Cielito F. Habito, Ph.D. Professor of Economics & Director,
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Cielito F. Habito, Ph.D. Professor of Economics & Director, Ateneo Center for Economic Research & Development Ateneo de Manila University Presentation on the Economic Performance and Outlook for MEPI
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The Philippines Under 'Aquinomics’. 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 - PowerPoint PPT Presentation
Transcript of Cielito F. Habito, Ph.D. Professor of Economics & Director,
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
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
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
• 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
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
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
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)
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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
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
Presyo:Inflation Trends
2007-Present
2.8%
9.3%
3.2% 3.8% 4.3%
2007 2008 2009 2010 2100
Trabaho:Latest Jobs SurveyMixed 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)
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
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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-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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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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… even as FDI dipsInflows Down, But Intentions Up
Top 2 Sources: Japan,
Netherlands
89% in Manufacturing
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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
How do recent economic trends translate to human welfare and poverty of Filipinos?
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
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, 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
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
Where is the Peso Going?Where is the Peso Going?
Euro
Baht
Sing$
Peso
Rupiah
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
Sectors to Watch,Sectors to Push
Sectors to Watch,Sectors to Push
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
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
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
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
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
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
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%
• 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
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
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
