Transcript 21699664Dr.CielitoF.HabitoPresentation

Presentation on the Economic
Performance and Outlook for MEPI
Cielito F. Habito, Ph.D.
Professor of Economics & Director,
Ateneo Center for Economic Research & Development
Ateneo de Manila University
Overview
– Where We Have Been: 50 Years A
Laggard
– Where We Are Now: Key Economic
Trends
– What It All Means for Filipinos
– Outlook & Imperatives
•Economic Drivers & Downers
•The Challenge of Inclusive Growth
•Where We Need to Push
•Outlook for Pharmaceuticals
•Long Term Prospects
The Philippines & Thailand:
Estranged Twins
Indicator
Population (million)
Population G.R. (%)
GDP Per Capita (US$)
GDP Share (%)
Agriculture
Industry
Services
Gross Dom Inv (%GDP)
Gross Dom Saving (%GDP)
FDI Stock (Billion US$)
1970
Thai
Phil
36
36
3.1
3.1
250
250
2009
Thai
Phil
66.9
92.2
0.6
2.0
4062 1796
32.0
26.0
23.0
27.5
45.2
46.7
1965
20.0
20.0
18.5
20.3
1998
7.8
2.3
11.6
14.8
43.3
30.2
45.1
55.0
2009
21.8
14.6
31.7
15.6
2009
93.8
22.9
Fifty Years A Laggard
• In 1960, average income in RP was twice
that of Thailand; now it is the reverse
• Other East Asian economies’ GDP grew
annually at 3.6-6.0%; RP only grew 1.4%
• Per capita GDP has grown 19 times in China,
8 times in Thailand, 6 times in Malaysia &
Indonesia, but only 2 times in RP
• At current rates of per capita income
growth, WB estimates it would take RP >200
years to reach the average per capita GDP
of the OECD (developed) countries
Top Heavy Growth
Bottom-Heavy Needs
 Narrow: Growth is propelled primarily
by a few leading sectors and geographic areas
 Shallow: Weak linkages to rest of
economy – e.g., low domestic valueadded exports
 Hollow: Jobless growth; povertyincreasing growth
Top-Heavy Growth,
Bottom-Heavy Needs
 Poverty incidence rose from 30% in 2003
to 33% in 2006, and 37% in 2009 (NSCB)
 Real per capita income fell 10%
nationally, and fell in 50 provinces
between 2003 and 2006 (NSCB)
 Basic education enrollment rates
dropped in 75% of provinces between
2002 & 2004 (PHDR 2009)
 Wide disparities in life expectancy across
provinces: Low - 53.4 (Tawi-tawi); High 74.6 (La Union) (PHDR 2009)
Wanted:
Inclusive Growth
a.k.a. Broad-Based Growth:
• Sectorally
• Geographically
• Temporally
Assessing Economic Performance:
The “PITIK Test”
The Essential Yardsticks (P-T-K):
•Price Stability (Presyo)
•Jobs (Trabaho)
•Incomes (Kita)
The Economy Last Year &
Now: Good News & Bad News
 Prices: Rose faster than in 2009, but
more slowly than projected; now
ticking up again
 Jobs: Jobs caught up with labor
force growth – but job quality
remains a challenge
 Incomes/Output: Strong Overall
―Manufacturing surged
―Services saw robust growth
―But agriculture declined
Ateneo Center for Economic
Research and Development
The Economy Last Year &
Now: Good News & Bad News
 Investment and Exports: strong
rebound, even with dropping
foreign investment inflows
 Balance of Payments: favorable last
year; has now turned negative
 Peso: appreciating with weak dollar
and amid “currency war”
 Net Income Inflows: slows to single
digit growth; now facing new threats
 Fiscal Deficit: too big for comfort
Ateneo Center for Economic
Research and Development
Presyo:
Inflation Trends
2007-Present
9.3%
3.2%
2.8%
2007
2008
2009
3.8%
2010
4.3%
2100
Trabaho:
Latest Jobs Survey
Mixed Picture
Kita:
Incomes/Production (GDP):
2010: Renewed Industrial Vigor
• Surge in Private Construction (19.1%)
and Durable Equipment (25.7%)
• Exports up 33.7% in Dollar values
(25.6% in real terms)
• Consumption growth surges in Q4
(7% from normal 4-5%)
• Manufacturing up by double digits
• Private services (esp. media) up
8.8% (media surged 31.4% in Q1)
• Spoiler: Agriculture declines 1% (but
bounced back in Q4)
Overall Output/Income Growth
Industry Takes the Lead
Indicator
GNP Growth (%)
Net Factor Inc fr Abr
GDP Growth (%)
Agri, Fish & Forestry
Industry
Services
Q1
Q2
2010
Q3
8.6
14.1
7.8
-2.7
15.9
7.1
7.6
3.9
8.2
-3.2
16.1
6.7
6.0
3.9
6.3
-3.0
8.6
8.0
Q4
FY
6.7
3.8
7.1
5.4
8.3
6.9
7.2
6.0
7.3
-0.5
12.1
7.1
Industry Leads the Way
Manufacturing Makes
A Comeback
Sector
INDUSTRY SECTOR
Mining/Quarrying
Manufacturing
Construction
Utilities
Q1
Q2
2010
Q3
15.9
7.4
20.4
4.3
8.2
16.1
37.4
12.7
22.5
8.6
8.6
6.9
9.0
7.5
8.8
Q4
FY
8.3
15.5
8.9
2.4
8.5
12.1
18.4
12.3
10.5
8.5
Gross Regional Domestic Product,
2008-2009
10.0
8.0
Bicol Region grew
fastest
6.0
4.0
2.0
0.0
Research and Development
III
Ateneo Center for Economic
X
-4.0
M
RM
4 Regions declined
A
II
X
I
X
X
IX
III
V
B
A
II
V
I
V
V
IV
IV
III
II
I
R
A
R
C
C
N
RP
-2.0
Private Investment Surges…
Govt Spending Takes the Background
Q1
Q2
2010
Q3
Personal Consn Exp
5.4
4.6
4.1
7.0
5.3
Govt Consumption
20.0
5.8
-7.9
-7.6
2.7
Capital Formation
Of which:
Construction
Public
Private
Durable Eqpt
Br Stck & Orch Dev
21.9
10.8
12.4
22.8
17.0
7.9
8.5
7.6
26.0
1.4
23.9
27.8
18.5
31.8
3.3
8.6
-24.0
34.7
18.8
2.1
3.4
-14.3
14.6
26.8
2.9
12.0
3.7
19.1
25.7
2.4
Exports
Imports
22.4
22.4
29.1
20.4
28.3
18.5
21.1
21.8
25.6
20.7
Indicator
Ateneo Center for Economic
Q4
FY
Research and Development
… even as FDI dips
Inflows Down, But Intentions Up
Top 2 Sources:
Japan,
Netherlands
89% in
Manufacturing
Ateneo Center for Economic
Research and Development
Remittances slowed in 2009,
but picked up anew
Year
Remittances
(US$)
Growth
Rate (%)
2003
2004
2005
2006
2007
2008
2009
2010
7578458
8,550,371
10,689,005
12,761,308
14,449,928
16,426,854
17,348,052
18,762,989
12.8
25.0
19.4
13.2
13.7
5.6
8.2
Ateneo Center for Economic
Research and Development
How do recent economic trends
translate to human welfare
and poverty of Filipinos?
The Economy in Human Terms
• Poverty rose from 24.9% (2003) to 26.5%
(2009) [Under old definition: 30% (‘03) to
33% (‘06) to 37% (‘09)]
• No. of poor Filipinos up by 970,000, or
185,000 families between 2006 and 2009
(Poverty line: P7,017/month per family of 5)
• Net elementary school participation rate
down from 97% in 2001 to 85% in 2008
• Net high schol participation rate down
from 66% to 62%
• Malnutrition incidence went up in most
provinces
Ateneo Center for Economic
Research and Development
Self Rated Poverty:
49% of Filipinos feel poor (Q4-2010)
Lowest since Cory Aquino
– but is it really?
Hunger: Roller Coaster
SWS Q1-’10 Puzzle: Self-Rated
Poverty Down But Hunger Up
• Of the 4 million households reporting
hunger in March 2010, only 2.6 million
rated themselves as Poor.
A significant 1.4 million who suffered
from hunger did not consider
themselves to be Poor.
• Living standards had dropped so low
that standard of “poorness” has
dropped (misery loves company)
Outlook & Imperatives
Why 2011 Should
Be Better
 Recovery from El Niño
 Resurgence in investment
(especially domestic)
 Proven “immunity” to global
slowdown
 Remittances continue growth
 “Rebalancing” of Asian growth
toward more internal, intraregional demand
Why 2011 Should
Be Worse
 Possible double-dip recession (Wshaped recovery) in the West?
 European economies under threat
 Middle East unrest and new inflation
pressures
 Peso appreciation (mixed effect)
 Japan earthquake/tsunami and
nuclear disaster
 Medium Term: Heavy debt burden
and continued fiscal pressures
Where is the Peso Going?
Euro
Baht
Sing$
Peso
Rupiah
Achieving Inclusive Growth:
Where To Push
Revenues: Restore tax effort to 17%;
mostly from collection/compliance
boost; sin taxes, trim excess tax perks
 Infrastructure: Massive catch-up
program needed; needs above revenue
boost &/or better BOT rules
 Investment: Now exceeded by savings;
confidence boost needed
 Democratize Growth: Massive SME boost,
asset reform, competition policy (esp.
with PLDT-Digitel merger)
Sectors to Watch,
Sectors to Push
Agriculture &
Agribusiness
 End of El Niño droughts
 Rebound from 4-quarter decline
 Ongoing budget reforms promise
positive results
 DA to “steer” while LGUs “row”
 Remittance-fueled consumer food
demand may taper in short term due
to external developments
Tourism
& Allied Industries
 Focused investments under Tourism
Act of 2009 underway
 Pocket open-skies policy to lower
costs, hike tourist arrivals
 Improved peace prospects in
Mindanao; tourism a major thrust in
Mindanao 2020 Plan
 “Appreciation lag” of Peso vs.
neighboring currencies can make PH
relatively more attractive
Business Process
Outsourcing
 Sustained demand growth
projected for long term
 Indian firms now moving into
Philippines
 Need to address dwindling skilled
recruitable personnel
 Important driver of real property
development sector
Construction
 Private construction is on a rebound
(19.1% growth in 2010)
 Massive infrastructure push (GAA &
PPPs) is imperative & inevitable
 Revenue performance needs clear
improvement; PPP policy environment
needs constant improvement
 Huge unmet demand in low to
medium-cost housing
Manufacturing
 Electronics: Continued dominance
 Food & Beverages: Rising average
incomes; elastic demand for
processed food  steady medium
to long-term growth
 Design-based manufactures:
Innate competitiveness (e.g.
Cobonpue, Lhuillier)
Pharmaceuticals
 Projected annual PH market
growth rate to 2015: 6.9% (BMI)
 Drivers:
− Cheaper Medicines Act (Elastic
demand leads to higher gross sales)
− Mergers/industry consolidation
(Greater stability)
− Universal PhilHealth coverage by
2015 (Wider market)
Economic Outlook: 2011
• Presyo:
➔ Inflation projected to inch
upward to 5-6%
• Trabaho:
➔ Marginal improvement at 78% unemployment
• Kita:
➔ Consensus GDP growth
projection: 5-6%
Long Term Outlook:
Building on Inherent Strengths
• Exceptionally rich natural & human
resources
• Strategic geography (transshipment,
shipbuilding/repair, tourism)
• Favorable global, regional trends
(e.g. aging, medical tourism,
outsourcing)
• Resilient, adaptable people, in high
demand worldwide
 Completing the picture: Good
Governance is key!
Checklist For Good
Governance
 Quality Appointments to Cabinet,
revenue and regulatory agencies
 Zero Tolerance for Corruption: an
unequivocal policy
 Decentralized Governance where NG
“steers,” LGUs “row”
 Participatory Mechanisms: bring people
to the gov’t & gov’t to the people
 Streamline Government Processes to
reduce cost of doing business
Post Script:
Stories from the Countryside
 Bgy. Lopero, Jose Dalman, Z Norte
Carabaos, Not Fertilizers: A Farmer’s
Plea
 Magsaysay, Davao del Sur
Diversified Organic Farming System: A
Mayor’s Lament
 Upland Barangay, Sarangani
Horses vs. FMR: A Pragmatic Farmer
Bottom-up devt; Solutions need not be
sophisticated nor expensive!
[email protected]