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Philippines Quarterly Update—February 2010
1
World Bank Office Manilawww.worldbank.org.ph
Quarterly UpdateL
AYING
O
UT THE
E
XIT
S
TRATEGIES
February 2010
Philippines Quarterly Update—February 2010
2
T
ABLE OF
C
ONTENTS
EXECUTIVE
SUMMARY
.................................................................................................................................................. 4
RECENT
ECONOMIC
DEVELOPMENTS
........................................................................................................................... 5
O
UTPUT AND
D
EMAND
.............................................................................................................................................. 5
E
MPLOYMENT AND
P
OVERTY
.................................................................................................................................... 7
B
ALANCE OF
P
AYMENTS AND
E
XTERNAL
D
EBT
........................................................................................................ 9
F
INANCIAL
M
ARKETS AND
C
ORPORATE
S
ECTOR
..................................................................................................... 11
POLICIES
...................................................................................................................................................................... 13
M
ONETARY
P
OLICY
................................................................................................................................................. 13
F
ISCAL
P
OLICY
........................................................................................................................................................ 14
PROSPECTS
.................................................................................................................................................................. 17
E
XTERNAL
E
NVIRONMENT
...................................................................................................................................... 17
O
UTPUT AND
D
EMAND
............................................................................................................................................ 18
E
MPLOYMENT AND
P
OVERTY
.................................................................................................................................. 21
B
ALANCE OF
P
AYMENTS AND
E
XTERNAL
D
EBT
...................................................................................................... 21
M
ONETARY
P
OLICY
................................................................................................................................................. 22
F
ISCAL
P
OLICY
........................................................................................................................................................ 23
APPENDIX:
SUMMARY
MACRO
AND
FISCAL
TABLES
................................................................................................. 29
B
OXES
B
OX
1.
P
ETROLEUM
T
AXATION IN THE
P
HILIPPINES
.................................................................................................... 26
B
OX
2.
P
HILIPPINES
:
R
EVISIONS TO THE
N
ATIONAL
I
NCOME
A
CCOUNTS
..................................................................... 28
F
IGURES
F
IGURE
1.
T
HE ECONOMY CONTRACTED FOR TWO QUARTERS BUT RECOVERED SINCE
................................................... 5
F
IGURE
2.
GDP
PER CAPITA DECLINED IN
2009
1/ .......................................................................................................... 5
F
IGURE
3.
GDP
GROWTH REBOUNDED THANKS TO PRIVATE CONSUMPTION
................................................................... 7
F
IGURE
4.
E
XCEPT FOR AGRICULTURE
,
ALL PRODUCTIVE SECTORS ALL POSTED MODERATE IMPROVEMENTS
................ 7
F
IGURE
5.
S
TRONG JOB CREATION BUT NOT ENOUGH TO OFFSET RAPIDLY RISING WORKING
-
AGE POPULATION
............. 8
F
IGURE
6.
R
ISING UNEMPLOYMENT AND UNDER
-
EMPLOYMENT
..................................................................................... 8
F
IGURE
7.
FALLING HOURS WORKED AND RISING LABOR FORCE PARTICIPATION
............................................................ 8
F
IGURE
8.
R
OBUST OVERSEAS DEPLOYMENT PARTLY REFLECTS GLOBAL STAFFING RESTRUCTURING
............................ 8
F
IGURE
9.
A
RESILIENT CURRENT ACCOUNT SURPLUS
.................................................................................................... 9
F
IGURE
10.
E
XTERNAL TRADE IS RECOVERING BUT REMAINS WELL BELOW PRE
-
CRISIS LEVEL
...................................... 9
F
IGURE
11.
A
FTER A SHARPER DECLINE
,
ELECTRONIC EXPORTS ARE POSTING A STRONG RECOVERY
.......................... 10
F
IGURE
12.
R
EMITTANCES HAVE BEEN STRONGLY COUNTERCYCLICAL IN REAL PESO TERMS
...................................... 10
F
IGURE
13.
R
ESERVES HAVE SURGED BY
$20
BILLION SINCE
2008Q4
DUE TO STRONG
B
O
P ....................................... 11
F
IGURE
14.
T
HE EXTERNAL DEBT POSITION REMAINS COMFORTABLE
.......................................................................... 11
F
IGURE
15.
E
QUITIES HAVE SURGED PAST THEIR PRE
-L
EHMAN
B
ROTHERS LEVEL
… ................................................... 12
F
IGURE
16.
…
AS HAVE SPREADS ON DOLLAR DEBT
..................................................................................................... 12
F
IGURE
17.
….
AND SIMILARLY FOR DOMESTIC FINANCING
.......................................................................................... 12
F
IGURE
18.
T
HE
P
ESO IS RAPIDLY APPRECIATING FOLLOWING A LONG PERIOD OF STEADY DEPRECIATION
................. 12
F
IGURE
19.
I
NFLATION TROUGHED AS THE FUEL AND FOOD PRICE SHOCKS DISAPPEARED
,
CORE REMAINS SUBDUED
... 13
Philippines Quarterly Update—February 2010
3
F
IGURE
20.
I
NFLATION REMAINS WITHIN THE
BSP
ANNOUNCED TARGET BAND
........................................................... 13
F
IGURE
21.
BSP’
S RATE CUT WERE INITIALLY BROADLY MATCHED BY THE BANKS TILL
A
PRIL
................................... 14
F
IGURE
22.
P
RIVATE CREDIT AND BANK LENDING GROWTH ARE FADING BUT FINANCIAL ASSETS KEEP GROWING
....... 14
F
IGURE
23.
G
APPING FISCAL DEFICITS AND RISING DEBT
.............................................................................................. 15
F
IGURE
24.
R
APIDLY DECLINING TAX EFFORT
,
AND RISING SHARE OF INTEREST PAYMENTS TO TOTAL REVENUE
......... 15
F
IGURE
25.
A
SHARPLY DETERIORATING STRUCTURAL FISCAL BALANCE
..................................................................... 16
F
IGURE
26.
…
MOSTLY DUE TO A STRUCTURAL DECLINE IN THE BIR’
S
TAX
EFFORT
....................................................... 16
F
IGURE
27.
C
ONSUMER SENTIMENT REMAINS CAUTIOUS
.............................................................................................. 19
F
IGURE
28.
R
EAL REMITTANCE GROWTH
...................................................................................................................... 19
F
IGURE
29.
E
L
N
IÑO
’
S IMPACT ON
A
GRICULTURE AND
GDP ....................................................................................... 20
F
IGURE
30.
B
USINESS SENTIMENT IS SURGING
.............................................................................................................. 20
F
IGURE
31.
I
NFLATION EXPECTATIONS REMAIN WELL ANCHORED
................................................................................ 23
F
IGURE
32.
C
REDIT GROWTH LAGS BEHIND NOMINAL
GDP
GROWTH OVER THE MEDIUM
-
TERM
.................................. 23
F
IGURE
33.
N
ATIONAL
G
OVERNMENT DEBT SUSTAINABILITY PROSPECTS DETERIORATED BETWEEN
2008
AND
2009 .. 24
F
IGURE
34.
P
HILIPPINES
:
P
ETROLEUM
T
AXATION AND THE
P
OOR
................................................................................ 26
F
IGURE
35.
G
ASOLINE AND
D
IESEL
T
AX
E
STIMATES
A
ROUND
T
HE
W
ORLD
,
2008* .................................................... 26
T
ABLES
T
ABLE
1.
P
HILIPPINES
S
TOCK
E
XCHANGE
I
NDEX AND
I
TS
C
OMPONENTS
,
2008-2009 .................................................. 12
T
ABLE
2.
G
LOBAL
E
CONOMIC
P
ROSPECTS
................................................................................................................... 17
T
ABLE
3.
P
HILIPPINES
:
H
OW DOES THE
2009
D
OWNTURN
C
OMPARE WITH
P
AST
R
ECESSIONS
? ................................... 19
T
ABLE
4.
P
HILIPPINES
:
S
ELECTED
E
CONOMIC
I
NDICATORS
,
2006-2011 ....................................................................... 29
T
ABLE
5.
P
HILIPPINES
:
N
ATIONAL
G
OVERNMENT
C
ASH
A
CCOUNTS
(GFS
B
ASIS
),
2006-2010 .................................... 30
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