao del Sur Davao Region 111,655

Category 2: Provinces where the proportion

of poor households is high

• Limited opportunities for rapid

growth

• Small population, low density,

remote areas

• Weather-related events and

armed conflict

Category 2: Provinces where the proportion

of poor households is high

Strategy:

• Social assistance programs

while economic opportunities

are being created

• Programs that promote

economic and physical mobility

• Peace-building efforts

PROVINCE REGION Poverty

Incidence (%)

Lanao del Sur ARMM 73.8

Maguindanao ARMM 63.7

Eastern Samar Eastern Visatas 63.7

Apayao Cordillera 61.4

Zamboanga del

Norte Western Mindanao 54.4

Camiguin Northern Mindanao 53.6

Saranggani SOCCSKSARGEN 53.2

North Cotabato SOCCSKSARGEN 52.4

Masbate Bicol 51.3

Northern Samar Eastern Visayas 50.2

Category 3. Provinces prone to multiple

hazards

LIST OF PROVINCES

Abra

Agusan del Sur

Albay

Antique

Aurora

Benguet

Bohol

Cagayan

Catanduanes

Cavite

Dinagat Islands

Eastern Samar

Ilocos Norte

Ilocos Sur

Iloilo

Isabela

Laguna

Leyte

Northern Samar

Nueva Vizcaya

Pampanga

Quezon

Quirino

Rizal

Southern Leyte

Surigao del Norte

Surigao del Sur

Zambales

Zamboanga del Sur

Zamboanga Sibugay

Marginally non-poor can slide into

poverty due to shocks or disasters;

poor can slide deeper to poverty

Strategy:

• Risk reduction and mitigation

• Social insurance and social

protection

• Income diversification

Plan Implementation

• Convergence of different government agencies

• Role of the private sector, business, development

partners

• Implementation will be monitored by a NEDA committee

or Cabinet cluster

• NEDA Secretariat will produce annual reports on

progress/accomplishment

17-Feb-14 18

17-Feb-14 19

Salamat at mabuhay tayong lahat.