Professional Documents
Culture Documents
FOREWORD
he primary objective of monetary policy is to promote a low and stable rate of inflation
conducive to a balanced and sustainable economic growth. The adoption in January
2002 of the inflation targeting framework for monetary policy was aimed at helping to fulfill this
objective.
One of the key features of inflation targeting is greater transparency, which means
greater disclosure and communication by the BSP of its policy actions and decisions. This
Inflation Report is published by the BSP as part of its transparency mechanisms under inflation
targeting. The objectives of this Inflation Report are: (i) to identify the risks to price stability and
discuss their implications for monetary policy; and (ii) to document the economic analysis
behind the formulation of monetary policy and convey to the public the overall thinking behind
the BSPs decisions on monetary policy. The broad aim is to make monetary policy easier for the
public to understand and enable them to better monitor the BSPs commitment to the inflation
target, thereby helping both in anchoring inflation expectations and encouraging informed
debate on monetary policy issues.
The governments target for annual headline inflation under the inflation targeting
framework has been maintained at 4.0 percent 1.0 percentage point (ppt) for 2014.
For 2015-2016, the medium-term inflation target has been set at 3.0 percent 1.0 ppt by the
Development Budget Coordination Committee (DBCC) to be consistent with the desired
disinflation path over the medium term, favorable trends in the structure of inflation, and
expected higher capacity of the economy for growth under a low inflation environment.
The report is published on a quarterly basis, presenting a survey of the various factors
affecting inflation. These include recent price and cost developments, inflation expectations,
prospects for aggregate demand and output, labor market conditions, monetary and financial
market conditions, fiscal developments, and the international environment. A section is devoted
to a discussion of monetary policy developments in the most recent, as well as a comprehensive
analysis of the BSPs view of the inflation outlook for the policy horizon.
The Monetary
25 September 2014.
Board
approved
this
Inflation
Report
at
its
meeting
on
3 October 2014
Advanced economy
Agriculture, Fishery, and Forestry
Agriculture, Hunting, Forestry and Fishing
Asset Management Companies
Asia Pacific
Auto Loans
Business Expectations Survey
Bonifacio Global City
Bureau of Internal Revenue
Bank for International Settlements
Bureau of Customs
Business Process Outsourcing
Bureau of the Treasury
Chamber of Automotive Manufacturers of the Philippines, Inc.
Capital Adequacy Ratio
Central Business District
Credit Card Receivables
Consumer Expectations Survey
Credit Default Swaps
Confidence Index
Consumer Price Index
Deferred Accounting Adjustment
Demand Deposit Account
Development Budget Coordination Committee
Department of Finance
US Energy Information Administration
Emerging Market
JP Morgan Emerging Market Bond Index
Energy Regulatory Commission
European Union
Food and Agriculture Organization
Food Price Index
Gross Domestic Product
Gross National Income
Generation Rate Adjustment Mechanism
Government Securities
Incremental Currency Exchange Rate Adjustment
International Energy Agency
International Monetary Fund
Independent Power Producer
Labor Force Survey
Liquefied Petroleum Gas
Land Transportation Franchising and Regulatory Board
Monetary Board
Multi-Equation Model
ii
MENA
Meralco
MISSI
MTP
NBQBs
NCCP
NDA
NEDA
NEER
NFA
NG
NGCP
NPC
NPI
NPLs
O&O
OECD
OPEC
OF
PSA
PBR
PMI
PSALM
PSEi
PSIC
R&I
RB
RDA
REER
ROP
RP
RR
RREL
RRP
RWA
SEM
SMS
SDA
TCS
TLP
U/KBs
VAPI
VOP
WEO
WESM
iii
The DBCC, created under Executive Order (E.O.) No. 232 dated 14 May 1970, is an inter-agency committee tasked
primarily to formulate the National Government's fiscal program. It is composed of the Office of the President (OP),
Department of Budget and Management (DBM), National Economic and Development Authority (NEDA), and the
Department of Finance (DOF). The BSP attends the Committee meetings as a resource agency.
2
The inflation target range for 2015-2016 was announced on 13 December 2012.
iv
Members
Cesar V. Purisima
Alfredo C. Antonio
Felipe M. Medalla
Armando L. Suratos
Juan D. De Zuiga, Jr.
Valentin A. Araneta
Members
Diwa C. Guinigundo
Deputy Governor
Monetary Stability Sector
Nestor A. Espenilla, Jr.
Deputy Governor
Supervision and Examination Sector
Ma. Cyd N. Tuao-Amador
Assistant Governor
Monetary Policy Sub-Sector
Ma. Ramona GDT Santiago
Assistant Governor
Treasury Department
Period
Advisory
Committee (AC)
Meeting
Monetary Board
(MB)
Meeting
Jan
Feb
3 (Monday)
AC Meeting No. 1
6 (Thursday)
MB Meeting No. 1
Mar
21 (Friday)
AC Meeting No. 2
27 (Thursday)
MB Meeting No. 2
Inflation Report
(IR) Press
Conference
9 (Thursday)
12 Dec 2013 MB meeting
24 (Friday)
Fourth Quarter 2013 IR
6 (Thursday)
6 Feb 2014 MB meeting
24 (Thursday)
Apr
May
2 (Friday)
AC Meeting No. 3
8 (Thursday)
MB Meeting No. 3
Jun
13 (Friday)
AC Meeting No. 4
19 (Thursday)
MB Meeting No. 4
5 (Thursday)
8 May 2014 MB meeting
Jul
28 (Monday)
AC Meeting No. 5
31 (Thursday)
MB Meeting No. 5
17 (Thursday)
19 Jun 2014 MB meeting
0
1
MB Highlights
Publication
11 (Friday)
Second Quarter 2014 IR
28 (Thursday)
31 Jul 2014 MB meeting
Aug
Sep
5 (Friday)
AC Meeting No. 6
11 (Thursday)
MB Meeting No. 6
Oct
17 (Friday)
AC Meeting No. 7
23 (Thursday)
MB Meeting No. 7
9 (Thursday)
11 Sep 2014 MB meeting
3 (Friday)
Third Quarter 2014 IR
20 (Thursday)
23 Oct 2014 MB meeting
Nov
Dec
28 (Monday)
First Quarter 2014 IR
5 (Friday)
AC Meeting No. 8
11 (Thursday)
MB Meeting No. 8
vi
CONTENTS
Overview
I.
II.
12
Aggregate Demand
12
14
Aggregate Supply
22
23
24
24
Interest Rates
29
31
Banking System
34
Exchange Rate
37
III.
Fiscal Developments
40
IV.
External Developments
41
V.
46
VI.
Inflation Outlook
47
VII.
47
51
54
57
vii
OVERVIEW3
Inflation rises further on higher food prices. Yearonyear (yoy) headline inflation increased to 4.6 percent4
in Q3 2014 (July-August) from the quarter- and year-ago rates of 4.4 percent and 2.4 percent, respectively.
Nonetheless, the resulting year-to-date (ytd) inflation rate of 4.4 percent remained within the Governments
inflation target range of 4.0 percent 1.0 percentage point (ppt) for 2014. The continued uptrend in headline
inflation was driven mainly by the higher prices of food owing to tight domestic supply conditions, triggered
by weather-related production disruptions and supply-side bottlenecks. At the same time, the official core
inflation rose to 3.2 percent in Q3 2014 from 3.0 percent in Q2 2014 and 2.1 percent in Q3 2013. Two out of
three alternative measures of core inflation estimated by the BSP were also higher during the review period.
Meanwhile, the number of items with inflation rates greater than the threshold of 5.0 percent (the upper end
of the 2014 inflation target) was unchanged at 30 items, accounting for 28.5 percent of the CPI basket.
Inflation expectations are stable but are settling at the upper end of the 2015-2016 target band. Results of
the BSPs survey of private sector economists for August 2014 yielded generally higher mean inflation
forecasts for 2014, but steady inflation forecasts for 2015-2016 relative to the results in June 2014. Analysts
expectations of higher inflation in 2014 were due to possible upticks in food prices, pending petitions for
adjustments in utility rates, and looming power shortages. Results of the August 2014 Consensus Economics
inflation forecast survey for the country also showed a higher mean inflation forecast for 2014 of
4.3 percent.
Domestic demand continues to be robust. The Philippine economy returned to a higher growth trajectory in
Q2 2014 with the higher-than-expected real GDP growth of 6.4 percent in Q2 2014 from 5.6 percent in the
previous quarter and 7.9 percent in Q2 2013. The output expansion was underpinned by net exports and
household consumption on the expenditure side, reflective of the improvement in external trade in line with
the gradual recovery of the global economy and continued favorable domestic demand conditions. At the
same time, this growth reflects the broadening output base in the production side, led by sustained
improvements in services and more recently in industry. Meanwhile, trends in higher-frequency demand
indicators have also remained generally positive in Q3 2014. Vehicle sales continued to post double-digit
growth on brisk demand for both passenger cars and commercial vehicles, while the composite Purchasing
Managers Index (PMI) remained firmly above the 50-point expansion threshold. Over the coming months,
domestic demand is likely to be supported by the generally favorable business and consumer sentiment amid
robust credit growth and steady improvements in employment conditions.
Global economic activity strengthens in Q2 2014, but growth prospects across countries continue to
diverge. Global growth gained traction during the quarter, notably in the US, where the expansion was
buoyed by personal consumption expenditure, private fixed investment, and inventory build-up. A rebound
was likewise seen in major emerging markets (EMs). Stronger external demand and government stimulus
measures provided support to the Chinese economy. In India, output growth was driven by the rebound in
manufacturing sector activity. Meanwhile, economic activity contracted in Japan as private consumption and
investment fell following the implementation of higher consumption tax in April 2014. The recovery in the
euro area meanwhile remained modest with favourable domestic demand and net exports offset by the
impact of inventory drawdowns. Going forward, the global economy is likely to proceed on a moderate
expansion path, but risks to the global growth outlook remain tilted to the downside. Geopolitical risks in the
Middle East and Ukraine-Russia and potential sharp adjustments in long-term yields and risk aversion as
monetary policy in the US normalizes represent soft spots for the global economy. Meanwhile, the global
inflation environment remains broadly benign. Inflation pressures in AEs continue to be subdued as output
gaps are seen to stay substantial even as the recovery gains pace. However, inflation has risen in some
emerg7ing economies owing to domestic supply side factors.
3
Financial market conditions improve generally. Investor sentiment was buoyed by reports of favorable
domestic Q2 2014 corporate earnings and the stronger-than-expected Q2 2014 GDP growth amid signs of
improving geopolitical situation in the Middle East and Ukraine. The rating upgrade received from the Japanbased credit rating agency Rating and Investment Information Inc.(R&I) likewise contributed to the positive
mood in the market. Confidence was further lifted by US Fed statements that interest rates will likely remain
low for some time after the end of the US Feds bond buying program and the unprecedented monetary
stimulus measures by the European Central Bank (ECB). Consequently, the local bourse surged past the
7,100-mark peaking to a 15-month high in August. The countrys 5-year sovereign credit default swap (CDS)
spreads also narrowed during the quarter, trading lower than Indonesias and Thailands CDS and close to
Malaysias CDS. The peso likewise strengthened in line with the overall appreciation observed among the
currencies in the region as global financial market conditions stabilized on the US Fed pronouncement to
maintain interest rates at current levels in the foreseeable future. The larger oversubscription in T-bill
auctions similarly pointed to strong investor appetite for Philippine government securities (GS), supported by
ample market liquidity. Meanwhile, broadly unchanged bank lending standards for both loans to enterprises
and household show that banks are prudently managing their risks.
The BSP key policy rates and SDA rate are raised. The BSP decided to increase its key policy interest rates by
25 bps each during its 31 July and 11 September 2014 monetary policy meetings. The interest rate on the SDA
was also raised by 25 bps during the 11 September policy meeting. Meanwhile, the reserve requirement
ratios were left unchanged during the quarter. The said policy decisions were based on the assessment that
the inflation target, particularly for 2015, could be at risk as latest baseline forecasts along with inflation
expectations have shifted near the higher end of the 2015 inflation target range. At the same time, the
balance of risks to the inflation outlook continued to lean toward the upside. The BSP also deemed it
necessary to respond with stronger policy action to rein in inflation expectations as well as preempt potential
second-round effects even as previous monetary responses continue to work their way through the
economy.
The inflation outlook calls for preemptive policy action. The latest baseline inflation path has shifted upward
compared to the previous quarter owing mainly to the higher inflation outturn in July. The inflation forecasts
show that the average inflation could settle above the midpoint of the target ranges of 4.0 percent 1.0 ppt
in 2014 and 3.0 percent 1.0 ppt in 2015 before easing to around the midpoint of the target range in 2016.
The current assessment of the price environment also indicates that the balance of risks to the inflation
outlook remains tilted to the upside, with price pressures emanating from the possible further increases in
food prices, pending petitions for adjustments in utility rates, and potential power shortages. Thus far, the
persistent increases in food prices have yet not translated into considerable second-round effects. Recent
wage petitions have not diverged significantly from their historical trends, while there have been no new calls
for transport fare adjustments. However, core inflation, which captures underlying price trends, has picked
up in Q3 2014, while inflation expectations have hovered close to the upper-end of the 2015-2016 target
ranges since the early part of 2014. Thus, monetary authorities remain ready to act preemptively to ensure
that inflation expectations and the general price-setting behavior do not become disanchored from the
inflation targets. The protracted supply shocks amid strong aggregate demand conditions can also potentially
increase the impetus for second-round effects, thus calling for a firmer policy response to help safeguard the
inflation target.
The broad buoyancy of domestic demand suggests that there is some room for a measured policy response to
potential second-round effects. Favorable growth dynamics reflected in solid domestic demand growth in Q2
2014 imply that monetary authorities have some flexibility to undertake a measured monetary policy
tightening. Responding preemptively to the rising inflation risks will also provide BSP latitude to assess at
future meetings the evolving balance of risks to both inflation and output and helps to avoid the need for
sharp adjustments later on. Going forward, the BSP will remain vigilant against a potential build-up in inflation
expectations and stands ready to undertake preemptive policy actions as necessary to safeguard its price and
financial stability objectives.
Food
Non-Alcoholic Beverage
Headline
7
6
Non-Food
Alcoholic Beverage and Tobacco
Q3 2014
4.6 pct
5
in percent
4
3
2
1
2009
2010
2011
2012
2013
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
0
2014
Quarter
2012
Q1
Q2
Q3
Q4
2013
Q1
Q2
Q3
Q4
2014
Q1
Q2
Q3
Official
Core
Inflation
3.7
3.5
3.7
4.1
3.4
2.9
3.8
2.9
2.1
2.9
3.0
3.0
3.0
3.2
Trimmed
Mean 1/
Weighted
Median 2/
3.2
3.0
3.1
3.4
3.2
2.5
3.0
2.3
2.1
2.6
3.6
3.3
3.6
3.8
3.0
2.6
3.2
3.2
3.0
2.3
2.8
2.3
2.0
2.2
3.0
2.6
3.2
3.1
Net of
Volatile
Items 3/ *
3.4
3.0
3.3
3.9
3.4
3.1
3.9
3.2
2.4
2.9
2.7
2.8
2.6
2.8
1/ The trimmed mean represents the average inflation rate of the (weighted) middle 70 percent in a lowest
to-highest ranking of year-on-year inflation rates for all CPI components.
2/ The weighted median represents the middle inflation rate (corresponding to a cumulative CPI weight of 50
percent) in a lowest-to-highest ranking of year-on-year inflation rates.
3/ The net of volatile items method excludes the following items: educational services, fruits and vegetables,
personal services, rentals, recreational services, rice, and corn.
r/ Revised.
* The series has been recomputed using a new methodology that is aligned with PSAs method of
computing the official core inflation, which re-weights remaining items to comprise 100 percent of the core
basket after excluding non-core items. The previous methodology retained the weights of volatile items in the
CPI basket while keeping their indices constant at 100.0 from month to month.
120
60
100
50
80
40
28.5 pct
60
30
30 items
20
40
20
10
2009
2010
2011
2012
2013
2014
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
0
Q1
Food Inflation
Tight domestic supply of key food items drives
up food inflation.
Inflation Rates for Selected Food Items
Quarterly averages in percent (2006=100)
Commodity
Q2
2013
Q3
Q2
2014
Q3
2.4
2.2
6.8
7.8
2.3
2.2
1.6
4.9
2.2
2.4
2.1
-7.4
5.0
4.6
0.9
2.3
2.7
2.2
4.0
4.5
3.7
2.0
1.9
1.7
-7.2
4.3
-0.7
-3.7
3.1
2.2
7.1
10.2
12.9
5.9
4.0
5.4
2.8
4.9
5.5
9.7
4.8
8.7
1.5
8.2
9.9
12.2
8.4
5.5
6.2
3.9
7.4
6.8
14.7
7.4
9.8
1.7
31.2
31.1
4.0
3.4
Non-food inflation
Price reductions in
products contributes
inflation.
domestic petroleum
to lower non-food
2013
Q3
Q2
2014
Q3
Non-Food
1.9
1.5
2.6
2.4
3.6
1.4
3.0
0.5
3.4
3.0
3.3
2.5
-0.6
-2.0
5.6
3.9
3.6
2.5
2.5
2.6
3.0
-0.2
-1.1
2.6
1.0
3.3
3.0
1.3
5.6
3.2
1.3
2.7
0.1
2.1
4.5
2.4
0.1
2.5
4.7
2.2
0.1
2.0
4.8
1.9
0.0
1.3
5.1
1.7
Commodity
Source of basic data: Official Poverty Statistics and Poverty Reduction Programs of the Philippines 2013
A more detailed description of the bottom 30% can be obtained from the 2008 Philippines Poverty
Survey which noted the profile of this income group as follows:
1. 67% of heads of the households have at most an elementary education
2. 36% do not have electricity at home
3. 25% have no sanitary toilet
4. 30% do not have access to safe water
5. 50% live in 10 to 29 square meter housing units, many of which are made of light materials.
The Philippine Governments (via the NSCB) official approach in constructing poverty lines or defining what is poor and non-poor
starts with the construction of representative food menus for urban and rural areas of each region of the country. The menus,
prepared by the Food and Nutrition Research Institute (FNRI), consider local consumption patterns and satisfy a minimum nutritional
requirement of 2,000 calories per person per day and 80 to 100 percent of recommended daily allowance for vitamins and minerals.
Two thresholds have been established: the food threshold and the poverty threshold. Food threshold is the minimum monthly
income required for a household (assumed composed of 5 individuals) to meet the basic food needs, which satisfies the nutritional
requirements for economically necessary and socially desirable physical activities. Poverty threshold is the minimum monthly
income required for a household (assumed composed of 5 individuals) to meet the basic food and non-food requirements. Note that
the basic food requirements are currently based on 100% adequacy for the Recommended Energy and Nutrient Intake (RENI) for
protein and energy equivalent to an average of 2000 kilocalories per capita, and 80% adequacy for other nutrients. On the other
hand, basic non-food requirements, indirectly estimated by obtaining the ratio of food to total basic expenditures from a reference
group of families, cover expenditure on: 1) clothing and footwear 2) housing 3) fuel, light, and water 4)maintenance and minor
repairs 5) rental of occupied dwelling units 6) medical care 7) education 8) transportation and communication 9) non-durable
furnishings 10) household operations and 11)personal care and effects.
Such living conditions resonate with the fact that the bottom 30% has a share of only about
11 percent of the countrys GDP while 60% of Philippines GDP accrue to the top 30% income group.
This gap in income and living conditions is now aggravated by the difference in inflation rates. While
the national or all-income inflation rate has remained within the BSPs target range of 4.0 percent
1.0 ppt, the inflation rate for the bottom 30% has breached the 5% upper bound of the range since
December 2013.
An analysis of the inflation rates show that the said divergence resulted from the following (1) food
comprise 70% of the CPI basket for the bottom 30% versus 47% for the national/all-income inflation
(2) prices of food, particularly rice, have increased significantly in the past months. The impact of the
said CPI basket weights is especially evident in Q1 2014 where 4.5% of the 5.7% inflation for the
bottom 30% is attributable to food inflation while 2.4% of the 5.7% inflation is caused by rice price
increases.
That inflation rate is higher for the bottom 30% is true in almost regions, with Region 8 experiencing
the highest inflation rate possibly due to the impact of typhoon Haiyan which devastated farms and
destroyed infrastructure causing a spike in transportation and logistics costs.
CPI Weights Bottom 30% versus All Income
The steady increase in the inflation rates for the bottom 30% bears watching given that this income
group is most economically sensitive and vulnerable to price increases. Moreover, high inflation can
increase the incidence and severity of poverty in the short-run and can exact a toll on the countrys
long-run economic development as lower income households, in order to meet food requirements,
reduce spending on health and education.
Going forward, the BSP will continue to take special interest in and monitor efforts by the Philippine
government to improve the countrys supply side management which could include improving the
scheduling and monitoring of rice imports, tighter monitoring of retail prices, lowering logistics and
shipping costs, and increasing agricultural productivity.
2014: 4.4
4.5
4.0
3.5
2015: 4.0
2016: 3.9
3.0
2014
2016
2.5
2015
target range
2.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug
2013
2014
2015
FY
2016
FY
4.00
3.90
3.90
4.00
4.00
3.80
4.00
4.50
3.40
4.15
4.00
4.20
2.80
4.0-4.3
3.50
3.50
4.00
3.80
4.30
4.20
4.38
3.9-4.3
4.0-4.5
4.00
3.90
4.50
4.40
4.00
3.60
3.90
4.00
3.50
3.80
4.00
4.15
4.40
2.80
4.0-4.3
4.00
4.00
4.00
4.0-4.5
3.5-40.
3.80
3.50
4.30
4.5
4.4
4.8
2.9
28
4.0
4.0
4.5
2.8
27
4.0
3.9
4.4
2.8
19
4.01.0
3.01.0
3.01.0
FY
4.70
4.60
4.60
4.80
4.60
4.50
4.07
4.03
4.25
5.00
4.50
4.50
4.80
4.80
4.50
4.90
4.30
4.40
4.20
3.80
4.10
4.80
4.40
4.40
5.00
4.80
4.50
4.20
5.00
4.80
4.60
5.00
4.70
4.50
5.20
4.90
4.60
2.80
2.90
2.90
4.5-4.8
4.6-4.9
4.6-4.9
4.30
4.00
4.30
4.50
3.80
4.20
4.50
4.60
4.20
4.30
4.80
4.60
4.50
4.90
4.80
4.70
4.84
4.69
4.49
4.8-4.9
4.5-4.9
4.4-4.6
4.75-5.0 4.5-5.75 4.25-4.75
3.50
3.50
4.30
4.70
4.60
4.40
4.70
4.30
4.30
4.60
4.90
4.60
Median Forecast
Mean Forecast
High
Low
Number of observations
4.8
4.6
5.2
2.8
26
4.6
4.4
5.1
2.9
26
Government Target
80.0
70.0
2014
60.0
2015
2016
50.0
40.0
30.0
20.0
10.0
0.0
<1
1.0-2.0
2.1-3.0
3.1-4.0
4.1-5.0
5.1-6.0
6.1-7.0
7.1-8.0
8.1-9.0
6
7
There were 28 respondents in the BSPs survey of private sector economists in August 2014.
There were 18 respondents in the Consensus Economics survey in August 2014.
120
30 June 2014
100
9 September 2014
80
60
40
20
2008
2009
2010
2011
2012
2013
2014
2015
2016
As of 9 September 2014.
Markit Economics reported that its euro-area gauge declined by more than initially projected in August, with the index for Italy
unexpectedly dropping below 50, reflecting the first contraction in 14 months. In the UK, manufacturing grew the least in more than
a year, with spillovers from the weak euro region among the factors cited. Similarly, Chinas manufacturing expanded at a slower
pace in August at 51.1, below the median estimate of 51.2 in a Bloomberg survey.
10
EIA, September 2014 Short-Term Energy Outlook, www.eia.doe.gov
11
OPEC, September 2014 Monthly Oil Market Report, www.opec.org
12
IEA, September 2014 Oil Market Report, www.iea.org
9
End-quarter prices
Quarter
Gasoline
Kerosene
Diesel
LPG
2013
Q1
Q2
Q3
Q4
51.45
51.95
53.20
55.50
48.45
50.07
51.12
53.07
39.85
42.30
42.90
45.45
40.21
36.83
41.25
49.80
2014
Q1
Q2
Q3***
53.75
54.95
52.35
50.87
51.54
48.99
44.25
43.70
41.80
41.73
40.44
38.74
Q-o-Q
(2.60)
(2.55)
(1.90)
(1.70)
Y-o-Y
(0.85)
(2.13)
(1.10)
(2.51)
Average retail pump price for the Big Three oil companiesCaltex,
Petron, and Shell, Metro Manila prices only.
** Average price for unleaded gasoline
*** Data as of 9 September 2014
Source: Department of Energy (DOE)
Power
Tight supply conditions put upward pressure on
electricity prices.
10
On 5 May 2014, the ERC issued Resolution No. 8, s. 2014, imposing a secondary cap of P6,245/MWH on the 73rd hour upon breach
of the P8,186/MWH 72-hour rolling average Generator Weighted Average Price (GWAP) threshold. The resolution aims to mitigate
sustained high prices in the WESM during the supply months of May and June 2014.
14
For the July supply month, a number of power plant units pushed through with their scheduled outages, including Pagbilao 1, and
Ilijan 1 & 2. Further depleting supply of power were 20 new forced outages of several power plant units of various durations during
the month (due to Typhoon Glenda or otherwise) such as Sta. Rita Units 10, 20 & 30, Calaca 1 & 2, GN Power 1 & 2, Sual 1 & 2, Ilijan
1 & 2, Pagbilao 1 & 2, Masinloc 1 & 2, San Lorenzo Units 50 & 60, Therma Mobile 2 & 4, and Quezon Power, in addition to the
continuing forced outage of Sta. Rita 40.
11
GDP
GNI
10
Q2 2014
7.3 pct
Q2 2014
6.4 pct
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2009
2010
2011
2012
2013
2014
12
50
HH Consumption
5.3 pct
Govt Spending
0.0 pct
Capital Formation
-2.4 pct
40
30
20
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-10
2009
2010
2011
2012
2013
2014
-20
-30
-40
Economic Performance
At constant 2000 prices
Growth rate (in percent)
Sector
By expenditure item
Household consumption
Government consumption
Capital formation
Fixed capital formation
Exports
Imports
Source: PSA
2013
Q2
2014
Q1
Q2
5.1
12.1
33.6
13.6
-7.7
-4.6
5.9
1.9
9.5
11.0
13.5
10.1
5.3
0.0
-2.4
4.0
10.3
1.4
13
15
In the absence of reported closed transactions, implied land values based on trends are used by Colliers International to monitor
prices.
14
16
Housing rentals account for 13.8 percent of the 2006-based CPI basket. The NSO only surveys rentals ranging from around
P300-P10,000/month to compute rent inflation. However, the rental values discussed in this section pertain to high-end rented
properties, which may be considered as indicators of wealth and demand.
17
Grade A refers to office space with capital values between P65,000 and P75,000/sq.m..
18
Probable price that the property would have fetched if sold on the date of the valuation. The valuation includes imputed land and
building value.
15
19
In terms of location, luxury residential units are located within the CBD core and have quality access to/from and have superior
visibility from the main avenue. Meanwhile, in terms of general finish, luxury residential units have premium presentation and
maintenance.
20
CAMPI represents the local assemblers and manufacturers of vehicle units in the Philippine automotive industry. The following are
the active members of CAMPI, (1) Asian Carmakers Corp., (2) CATS Motors, Inc., (3) Columbian Autocar Corp., (4) Honda Cars
Philippines, Inc., (5) Isuzu Philippines Corp., (6) Mitsubishi Motors Philippines Corp., (7) Nissan Motor Philippines Corp., (8) Suzuki
Philippines Inc., (9) Toyota Motor Philippines Corp. and (10) Universal Motors Corp.
16
Energy Sales
Total energy sales of Meralco declined by
0.3 percent y-o-y in July 2014, a reversal of the
4.6 percent growth a year-ago. According to
Meralco, the decline in total energy sales could be
attributed to the effect of Typhoon Glenda on
16 July 2014 where the majority of Meralco
customers within their franchise area experienced
disruptions in electric power due to damaged
electric poles and power lines.
90
July 2014 = 83.4
85
80
75
70
65
J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J
2009
2010
2011
2012
2013
2014
Source: PSA
17
45
Value of Production
7.7 pct
35
July 2014
9.6 pct
25
in percent
15
5
-5
-15
July 2014
7.7 pct
-25
-35
J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J
2009
2010
2011
2012
2013
2014
Source: PSA
Business Expectations
Business sentiment in Q3 2014 remains
positive, but turns more upbeat in Q4 2014.
Business Expectations Survey
2013
Index
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Current Quarter
41.5
54.9
42.8
52.3
37.8
50.7
34.4
Next Quarter
56.4
46.2
60.0
40.7
50.8
48.9
52.9
Business Outlook
Index
Source: BSP
21
The Q3 2014 BES was conducted from 1 July 15 August 2014 among 1,527 firms nationwide, drawn from the Securities and
Exchange Commissions Top 7000 Corporations in 2010 and Business Worlds Top 1000 Corporations in 2012.
18
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
-11.2
-5.7
-7.9
-21.3
-18.8
-17.3
-26.3
Next 3 months
7.8
4.1
5.7
2.8
5.4
0.0
-1.0
Next 12 months
18.5
16.1
15.8
14.1
19.3
15.9
9.7
Current Quarter
Source: BSP
19
22
The PMI for the Philippines is compiled by the Foundation of the Society of Fellows in Supply Management, Inc. (SOFSM), the
advocacy arm of PISM.
23
The actual formula used to calculate the PMI assigns weights to each common element and then multiplies them by 1.0 for
improvement, 0.5 for no change, and 0 for deterioration. As a result, an index above 50 indicates economic expansion, and an index
below 50 implies a contraction. PMI surveys are conducted on the last week of the month.
20
External Demand
Exports
Export growth slows down on lower shipments
of electronic components.
Exports of Goods
Growth rate (in percent)
Commodity Group
2014
Q1
Q2
11.5
3.8
-12.7
-1.1
Fishery Products
43.6
-37.8
13.3
23.4
Electronic Components
Agricultural Products
Basketworks
Copper
-1.4
-8.1
-100.0
31.5
13.4
22.1
Metal Components
-11.3
-31.7
Petroleum Products
-31.2
-67.8
Others
22.4
21.1
Total Exports
14.2
10.0
Source: PSA
Imports
Import growth declines as electronic imports
falls.
Imports of Goods
Growth rate (in percent)
Commodity Group
2014
Q1
Q2
-38.9
-49.2
8.3
-4.9
20.5
-4.7
Base Metals
39.4
21.5
Transport Equipment
13.8
9.9
Textile Yarns
14.0
17.9
Electrical Machinery
11.6
22.1
Artificial Resins
43.9
32.8
Chemical Products
36.4
-16.8
Electronics
Mineral Fuels
110.1
38.5
Dairy Products
42.5
-1.9
18.5
9.8
Paper Products
23.8
-12.5
Feedstuff
96.6
50.1
-68.9
-66.7
41.0
19.8
7.5
-3.9
Cereals
Source: PSA
21
Aggregate Supply
The services sector remains the main driver of
output growth on the production side.
GDP-Production (At Constant Prices)
20
Agriculture
Industry
Services
3.6 pct
7.8 pct
6.0 pct
15
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2009
2010
2011
2012
2013
2014
-5
-10
Economic Performance
At constant 2000 prices
Growth rate (in percent)
Sector
By industrial origin
Agri, Hunting, Forestry & Fishing
Agriculture and Forestry
Fishing
Industry
Mining and quarrying
Manufacturing
Construction
Electricity, gas and water supply
Services
Transport., Storage, & Comm.
Trade
Finance
Real estate, Rent, & Bus. Act.
Public administration & defense
Other services
Source: PSA
2013
Q2
Q1
2014
Q2
-0.2
-0.9
3.3
10.5
0.3
10.3
16.6
7.0
7.8
6.6
6.3
10.3
9.5
5.9
8.3
0.9
1.7
-3.1
5.3
9.0
6.9
0.2
1.0
6.8
7.7
6.0
5.7
9.5
6.3
5.5
3.6
4.6
-0.7
7.8
1.9
10.8
1.4
2.8
6.0
6.3
6.6
5.9
8.9
1.2
4.1
22
Unemployment
* Excludes Leyte province
Underemployment
20
July 2014*
18.3 pct
10
July 2014*
6.7 pct
2009
2010
2011
2012
2013
2014
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
0
Q1
in percent
15
24
23
24
credit
26
The survey consists of questions on loan officers perceptions relating to the overall credit standards of universal/commercial
banks (U/KBs) in the Philippines, as well as to factors affecting the supply of and demand for loans by both enterprises and
households. Survey questionnaires were sent to all commercial banks, except for one bank that requested not to be included in the
survey since it does not engage in corporate and retail lending. Thirty-four banks responded to the current survey representing a
response rate of 97.1 percent. As of March 2014, U/KB loans accounted for about 86.4 percent of the banking systems total
outstanding loans.
27
In the modal approach, the results of the survey are analyzed by looking at the option with the highest share of responses.
28
In the diffusion index approach, a positive diffusion index (DI) for credit standards indicates that the proportion of banks that have
tightened their credit standards are greater compared to those that eased (net tightening), whereas a negative DI for credit
standards indicates that more banks have eased their credit standards compared to those that tightened (net easing).
29
From Q1 2010 to Q4 2012 survey rounds, the BSP used largely the DI approach in the analysis of survey results. Beginning in
Q1 2013, the BSP used both the modal and DI approaches in assessing the results of the survey.
25
2013
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Tightened considerably
0.0
0.0
3.6
3.3
3.7
3.6
0.0
Tightened somewhat
0.0
3.4
3.6
3.3
0.0
3.6
3.2
90.3
86.2
89.3
86.7
88.9
85.7
93.5
9.7
Eased somewhat
10.3
3.6
6.7
7.4
7.1
3.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-9.7
-6.9
3.6
0.0
-3.7
0.0
0.0
-4.8
-3.4
3.6
1.7
0.0
1.8
0.0
Mean
3.1
3.1
2.9
3.0
3.0
3.0
3.0
Eased considerably
Total
29.0
28.0 tightened
30.0 their
27.0credit28.0
31.0
Number
ofdiffusion
banks responding
Note:
A positive
index for credit standards indicates 31.0
that more
banks have
standards
compared to those that eased (net tightening), whereas a negative diffusion index for credit standards indicates
that more banks have eased their credit standards compared to those that tightened (net easing).
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Tightened considerably
0.0
0.0
5.3
4.8
5.0
5.0
4.8
Tightened somewhat
4.2
4.8
0.0
4.8
10.0
0.0
9.5
87.5
85.7
84.2
85.7
80.0
95.0
81.0
Eased somewhat
8.3
9.5
10.5
4.8
5.0
0.0
4.8
Eased considerably
0.0
0.0
0.0
0.0
0.0
0.0
0.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-4.8
-5.3
4.8
10.0
5.0
9.5
-2.1
-2.4
Weighted Diffusion Index for Credit Standards
0.0
4.8
7.5
5.0
7.1
Total
3.0
3.0
3.0
2.9
2.9
2.9
2.9
24.0
21.0
19.0
21.0
20.0
20.0
21.0
Note: A positive diffusion index for credit standards indicates that more banks have tightened their
credit standards compared to those that eased (net tightening), whereas a negative diffusion index
for credit standards indicates that more banks have eased their credit standards compared to those
that tightened (net easing).
30
The survey questionnaire identified six specific credit standards: (1) loan margins (price-based); (2) collateral requirements;
(3) loan covenants; (4) size of credit lines; (5) length of loan maturities; and (6) interest rate floors. A loan covenant is an agreement
or stipulation laid down in loan contracts, particularly contracts with enterprises, under which the borrower pledges either to take
certain action (an affirmative covenant), or to refrain from taking certain action (a negative covenant); this is consequently part of
the terms and conditions of the loan. Meanwhile, an interest rate floor refers to a minimum interest rate for loans. Greater use of
interest rate floor implies tightening while less use indicates otherwise.
26
31
Diffusion index (DI) for loan demand refers to the percentage difference between banks reporting an increase in loan demand
and banks reporting a decrease. A positive DI for loan demand indicates that more banks reported an increase in loan demand
compared to those stating the opposite, whereas a negative DI for loan demand implies that more banks reported a decrease in loan
demand compared to those reporting an increase.
27
28
Interest Rates
Primary Interest Rates
T-bill rates in the primary market decline.
in percent
4
3
2
1
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2011
2010
2009
91-day T-bill Rate
2012
2013
2014
Yield Curve
Secondary market yields rise.
Yields of Government Securities in the Secondary Market
6
5
in percent
4
3
2
1
0
3Mo
6Mo
1Yr
2Yr
11 Sep 2013
3yr
4Yr
5Yr
Maturity
30 Jun 2014
7Yr
10Yr
20Yr
25Yr
11 Sep 2014
29
400
350
300
250
200
150
100
50
0
-50
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2011
2013
2014
2012
RP 91-day T-bill vs. US 90-day LIBOR (before tax)
RP 91-day T-bill vs. US 90-day LIBOR (after tax)
in percent
4
3
2
1
0
-1
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2013
2011
2012
2014
BSP RRP Rate
US Federal Funds Target Rate
in basis points
Risk-Adjusted Differentials
350
325
300
275
250
225
200
175
150
125
100
75
50
25
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2012
2014
2013
2009
2011
2010
32
33
This is the first BSP policy interest rate increase since 2013.
The difference between the 10-year ROP note and the 10-year US Treasury note is used as proxy for the risk premium.
30
in percent
4
3
2
1
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Aug
2009
2014
2010
2011
2012
2013
34
Real lending rate is measured as the difference between the average bank lending rate and inflation.
31
6,000
index points
5,000
Q3 2014
6,954.9
4,000
3,000
2,000
1,000
2009
2010
2011
2012
2013
2014
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
32
Q3 2014
P106.7B
in billion pesos
120
100
80
60
40
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2011
2012
2013
2014
600
in basis points
500
EMBI+Global
291 bps
400
300
200
100
EMBI+Philippines
141 bps
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2011
2012
2013
2014
33
Philippines
88 bps
in basis points
500
Indonesia
148 bps
Thailand
100 bps
Malaysia
84 bps
400
300
200
unemployment. At the local front, the lower-thanexpected June inflation translated to lower
premiums in holding Philippine debt papers.
Meanwhile, the credit rating upgrade received by
the Philippines from the Japan-based credit rating
agency R&I likewise contributed to the narrowing
of credit spreads during the month.
100
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2011
2012
2013
2014
Banking System
Philippine banking system continues to register
strong performance amid tighter capital
requirements.
35
34
36
Under BSP Memorandum to All Banks/Non-Bank Financial Institutions dated 17 May 2013, SDA placements of trust
departments/entities under the investment management accounts (IMA) must be reduced by at least 30 percent by end-July 2013
(relative to the outstanding balance as of 31 March 2013) and the remaining balance must be phased out by end-November 2013.
Thus, beginning 1 January 2014, placements of trust departments/entities in the SDA facility must consist only of funds from trust
accounts allowed under existing regulations.
35
The
Philippine
banking
systems
gross
non-performing loan (GNPL) ratio marginally
declined to 2.7 percent as of end-June 2014,37
relative to the previous quarters 2.8 percent.38
Banks initiatives to improve their asset quality
along with prudent lending regulations helped
bring the NPL ratio to below its pre-Asian crisis
level of around 3.5 percent. The lower Q2 2014
GNPL ratio reflected the slower GNPL growth of
1.1 percent from P138.5 billion to P140.0 billion,
relative to the banking systems TLP expansion of
4.0 percent, from P5.0 trillion to P5.2 trillion.
Meanwhile, the net non-performing loan (NNPL)
ratio increased slightly to 0.7 percent from the
0.6 percent posted in end-March 2014. In
computing for the NNPLs, specific allowances for
credit losses39 on TLP are deducted from the
GNPLs. The said allowances decreased to
P105.9 billion in Q2 2014 from the P106.0 billion
posted a quarter ago.
The Philippine banking systems GNPL ratio of
2.7 percent was higher compared to Indonesia
(2.2 percent), South Korea (1.7 percent), and
Thailand (2.3 percent), but broadly similar as that
of Malaysia.40
The loan exposures of banks remained adequately
covered as the banking systems NPL coverage
ratio improved slightly to 116.4 percent as of
end-June 2014 from 116.2 percent in end-March
2014. The ratio was indicative of banks continued
compliance with the loan-loss provisioning
requirements of the BSP to ensure adequate
buffers against potential credit losses.
37
On 16 October 2012, the BSP amended banks reporting standard for NPLs. Beginning with the January 2013 reports, banks have
been required to report their gross NPLs and their net NPLs. Gross NPLs represent the actual level of NPL without any
adjustment for loans treated as loss and fully provisioned. Net NPLs is just the gross NPLs less specific allowance for credit losses
on TLP (Circular No. 772, series of 2012). The new reporting standard was driven by the BSPs intent to be more transparent as it
gives a fuller picture of the gross amount of NPLs and the full extent of allowances for probable losses. Under the previous
framework, NPLs were reported net of loans considered as loss but fully provisioned for.
38
For comparative purposes, computations for periods prior to January 2013 are aligned with Circular No. 772. Certain ratios were
rounded-off to the nearest hundredths to show marginal movements.
39
This type of provisioning applies to loan accounts classified under loans especially mentioned (LEM), substandard-secured loans,
substandard-unsecured loans, doubtful accounts and loans considered as loss accounts.
40
Sources: Various central bank websites, IMF and financial stability reports, Indonesia (commercial banks, May 2014); Malaysia
(banking system, Q2 2014); Thailand (commercial banks, Q2 2014); and South Korea (banking system, Q2 2014).
36
Exchange Rate
The peso along with other EM currencies
strengthens during the review period.
Quarterly Peso-Dollar Rate
50
48
Q3 2014
P43.62/US$1
44
42
40
38
2009
2010
2011
2012
2013
2014
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
36
Q1
Php/US$
46
41
Basel 3 no longer counts towards bank capital those Basel 2-compliant capital instruments that do not have the feature of loss
absorbency. Loss absorbency refers to the ability of bank-eligible capital instruments other than common equity to behave and act
in the same way as common equity shares at the point where the bank takes losses and becomes non-viable. In addition, Basel 3
now deducts from capital the investments of banks in non-allied undertakings, defined benefit pension fund assets, goodwill and
other intangible assets.
42
Sources: Various central bank websites, IMF and financial stability reports, Indonesia (commercial banks, May 2014); Thailand
(commercial banks, Q2 2014); Malaysia (banking system, Q2 2014); and Korea (banking system, Q2 2014).
43
Dollar rates or the reciprocal of the peso-dollar rates were used to compute for the percentage change.
37
Personal remittances from OFs rose by 7.0 percent y-o-ythe highest recorded growth in six monthsto US$2.3 billion in
June 2014.
45
Transactions in July 2014 for registered foreign portfolio investments yielded overall net inflows of US$321 million, reflecting a
significant improvement from the previous months US$44 million.
46
Foreign direct investments (FDI) posted net inflows amounting to US$473 million in May 2014, a turnaround from the
US$62 million net outflows registered in the same period last year.
47
GIR reached US$80.79 billion as of end-August 2014 (preliminary).
48
Based on the last done deal in the afternoon.
49
The coefficient of variation is computed as the standard deviation of the daily exchange rate divided by the average exchange
rates for the period.
38
29 Aug 14**
Philippine peso
(7.53)
1.85
(6.74)
2.67
(6.98)
1.02
(3.56)
(2.99)
(20.22)
(17.13)
2.40
(1.47)
3.99
3.58
1.22
(0.14)
4.06
1.44
50
The Trading Partners Index (TPI) measures the nominal and real effective exchange rates of the peso across the currencies of 14
major trading partners of the Philippines, which includes US, Euro Area, Japan, Australia, China, Singapore, South Korea, Hong Kong,
Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand. The TPI-Advanced measures the effective exchange
rates of the peso across currencies of trading partners in advanced countries comprising of the US, Japan, Euro Area, and Australia.
The TPI-Developing measures the effective exchange rates of the peso across 10 currencies of partner developing countries which
includes China, Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and Thailand.
51
The REER index represents the Nominal Effective Exchange Rate (NEER) index of the peso, adjusted for inflation rate differentials
with the countries whose currencies comprise the NEER index basket. A decrease in the REER index indicates some gain in the
external price competitiveness of the peso, while a significant increase indicates the opposite. The NEER index, meanwhile,
represents the weighted average exchange rate of the peso vis--vis a basket of foreign currencies.
39
2014
Growth
(%)
Surplus/(Deficit)
Revenues
-104.5
984.1
-55.7
1,100.5
-47.0
12.0
Expenditures
1,088.6
1,156.2
6.0
40
52
41
over
54
Institute for Supply Management, August 2014 Manufacturing ISM Report On Business, 2 September 2014,
http://www.ism.ws/ISMReport/MfgROB.cfm
55
The Conference Board Consumer Confidence Index Improves Again. 26 August 2014. http://www.conferenceboard.org/data/consumerconfidence.cfm
56
Stability in Consumer Sentiment Aids Economy. 29 August 2014. http://press.sca.isr.umich.edu/press/press_release
57
Eurostat news release 133/2014 dated 5 September 2014.
58
Markit Eurozone Composite PMI,
http://www.markiteconomics.com/Survey/PressRelease.mvc/0bdd0b3b190a4eee9180e1180d572ce5
42
59
43
65
44
45
4
3
2
1
Overnight RP rate
SDA rate
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
in percent
2011
2012
2013
2014
46
66
47
FAO, Cereal Supply and Demand Brief, 11 September 2014, available online at http://www.fao.org
48
49
71
CPC and IRI, CPC/IRI ENSO Update, 04 September 2014, available online at http://iri.columbia.edu
50
51
52
The fan chart shows the probability of various outcomes for inflation over the forecast horizon. The darkest band
depicts the central projection, which corresponds to the BSPs baseline inflation forecast. It covers 25 percent of
the probability distribution. Each successive pair of bands is drawn to cover a further 25 percent of probability,
until 75 percent of the probability distribution is covered. Lastly, the lightest band covers the lower and upper
90 percent of the probability distribution. The bands widen (i.e., fan out) as the time frame is extended,
indicating increasing uncertainty about outcomes. The band in wire mesh depicts the inflation profile in the
previous report.
The shaded area, which measures the range of uncertainty, is based on the forecast errors from the past years. In
greater detail, it can be enhanced by adjusting the level of skewness of the downside and upside shocks that
could affect the inflationary process over the next two years in order to change the balance of the probability
area lying above or below the central projection.
53
54
55
56
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
JAN 31
5.00
7.00
MAR 13
5.00
7.00
APR 24
5.00
7.00
JUN 5
5.25
7.25
JUL 17
5.75
7.75
AUG 28
6.00
8.00
OCT 6
6.00
8.00
NOV 6
6.00
8.00
57
EFFECTIVITY DATE
2009
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
DEC 18
5.50
7.50
JAN 29
5.00
7.00
MAR 5
4.75
6.75
APR 16
4.50
6.50
58
EFFECTIVITY DATE
MAY 28
4.25
6.25
JUL 9
4.00
6.00
4.00
6.00
AUG 20
OCT 1
NOV 5
DEC 17
2010
2011
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
JAN 28
MAR 11
APR 22
JUN 3
JUL 15
AUG 26
OCT 7
NOV 18
DEC 29
FEB 10
4.00
6.00
MAR 24
4.25
6.25
59
EFFECTIVITY DATE
2012
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
MAY 5
4.50
6.50
JUN 16
4.50
6.50
JUL 28
4.50
6.50
SEP 8
OCT 20
DEC 1
4.50
6.50
JAN 19
4.25
6.25
MAR 1
4.00
6.00
APR 19
4.00
6.00
60
EFFECTIVITY DATE
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
JUN 14
4.00
6.00
JUL 26
3.75
5.75
SEP 13
3.75
5.75
OCT 25
3.50
5.50
DEC 13
3.50
5.50
61
EFFECTIVITY DATE
2013
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
JAN 24
3.50
5.50
MAR 14
3.50
5.50
APR 25
3.50
5.50
JUN 13
3.50
5.50
JUL 25
3.50
5.50
SEP 12
3.50
5.50
OCT 24
3.50
5.50
DEC 12
3.50
5.50
62
EFFECTIVITY DATE
2014
LEVELS (IN %)
RRP OVERNIGHT
RP OVERNIGHT
FEB 6
3.50
5.50
MAR 27
3.50
5.50
MAY 8
3.50
5.50
JUN 19
3.50
5.50
JUL 31
3.75
5.75
SEP 11
4.00
6.00
63
The BSP Inflation Report is published every quarter by the Bangko Sentral ng
Pilipinas. The report is available as a complete document in pdf format, together
with other general information about inflation targeting and the monetary policy of
the BSP, on the BSPs website:
www.bsp.gov.ph/monetary/inflation.asp
If you wish to receive an electronic copy of the latest BSP Inflation Report, please
send an e-mail to bspmail@bsp.gov.ph.
The BSP also welcomes feedback from readers on the contents of the Inflation
Report as well as suggestions on how to improve the presentation. Please send
comments and suggestions to the following addresses:
By post:
By e-mail:
bspmail@bsp.gov.ph