Fast Track

PH ECONOMIC FAST TRAIN-BACK ON TRACK .... OR

DERAILED
FMIC ECONOMIC BRIEFING
January 9, 2015
Victor A. Abola, Ph.D.

To
Repair Bay

 Domestic Demand-led Growth

Slowdown in 2014-to Q3
Can PH Get Back into Fast
Track in Q4, 2015?
Domestic Demand Outlook
External Demand Outlook
Macroeconomic Forecasts
Summary .

Robust Domestic Demand

But this has slowed down
Faster pace of inflation
Typhoon Yolandas Impact on
Productive Capacity
Under-spending of the NG

From 8.3% in 2012, and faster in 2013, but slowed in 2014

GDP GROWTH RATE (Quarterly, y-o-y)

2001-Q1 to 2014-Q3

Source of Basic Data: National Statistical Coordination Board (NSCB)

GDP Growth on Acceleration Mode, Sputtered til Q3-2014

Robust Domestic
Demand Faltered
2013

2014-H1

Domestic Demand:

10.4% 4.7%

Spending view:
Consumption Spending
Government Spending
Investment Spending
Construction

5.7
7.7
29.9
10.4

5.6
0.8
3.8
2.1

From 8.3% in 2012, and faster in 2013, H1 has slowed

Resurgence in Manufacturing

Sources of Basic Data: NSCB, NSO

Japanese and Koreans Coming Back

Net New Jobs Created (000)

Year Ending Survey Month
Low Target of 1 M jobs per year
Annual increase in labor force 1.15M

Source of Basic Data: National Statistics Office (NSO)

Past 3 quarters employment data in 2014 is in-line

with low target of 1M

Inflation Has Risen

But Within Target

2012
2013
2014

3.2%
3.0%
4.1%

Record oil
prices &
rice crisis

Target

Source of Basic Data: NSO

Low Inflation: Monthly Inflation peaked at 4.9% in July-Aug. Still on Target

91-day T-bill and 10-year T-bond Yields

(May 2005 October 2014)
UITF
Crises

Global Financial
Crisis

MENA
Crisis

Inflation Acceleration Had Pushed Up Interest Rates Slightly

Source of Basic Data: Bureau of the Treasury (BTr)

Part II

Can PH Get Back into the Fast Tr

in Q4 & 2015
.

Domestic Demand Outlook

External Demand Outlook
.

A. Domestic Demand Outlook

Consumer Spending

2013

2014
H1

2014
H2

2015

Qualitative Factors

Jollibee (11.2% to 12.2%, SM

Malls (0% to 18%) , Other Food
Survey

Due to:

Growth Rate

5.7%

5.6%

Stronger
than H1

Even stronger
than H2

Lower
inflation

Lower
inflation
Election
spending

5.8%

6.5%

A. Domestic Demand Outlook

Govt Consumption
Spending
Growth Rate

2013 2014
H1
7.7

0.8

2014
H2

2015

4.8

6.6

Qualitative Factors
Overall: Extreme reaction
to PDAF, DAP has played
out; more spending expected

Due to:

Stronger
than H1

Even stronger
than H2

Lower
inflation

Lower
inflation
Election
spending
Recovery from
underspending
(PDAF, DAP)

A. Domestic Demand Outlook

Investment Spending

2013 2014 2014 H2

H1

2015

Qualitative Factors:
Car sales: (24.8%, 37.7%),
Capital Goods Imports (-9.4%,
+5%)

Stronger
than H1

Even stronger
than H2

Lower
inflation

Lower interest
rates
Faster Infra
spending
Imports of
power plants,
telecoms,
aircraft

Due to:

Growth Rate

29.9

3.9

9.0

14.0

Domestic Demand Recovery

2013

Domestic Demand:
Spending view:
Consumption Spending
Government Spending
Investment Spending
Construction
Basis for 2015

2014-H1 2014-H2 2015

10.4% 4.7%

6.5% 7.5%

5.7
7.7
29.9
10.4

5.8
4.8
9.0
6.0

5.6
0.8
3.8
2.1

6.5
6.6
14.0
16.0

Consumption Spending: Weak Peso & Exports, Election,

Low Oil prices
Government Spending: Reconstruction
Investment Spending:
Public Construction Infra & Reconstruction
Durable Equipment - Utilities Property, Airlines, Mfg

Pick up of pace in Q4 gets into higher gear in 2015

Within New, Lower

Target Inflation
Record oil
prices &
rice crisis

2013
2014
2015

3.0%
4.1%
2.7%

New Target

Source of Basic Data: NSO

Inflation Eases to 4.1% in Q4, and 2.7% in 2015// Limits interest rates rise

B. The World Economys

in 2015 Recovery
Focused on US
US to grow 3.1%
Eurozone down to +1.3%

More oil output

from US, Canada,
Saudi Arabia, Libya

MENA & Crude Oil Prices (WTI)

Jan 2000-Dec 2015*
Forecast

Savings: $3.25 B
+ Domestic Spending P220 B
or +1.2% to GDP Growth

2014
WTI
93.82
(4.1%)
Brent 99.54
(8.4%)

Source of Basic Data: US Energy Information Administration

2015
62.75
(33.1%)
68.08
(31.6%)

OPEC Surplus Capacity &

WTI Crude Oil Price

2002-2012
Average at
2.5 MMB/day

Saudi Arabia, Libya, Iran Output

Source: US Energy Information Administration

Housing Starts

Housing starts for Oct 1045,

Nov 1028

Starts have exceeded 1.0 Million

units in 7 of last 12 months

US Job New Creation

250,000+ jobs/mo.
needed for strong
recovery

Jobs increased 321,000 (Nov)

and 243,000 (Oct), and has
exceeded 220,000 in 8 out of last
12 months

US Net New Jobs Created (000)

Source of Basic Data: BLS

New Jobs Created per month

Exceeded 220,000 in 8 out of last 12 months

Source: WEO, October 2014

PH Exports Growth
2013
5.4%
2014-H1
4.7%
2014-H2
9.2%
2015
12.0%

US GDP Growth to hit long-term trend of 3% by 2015

Grew annually by 28%, now employs 1.0 MM people

Tourist Arrivals (2001-2013)

Tourist Arrival for Jan-October 2014
3.95M or 2.3% (y-o-y). For 2015,
we expect a 10% rise.

9.6%

9.1%
11.3%

New Hotel Rooms Up or Under Construction

Source of Basic Data: Department of Tourism (DoT)

Awarded PPP Projects

as of December 2014
Awarded & in Progress
Expected Work in 2015

P127.4 B
P 44.3 B

Data and photos from PPP Center Website

Part III. Macroeconomic Forecasts

2012
Inflation Rate (% )

2013

2014

2015

3.2

3.0

4.3

2.7

41.50

44.41

44.80

45-47

84.5

83.2

80.0

86.0

GDP Growth Rate

6.8

7.2

6.0

7.5

Industry Sector

6.8

9.5

7.6

11.0

Services Sector

7.6

7.1

5.9

7.2

Peso-Dollar Rate (end)

Gross Int'l Reserves ($B)

GDP growth to accelerate due to Infra, PPP

Reconstruction Work + Low Oil Prices

Summary
Domestic Demand Slowed
Down in Q1-Q3 2014
Domestic Demand will Pick up Pace in Q4
and will get into higher gear in 2015
US Recovery is Solid &
Boost External Demand
1.2% Added Growth Due
to Low Crude Oil Prices
GDP growth to accelerate due to stronger
Domestic and External Factors

This Way !!!

Victor A. Abola, Ph.D.

Fast Track

PH ECONOMIC FAST TRAIN-BACK ON FAST TRACK .... OR

SLOWDOWN TO REPAIR BAY
FMIC ECONOMIC BRIEFING
January 9, 2015
Victor A. Abola, Ph.D.

To
Repair Bay