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![Page 1: Cielito F. Habito, Ph.D. Professor of Economics & Director, Ateneo Center for Economic Research & Development Ateneo de Manila University Presentation.](https://reader035.fdocuments.in/reader035/viewer/2022062716/56649e0b5503460f94af39b5/html5/thumbnails/1.jpg)
Cielito F. Habito, Ph.D.Professor of Economics & Director,Ateneo Center for Economic Research & DevelopmentAteneo de Manila University
Presentation on the Economic Performance and Outlook for
MEPI
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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
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The Philippines & Thailand:Estranged Twins
Thai Phil Thai PhilPopulation (million) 36 36 66.9 92.2Population G.R. (%) 3.1 3.1 0.6 2.0GDP Per Capita (US$) 250 250 4062 1796GDP Share (%) Agriculture 32.0 26.0 11.6 14.8 Industry 23.0 27.5 43.3 30.2 Services 45.2 46.7 45.1 55.0
Gross Dom Inv (%GDP) 20.0 20.0 21.8 14.6Gross Dom Saving (%GDP) 18.5 20.3 31.7 15.6
FDI Stock (Billion US$) 7.8 2.3 93.8 22.91998 2009
Indicator1970 2009
1965 2009
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• 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
Fifty Years A Laggard
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Top Heavy GrowthBottom-Heavy Needs
Narrow: Growth is propelled primarily by a few leading sectors and geo-graphic areas
Shallow: Weak linkages to rest of economy – e.g., low domestic value-added exports
Hollow: Jobless growth; poverty-increasing growth
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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)
Top-Heavy Growth, Bottom-Heavy Needs
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Wanted:Inclusive Growth
a.k.a. Broad-Based Growth:
• Sectorally
• Geographically
• Temporally
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Assessing Economic Performance: The “PITIK
Test”The Essential Yardsticks (P-T-K):
•Price Stability (Presyo)
•Jobs (Trabaho)
•Incomes (Kita)
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Ateneo Center for Economic Research and Development
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
The Economy Last Year & Now: Good News && Bad News
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Ateneo Center for Economic Research and Development
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
The Economy Last Year & Now: Good News && Bad News
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Presyo:Inflation Trends
2007-Present
2.8%
9.3%
3.2% 3.8% 4.3%
2007 2008 2009 2010 2100
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Trabaho:Latest Jobs SurveyMixed Picture
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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)
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Q1 Q2 Q3 Q4 FY
GNP Growth (%) 8.6 7.6 6.0 6.7 7.2Net Factor Inc fr Abr 14.1 3.9 3.9 3.8 6.0GDP Growth (%) 7.8 8.2 6.3 7.1 7.3 Agri, Fish & Forestry -2.7 -3.2 -3.0 5.4 -0.5 Industry 15.9 16.1 8.6 8.3 12.1 Services 7.1 6.7 8.0 6.9 7.1
Indicator2010
Overall Output/Income Growth
Industry Takes the Lead
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Industry Leads the Way Manufacturing Makes
A Comeback
Q1 Q2 Q3 Q4 FY
INDUSTRY SECTOR 15.9 16.1 8.6 8.3 12.1 Mining/Quarrying 7.4 37.4 6.9 15.5 18.4 Manufacturing 20.4 12.7 9.0 8.9 12.3 Construction 4.3 22.5 7.5 2.4 10.5 Utilities 8.2 8.6 8.8 8.5 8.5
2010Sector
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Ateneo Center for Economic Research and Development
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Gross Regional Domestic Product, 2008-2009
Bicol Region grew
fastest
4 Regions declined
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Ateneo Center for Economic Research and Development
Q1 Q2 Q3 Q4 FY
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 21.9 10.8 12.4 22.8 17.0 Of which: Construction 7.9 23.9 8.6 3.4 12.0 Public 8.5 27.8 -24.0 -14.3 3.7 Private 7.6 18.5 34.7 14.6 19.1 Durable Eqpt 26.0 31.8 18.8 26.8 25.7 Br Stck & Orch Dev 1.4 3.3 2.1 2.9 2.4
Exports 22.4 29.1 28.3 21.1 25.6Imports 22.4 20.4 18.5 21.8 20.7
2010Indicator
Private Investment Surges…Govt Spending Takes the Background
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Ateneo Center for Economic Research and Development
… even as FDI dipsInflows Down, But Intentions Up
Top 2 Sources: Japan,
Netherlands
89% in Manufacturing
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Ateneo Center for Economic Research and Development
YearRemittances
(US$)Growth Rate (%)
2003 75784582004 8,550,371 12.82005 10,689,005 25.02006 12,761,308 19.42007 14,449,928 13.22008 16,426,854 13.72009 17,348,052 5.62010 18,762,989 8.2
Remittances slowed in 2009, but picked up anew
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How do recent economic trends translate to human welfare and poverty of Filipinos?
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Ateneo Center for Economic Research and Development
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
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Self Rated Poverty: 49% of Filipinos feel poor (Q4-
2010)
Lowest since Cory Aquino – but is it really?
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Hunger: Roller Coaster
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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)
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Outlook & Imperatives
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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, intra-regional demand
Recovery from El Niño Resurgence in investment
(especially domestic) Proven “immunity” to global
slowdown Remittances continue growth “Rebalancing” of Asian growth
toward more internal, intra-regional demand
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Possible double-dip recession (W-shaped recovery) in the West?
European economies under threatMiddle East unrest and new
inflation pressures Peso appreciation (mixed effect)Japan earthquake/tsunami and
nuclear disasterMedium Term: Heavy debt burden
and continued fiscal pressures
Possible double-dip recession (W-shaped recovery) in the West?
European economies under threatMiddle East unrest and new
inflation pressures Peso appreciation (mixed effect)Japan earthquake/tsunami and
nuclear disasterMedium Term: Heavy debt burden
and continued fiscal pressures
Why 2011 ShouldWhy 2011 ShouldBe WorseBe Worse
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Where is the Peso Going?Where is the Peso Going?
Euro
Baht
Sing$
Peso
Rupiah
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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)
Achieving Inclusive Growth:Where To Push
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Sectors to Watch,Sectors to Push
Sectors to Watch,Sectors to Push
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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
Agriculture & Agribusiness
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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
Tourism& Allied IndustriesTourism& Allied Industries
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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
Business Process Outsourcing
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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
ConstructionConstruction
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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)
Manufacturing
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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)
PharmaceuticalsPharmaceuticals
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Economic Outlook: 2011
•Presyo: ➔ Inflation projected to inch
upward to 5-6% •Trabaho:
➔ Marginal improvement at 7-8% unemployment
•Kita: ➔ Consensus GDP growth
projection: 5-6%
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• 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!
Long Term Outlook:Building on Inherent Strengths
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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
Checklist For Good Governance
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Bgy. Lopero, Jose Dalman, Z Norte Carabaos, Not Fertilizers: A Farmer’s Plea
Magsaysay, Davao del SurDiversified Organic Farming System: A Mayor’s Lament
Upland Barangay, SaranganiHorses vs. FMR: A Pragmatic Farmer
Bottom-up devt; Solutions need not be sophisticated nor expensive!
Post Script:Stories from the Countryside