Transcript QRT-ECO-AUG-2

we tell it like it is
3RD Quarterly Roundtable
Gary B. Teves
Managing Director
August 2, 2012
Rigodon Ballroom A & B, Peninsula Manila Hotel
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1
AUGUST 2,
2012
A SURPRISING 6.4% GROWTH IN 1Q12
UP FROM 4.9% IN 1Q11
QUARTERLY GDP GROWTH RATES
(%, AT ‘00 PRICES)
 REBOUND IN GOV’T SPENDING:
9
 O&M EXPENSES +24%
8
7
 INFRA/CAPEX +62.2%
6
5
 STRONG CONSUMER SPENDING
(OFWs, CCT, ETC.) +6.6%,
35-YEAR HIGH!  6.9% IN 1977
4
3
2
1
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2
2Q
1Q
12
3Q
4Q
2Q
1Q
09
3Q
4Q
06
2Q
1Q
3Q
4Q
03
1Q
2Q
3Q
4Q
1Q
 SOME RECOVERY IN EXPORTS:
+7.9% VS. +3.9% 1Q11
00
0
Source: National Statistical Coordination Board (NSCB)
AUGUST 2,
2012
SERVICE SECTOR DRIVEN
SERVICES UP 8.5% IN 1Q12, MORE THAN DOUBLE 3.6% IN 1Q11…
 REAL ESTATE +24.3%
 HOTELS & RESTAURANTS +10.9%
 RETAIL TRADE +10.1%
 COMMUNICATIONS +9.8%
… AND CONSUMER-DRIVEN
MAJOR CONTRIBUTION TO GDP INCREASE WERE RETAIL, FOOD MANUF’G,
TELECOMS (MOBILE), REAL ESTATE AND RECREATION
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AUGUST 2,
2012
SOURCES OF GROWTH (% OF INCREASE IN GDP)
FOOD MANUF’G
8.7%
TELECOM
7.7%
INFRA 7.5%
REAL ESTATE
7.1%
RETAIL 18.5%
RECREATIONAL
6.5%
FURNITURE
6.3%
BANKING 5.1%
RENTING 4.3%
OTHERS 24.7%
9 INDUSTRIES = 75.3% OF GDP INCREASE (OUT OF 46 INDUSTRIES)
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4
AUGUST 2,
2012
SECOND FASTEST IN EMERGING ASIA IN 1Q12
REAL ANNUAL GDP GROWTH RATE:
SELECTED ASIAN COUNTRIES (%)
COUNTRY
1Q12
1Q11
AVE.
1Q12&1Q11
CHINA
8.1
9.7
8.9
PHILIPPINES
6.4
4.9
5.7
INDONESIA
6.3
6.5
6.4
INDIA
5.3
8.5
6.9
MALAYSIA
4.7
5.2
5.0
VIETNAM
4.0
5.6
4.8
SOUTH KOREA
2.8
4.2
3.5
SINGAPORE
1.6
9.1
5.4
TAIWAN
0.4
6.6
3.5
THAILAND
0.3
3.2
1.8
BUT IT’S JUST ONE QUARTER: AVE. OF 2 QUARTERS PH PERFORMED
JUST WITHIN ASIAN AVE ONLY
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AUGUST 2,
2012
ECONOMIC RESULTS SUMMARY
(% REAL GROWTH RATE)
ITEM
1Q12
1Q11
2011
GDP
GNI
6.4
5.8
4.9
3.5
3.9
3.2
CONSUMER SPENDING
GOV’T CURRENT EXP.
FIXED INVESTMENT
PUBLIC CONSTRACTION (INFRA)
PRIVATE CONSTRACTION (PROPERTY)
PLANT & EQUIPMENT
EXPORT GOODS & SERVICES
IMPORT GOODS & SERVICES
6.6
24.0
2.8
62.2
-9.9
3.6
7.9
-2.6
5.9
-15.8
12.5
-37.9
23.0
17.2
3.9
11.2
6.3
1.0
0.2
-31.8
4.5
5.2
-4.2
0.2
AGRICULTURE
INDUSTRY
SERVICES
1.0
4.9
8.5
4.4
7.3
2.8
2.7
2.3
5.1
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6
AUGUST 2,
2012
IS IT SUSTAINABLE?
NOT AT 6%++ IN 2012
2
-2
WORLD
US
EURO AREA
12
20
11
20
 WEAKEST US RECOVERY IN 4 DECADES
10
-6
20
WORLD ECONOMIC ENVIRONMENT
NOT PROMISING, TOO
6
09
 FIXED INVESTMENT SLUGGISH, UP
ONLY 2.8% = CAPACITY
CONSTRAINTS
TO GROWTH
GDP GROWTH:US, EUROAREA, WORLD
20
 IMPORTS ARE WEAK, DOWN -2.6%
IN 1Q12 = NO INDUSTRIAL SURGE,
WEAK IND’L ACTIVITY
 EUROZONE IN A RECESSION – FINANCIAL CRISIS IN SOME AREAS
COULD IMPACT ADVERSELY GLOBALLY
 CHINA A SLOWING GROWTH LOCOMOTIVE FOR ASIA
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AUGUST 2,
2012
1
FASTER GROWTH IN 2013
MAJOR PPP PROJECTS IN 2012/2013
2012
PROJECT COST
 INFRASTRUCTURE SPENDING
IN FULL SWING, ACCELERATING
IN 2013
DAANG HARI-SLEX ROAD
P2.0B
SCHOOL INFRASTRUCTURE
10.0B
 CONSUMER SPENDING
SUSTAINED BY:
LRT-1 EXTENSION
59.2B
NAIA X’WAY II
15.8B
 P39B CONDITIONAL CASH
TRANSFER + OTHER ANTI-POVERTY
SUBSIDIES
 OFW REMITTANCES
 IT-BPO JOB CREATION
2013
NLEX-SLEX CONNECTOR
P20.1B
CAVITE-LAGUNA X’WAY
19.7B
P. PRINCESA AIRPORT O&M
N.A.
LAGUINDINGAN AIRPORT O&M
1.8B
PANGLAO AIRPORT
8.0B
LRT 2 EXTENSION
11.9B
 ACCESS TO CREDIT + STABLE PRICES
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AUGUST 2,
2012
2
FASTER GROWTH…
 INVESTMENTS TO START PICKING UP:
 MINING & MINERAL PROCESSING PLANTS: 2013 & ONWARDS
 RENEWABLE ENERGY – MINI-HYDROS & BIO MASS
 AGRI-BUSINESS: BEVERAGES (COFFEE), DAIRY PRODUCTS,
ORGANIC & HALAL FOODS, ETC.
 EXPANSION OF AUTO PARTS, ELECTRONICS, GARMENTS
 PROPERTY DEVELOPMENT STILL BOUYANT:
 OFFICE SPACE FOR BPO’S (BPO GROWING ~20% P.A.)
 HOTELS & RESORTS TO SUPPORT INCREASE IN TOURISTS 4M
‘12  8M ‘16
BUT RESIDENTIAL CONDOS COULD SLOW BY 2013+ DUE TO EXCESS SUPPLY
PH ABLE TO INSULATE ITSELF FROM EXTERNAL THREATS 6-7%
GDP GROWTH IN 2013
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AUGUST 2,
2012
BUT BACK TO 5-6% 2014/2015
PH INDUSTRIAL STRUCTURE NOT DEEP AND DIVERSIFIED ENOUGH
TO SUSTAIN “POTENTIAL” GROWTH OF 7%+
 INDUSTRY’S SHARE
TO THE ECONOMY (GDP)
HAS FALLEN IN PAST 10 YEARS
INDUSTRY AND MANUFACTURING
(% OF GDP)
40
INDUSTRY
MANUF'G
MANUFACTURING’S SHARE DOWN,
TOO
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10
AUGUST 2,
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
 EXPORTS NOT DIVERSIFIED: 60%
ARE ELECTRONICS & AUTO PARTS
20
20
 MANUF’G DOMINATED BY JUST
4 INDUSTRIES, INCL. F&B AND
ELECTRONICS = 66% OF TOTAL
30
2012
1
KEY BUSINESS COST FORECAST
EXCHANGE RATE
 P:$ RATE STILL APPRECIATING IN 2012 43-44 END ‘11  41-42 TODAY,
P42:$1 AVE ’12 WITH MORE DOLLAR INFLOWS DUE TO:
 OFW REMITTANCES STILL RISING 5-6%
 BPO STILL DELIVERING THE $’S
 TOURISM EXPERIENCING A MODEST BOOM
 STEADY AT NEAR 42 IN 2013 AS BSP ADOPTS MEASURES TO SLOW INFLOW
OF PORTFOLIO INVESTMENTS, LIBERALIZE OUTFLOW OF $’S
 DEPRECIATES SLIGHTLY IN 2013 AS US$ STRENGTHENS WITH US RECOVERY,
EURO AREA HITTING BOTTOM (= SOME OUTFLOW OF $ TOWARDS US, ETC.)
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11
AUGUST 2,
2012
2
KEY BUSINESS COST FORECAST…
INTEREST RATES
 AT HISTORIC LOWS IN 2012, 6-7% PRIME; 91-DAY TBILL RATES 2-3%
 BUDGET DEFICIT UNDER CONTROL DESPITE INCREASED SPENDING
 LOW WORLD INTEREST RATES, ALMOST ZERO POLICY RATES
IN EURO AREA
 CREDIT RATING UPGRADES (TO ONE-NOTCH BELOW INVESTMENT-GRADE)
= REDUCED RISK PREMIUM
= IMPROVED FDI PROSPECTS
 BSP CUTTING KEY RATES
 ALMOST UNCHANGED IN 2013: BSP KEEPS RATES LOW TO ARREST
PESO APPRECIATION + POSSIBLE INVESTMENT-GRADE CREDIT RATING
 UP SLIGHTLY IN 2014 LOAN DEMAND , LOW BASE PAST 3 YEARS,
GLOBAL RECOVERY MORE WIDESPREAD
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12
AUGUST 2,
2012
INFLATION
RECEEDING IN 2012 DUE TO SOME DECLINE IN WORLD OIL, COMMODITY
PRICES WITH WEAK GLOBAL DEMAND
CLIMBS BACK TO NEAR HISTORICAL (10-YEAR) AVE. OF 4 ½% IN 2013/2014 AS
DOMESTIC DEMAND RISES WITH FASTER ECONOMIC GROWTH, WORLD OIL,
COMMODITY PRICES FIRM UP
WORLD CRUDE OIL PRICE
(AVE OF 3 SPOT CRUDE, $/BBL)
115
100
85
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13
4
2
0
1
3
2
0
1
2
2
0
1
1
1
0
2
2
0
1
0
70
AUGUST 2,
2012
FORECAST UPDATE
ITEM
2011
2012
2013
2014/2015
% GROWTH:
GDP
GNI
3.7
2.6
6.0
6.0
6-7
6-7
5-6
6-7
CONSUMER SPENDING
GOV’T CONSUMPTION
FIXED INVESTMENT
EXPORT GOODS & SERVICES
IMPORT GOODS & SERVICES
6.1
-0.7
2.7
-3.8
1.9
6.4
6.6
3.0
4.0
3.0
6-7
7-8
5-6
6-7
7-8
5-6
5-6
6-8
5-7
6-8
AGRICULTURE
INDUSTRY
SERVICES
2.6
1.9
5.0
2.0
4.5
8.2
3-4
5-6
8-9
3-4
5-7
6-8
P:RATE (AVE)
BANK LENDING RATE (%)
91-DAY T-BILL RATE (%)
INFLATION (%)
43.6
7.2
2.0
4.8
42.0
6.5
2.0
3.2
41.8
6.7
2.5
3.6
42-43
7-8
3-4
3-5
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AUGUST 2,
2012
1
WHAT’S NEEDED TO GROW 7% P.A. AND ACHIEVE
INCLUSIVE GROWTH?
THERE’S AN OPPORTUNITY TO DO SO BECAUSE IMPROVING STATE
OF FINANCES GIVES PH MORE ROOM FOR GROWTH:
 BUDGET DEFICIT REMAINS UNDER CONTROL (<<3% OF GDP)
DESPITE STRONG SPENDING THIS YEAR
 FOREIGN RESERVES STILL BUILDING UP: $76B AS OF JUNE,
MORE THAN FOREIGN DEBT OF $62B
 FOREIGN DEBT REDUCED TO 28% OF GDP, BETTER THAN 32%
ASEAN AVE., WITHIN 25-30% ASIA-PACIFIC MEDIAN
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AUGUST 2,
2012
2
WHAT’S NEEDED TO GROW 7% P.A…
PH LIKELY TO ATTAIN “POTENTIAL” GROWTH (7% P.A.)
IF THE FOLLOWING CONDITIONS EXIST:
 INFRA SPENDING IS SUSTAINED AT 5% OF GDP OR HIGHER
(ASEAN AVE.: 6%), NOT AT 3% THAT IT AVERAGED DURING PAST 5-6%
YEARS
 TAX EROSION AVOIDED, IN FACT TAX RATIO SHOULD BE IMPROVING
TO >14%, TO SUPPORT HIGHER INFRA & BASIC SERVICES SPENDING
 BETTER IF WE CAN ATTAIN 17% AS WE DID IN 1995-97 BEFORE
ASIAN FINANCIAL CRISIS
 GOVERNANCE & COMPETITIVENESS IMPROVE SIGNIFICANTLY WITH
GLOBAL RANKINGS RISING TO UPPER HALF INSTEAD OF BOTTOM
THIRD IN TI CORRUPTION RANKING (129TH OUT OF 182 COUNTRIES)
AND COMPETITIVENESS RANKING (WEF: 75TH OUT OF 142)
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16
AUGUST 2,
2012
3
WHAT’S NEEDED TO GROW 7% P.A…
 PASSAGE OF KEY REFORM BILLS, ESPECIALLY:
 SIN TAX AMENDMENTS
 FREEDOM OF INFORMATION
 PUBLIC UTILITIES ACT AMENDMENTS
 ANTI-TRUST
 RATIONALIZATION OF FISCAL INCENTIVES
 AMLA AMENDMENTS
 IPR ACT AMENDMENTS
+ CHARTER CHANGE (ECONOMIC PROVISIONS)
 SOME REFOCUSING ON INDUSTRIES/MANUF’G: DEVELOPMENT
AND IMPLEMENTATION OF DOABLE INDUSTRY ROADMAPS
 INCREASE IN FDI
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17
AUGUST 2,
2012