IN THIS ISSUE:

Latest Economic Performance:

GDP Year-on-Year Growth Rates and
Philippine Trade Performance

State of the National Economy:

Overall Consumer Outlook Index

Recent Economic Studies:

Overall Business Confidence Index

economic
snapshots
QUICK FACTS AND FIGURES OF THE PHILIPPINE ECONOMY

QUARTERLY
 CURRENT
ECONOMIC
SITUATION This issue will include the countrys most recent data on GDP Year-on-Year Growth Rates and
Philippine Trade Performance. In addition, Overall Consumer Outlook Index Overall Business Confidence
Index are included in this report.

2 2nd QUARTER ECONOMIC SNAPSHOTS

 For the First Quarter of 2015, growth of the Philippine
economy reached 5.2 percent, lower than the 5.6 percent Figure 1: GDP Year-on-Year Growth Rates
achieved during the same period of 2014. In spite of this, (2014 2015)
the National Statistical Coordination Board (NSCB) noted 10.0
that the Services, Industry and Agriculture sectors all grew
8.0
by 5.6, 5.5 and 1.6 percent, respectively. It was the Services 6.6
sector, added the NSCB, that contributed the highest to 6.0 5.6 5.2
the countrys gross domestic product (GDP) growth.
4.0
Because of the growth slowdown, some economists
and financial institutions have expressed scepticism on 2.0
governments ability to meet its target of 7 8 percent.
In fact, World Bank said in its Philippine Economic Update Q1 2013-2014 Q4 2013-2014 Q1 2014-2015
for January 2015 that lower government spending, in-
vestment delays and slowdown, and weaker exports are Source: NSCB1
likely to limit economic growth.2 Data from the Depart-
ment of Budget and Management (DBM) itself showed
that spending on infrastructure declined by 1.9 percent DBM also reported that disbursements increased by P12.9 billion or 9 percent compared to 2014
at P91.9 billion3 for the months of January April 2015. levels, outpacing the 6-percent average for the month over the last ten years.5

There was however an increase in national government
disbursements in the latest DBM report, which increased
year-on-year by 5.5 percent, or P34.4 billion, to P660.6 bil-
lion for the months of January to April,4 showing con-
tinued improvements in governments spending perfor-
mance for 2015. Even for the month of April alone, the
However, there are still those who remain optimistic about the countrys growth accelerating,
provided that there is ample spending in the economy, diversified source of growth and the
necessary infrastructure to support it. Despite its reservations with governments public spend-
ing constraints, top credit watcher Fitch Ratings has retained its GDP growth forecasts at 6.3% for
2015 and 6.2% for 2016.

ECONOMIC SNAPSHOTS 2nd QUARTER 3

 Rapid growth has also been supported by a slower inflation rate. At 1.6 percent from 2.2 percent in April,
this was the lowest in 20 years and was within the Bangko Sentral ng Pilipinas (BSP) range forecast of 1.6-2.4
percent for the month.6

Aside from relatively strong GDP growth, the Philippines economy is also in its balance of payments (BOP)
which is the record of all the countrys transactions with the rest of the world. BSP said that the Philippines
yielded a surplus of US$877 million in Q1 2015, a reversal of the US$4.5 billion deficit registered in Q1 2014.7

Further, the countrys external debt improved at US$75.3 billion by March 2015, down by 3 percent from
what was recorded in 2014. With an improved debt burden, DBM Secretary Florencio Abad said that this
implies that the government can provide greater budgetary support to key social and economic services,8
including for education, health care, and infrastructure development, among others.

Improved accounts for the Philippine economy have also been reflected in the countrys total external
trade in goods in 2014 which expanded by 7 percent. Data from the National Statistics Office (NSO) shows
that both total imports and total exports accelerated by 4.8 and 9.5 percent, respectively, in 2014. This brings
the countrys balance of trade in goods registering a $3.296 billion deficit in 2014 from $5.713 billion deficit
in 2013.9
Foreign direct investments (FDI) themselves registered inflows in March 2015. BSP data reveals that despite

Figure 2: Philippine Trade Performance

(2014 and 2013)

Source: NSO10

4 2nd QUARTER ECONOMIC SNAPSHOTS

being lower by 54.6 percent, FDI inflows were at US$229 million. During the period, FDIs were sourced mainly
from the United States, Japan, Singapore, Spain, and Germany and were channeled primarily to manufactur-
ing; electricity, gas, steam and air conditioning supply; real estate; financial and insurance; and wholesale and
retail trade activities.11

Total approved foreign investments, based on NSCB data, further shows that for the First Quarter of 2015,
manufacturing stands to receive the highest investments, with 41.8 percent share of total FI pledges. This
was followed by accommodation and food service activities, with investment commitments contributing
19.9 percent and administrative and support service activities at 13.1 percent.12 Japan, followed by Korea and
the US were the top investors in the Philippines. However, total approved investments did decline by 41.7
percent from the same period the previous year.
The level of the countrys investments, a major source of growth and employment generation, is also an

Figure 3: Total Approved Foreign Investments

(First Quarter, 2014 and 2015)

Source: NSCB13

ECONOMIC SNAPSHOTS 2nd QUARTER 5

 indicator of the attractiveness and competitiveness of its busi-
ness environment. A recent study by the Economic Research Figure 4 & 5: Overall FDI Restrictiveness Index by Sectors for ASEAN
Institute for Asean and East Asia (ERIA) ERIA discussion paper
titled FDI Restrictiveness Index for Asean: Implementation
of AEC (ASEAN Economic Integration) Blueprint Measures
showed that the Philippines is among the more restrictive
economies in the Southeast Asian region in terms of openess
to FDIs.

On one hand, the graphs here show that the Philippines,

relative to other countries in the region, are more restrictive
particularly in business services, health-related and social sci-
ences and transport services. On the other, manufacturing in
the country seems to be the least restrictive among the sur-
veyed industries. This is true even for most of countries includ-
ed in the study.

A major constraint for the Philippines in attracting FDIs, ac-

cording to the study, is Executive Order (EO) 98 or the 9th
regular Foreign Investment Negative List (FINL), which was
signed by President Aquino on October 2012.15 Liberalizing
policy roadblocks such as this will be a significant component
of their growth and competitiveness.

Even the National Economic Development Authority agrees

that there needs to be a review of Philippine laws and regula-
tions that may be obstacles to Philippine growth and compet-
itiveness. NEDA Secretary Arsenio Balisacan says that NEDA
supports the review and updating of the Foreign Investments
Act, particularly the feasibility of adopting a general policy of
openness, which includes the lowering of tariffs and other
barriers to trade, and expansions of areas opened for foreign
investment.16 Source: ERIA14

6 2nd QUARTER ECONOMIC SNAPSHOTS


Figure 6: Key Employment Figures
(April 2015)
Meanwhile remittances, which is another major source
for Philippines GDP, increased by 5.1 percent in April
2015. Cash remittances reached US$2 billion in April
2015 while for January-April 2015, US$7.8 billion was
recorded, higher by 5.4 percent compared to the level
posted in the same period in 2014.17

Economic Survey Results

According to the Philippine Statistics Authority, the

countrys unemployment rate significantly decreased
to 6.4 percent in April 2015 from 7 percent of the same
month in 2014.18 There was also an improvement in the
countrys employment rate which is now at 93.6 percent.

Further, NEDA reports that total employment also

grew by 1.3 percent year-on-year in April 2015, 20 signify-
ing an additional 495,000 Filipinos being able to get jobs
during this period.

Source: NEDA19

ECONOMIC SNAPSHOTS 2nd QUARTER 7

 Aside from a labor and employment survey, anoth-
er BSP report reveals that there is a weak consumer
sentiment for the Second Quarter 2015, with a lower Figure 7: Overall Consumer Outlook Index
(2007 2015)
confidence index of -16.2 percent.

This pessimistic outlook, based on the BSP report

was due to the following: (a) anticipated higher
prices of commodities due to increase in domestic
oil prices, power rate hike and higher tuition fees,
which could lead to higher household expenditures;
(b) expected increase in the number of unemployed
persons as new graduates enter the labor force; and
(c) perceived graft and corruption in the govern-
ment. Respondents also cited their concerns on the
peace and order situation in the country following
the death of 44 members of the Special Action Force
(SAF 44) and the political issues behind it, occurrence
of calamities such as fire, typhoons, and floods as well
as the impact of the El Nio dry spell on agricultural
output.22

Meanwhile, in contrast to the weak consumer out-

look for the next quarter, business confidence is more
positive about the countrys economic prospects Source:BSP21
with the index at 49.2 percent.

8 2nd QUARTER ECONOMIC SNAPSHOTS

ECONOMIC SNAPSHOTS 2nd QUARTER 9
 BSP explained that the more bullish outlook was
brought about by the following reasons: (a) robust
consumer demand during the secondary harvest Figure 8: Overall Business Confidence Index
and fishing seasons, graduation and enrolment peri- (Q1 2010 Q2 2015)
ods, and summer season given the expected influx of
both local and foreign tourists, (b) expected increase
in activities in the construction sector, particularly in-
frastructure-related government projects, (c) increase
in orders and new contracts/projects leading to high-
er volume of production, (d) expansion of businesses
and launch of new product lines, and (e) continuing
confidence in the administration. Their more positive
outlook was further driven by expectations of more
favorable macroeconomic conditions in the country
(particularly, stable inflation and low interest rates),
sustained foreign investment inflows and the steady
stream of overseas Filipinos (OFs) remittances.24

However, business constraints were still identified,

namely, domestic competition and insufficient de-
mand leading to low sales volume. Nonetheless, there
is seen to be an easing of these constraints support-
ing the more positive business outlook and improv-
ing business conditions in the country. Source:BSP23

110 2nd QUARTER ECONOMIC SNAPSHOTS

ENDNOTES:
1
National Statistical Coordination Board. (May 2015). Philip-
pine Economy Posts 5.2 Percent GDP Growth. Retrieved from:
http://www.nscb.gov.ph/sna/2015/1st2015/2015qpr1.asp
2
Taruc, P. (2015, June 24). Fitch maintains GDP forecast, cites
govt spending concerns. CNN Philippines. Retrieved from:
http://cnnphilippines.com/business/2015/06/24/fitch-philip-
pines-gdp-forecast-june-2015.html
3
Torres, E. (2015, July 1). National government disbursement
up 5.5% but infrastructure spending down 1.9%DBM report.
Business Mirror. Retrieved from: http://www.businessmirror.com.
ph/national-government-disbursement-up-5-5-but-infrastruc-
ture-spending-down-1-9-dbm-report/
5
Ibid.
6
Department of Budget and Management. (2015, June 30).
April spending climbs by 12.9-B year-on-year; Abad: Measures
to improve performance further in coming months. Retrieved
from: http://www.dbm.gov.ph/?p=13012
7
Bangko Sentral ng Pilipinas. (June 2015). Inflation Eases to
1.6 Percent in May. Retrieved from: http://www.bsp.gov.ph/pub-
lications/media.asp?id=3750&yr=2015
8
Bangko Sentral ng Pilipinas. (June 2015). Strong Current Ac-
count Boosts BOP Surplus in Q1 2015. Retrieved from: http://
www.bsp.gov.ph/publications/media.asp?id=3760
9
Department of Budget and Management. (2015, June 30).
April spending climbs by 12.9-B year-on-year; Abad: Measures
to improve performance further in coming months. Retrieved
from: http://www.dbm.gov.ph/?p=13012
10
National Statistics Office. (July 2015). Foreign Trade Statistics 18
Bangko Sentral ng Pilipinas. (June 2015). Personal Remit-
of the Philippines: 2014. Retrieved from: http://web0.psa.gov.ph/ tances Sustain Growth in April 2015; January-April 2015 Level
content/foreign-trade-statistics-philippines-2014 Totals US$8.6 Billion. Retrieved from: http://www.bsp.gov.ph/
publications/media.asp?id=3757
11
Ibid.
19
National Economic Development Authority. (June 2015).
12
Bangko Sentral ng Pilipinas. (June 2015). Foreign Direct In- Key employment figures improve in April 2015, on track with
vestments Yield US$229 Million Net Inflows in March 2015; Q1 govt target for the year. Retrieved from: http://www.neda.gov.
2015 Net Inflows Reach US$851 Million. Retrieved from: http:// ph/?p=6018
www.bsp.gov.ph/publications/media.asp?id=3754
20
National Economic Development Authority. (June 2015).
13
National Statistical Coordination Board. (June 2015). Total Key employment figures improve in April 2015, on track with
approved foreign investments down by 41.7 percent in Q1 2015. govt target for the year. Retrieved from: http://www.neda.gov.
Retrieved from: http://www.nscb.gov.ph/pressreleases/2015/ ph/?p=6018
PSA-PR-20150609-ES4-02_1Q15FDI.asp
21
Ibid.
14
National Statistical Coordination Board. (June 2015). Total
approved foreign investments down by 41.7 percent in Q1 2015. 22
Bangko Sentral ng Pilipinas. (June 2015). Consumer expecta-
Retrieved from: http://www.nscb.gov.ph/pressreleases/2015/ tions survey: Second quarter 2015. Retrieved from: http://www.
PSA-PR-20150609-ES4-02_1Q15FDI.asp bsp.gov.ph/downloads/Publications/2015/CES_2qtr2015.pdf
15
Thangavelu, S. (May 2015). FDI Restrictiveness Index for 23
Ibid.
ASEAN: Implementation of AEC Blueprint Measures. ERIA Dis-
cussion Paper Series. Retrieved from: http://www.eria.org/ERIA- 24
Bangko Sentral ng Pilipinas. (May 2015). Business expecta-
DP-2015-43.pdf tions survey: Second quarter 2015. Retrieved from: http://www.
bsp.gov.ph/downloads/Publications/2015/BES_2qtr2015.pdf
16
Rivera, D. (2015, July 2). Philippines Among Most Restrictive Ibid.
In SEA On FDI. Philippine Star. Retrieved from: http://www.phil-
star.com/business/2015/07/02/1472175/philippines-among-
most-restrictive-sea-fdi
17
National Economic Development Authority. (June 2015).
NEDA pushes review of laws and regulations that impede in-
vestments, growth. Retrieved from: http://www.neda.gov.
ph/?p=6047
ECONOMIC SNAPSHOTS 2nd QUARTER 11
ABOUT
economic
snapshots
is a quarterly publication that presents the current economic situation
of the Philippines through various economic indicators as monitored by local and
international financial institutions. This includes the countrys most recent data
on Gross Domestic Product, Foreign Direct Investments and Remittances,
among others. In addition, studies on the economic performance and
financial forecasts for the Philippines are included in this report.

Stratbases Albert Del Rosario Institute

is an independent international and strategic research
organization with the principal goal of addressing the
issues affecting the Philippines and East Asia
9F 6780 Ayala Avenue, Makati City
Philippines 1200
V 8921751
F 8921754
www.stratbase.com.ph