IN THIS ISSUE:

Latest Economic Performance:

Real GDP Growth Rate , Labor Productivity, GNI Growth
State of the National Economy:
Inflation Rates, Cash Remittances, and FDI Flows
Economic Reports:
2016 WEF Global Competitiveness Report,
IMD World Competitiveness, and BSP Consumer
and Business Expectations Survey

economic

snapshots

QUICK FACTS AND FIGURES OF THE PHILIPPINE ECONOMY

QUARTERLY

CURRENT

ECONOMIC

SITUATION

A few short months after the Duterte administration took the helm of
government, its agenda of solving the drug problem and criminality nationwide
has touched all corners of Philippine society. Although Dutertes law and order program is not
often understood in terms of its economic impact, the administrations efforts have had positive and
negative implications on the Philippines business and economic environment.
This Quarters Economic Snapshots looks at the current macroeconomic situation, using the latest available
indicators on economic growth, investments, remittances, employment, and global confidence and
competitiveness, among others. This issue also compares indicators across selected Southeast Asian countries,
to help situate where the Philippines stands and needs to improve under a new administration.

September 2016

3rd QUARTER

ECONOMIC SNAPSHOTS

picture credit: blog.infinit-o.com

The Philippine Economy:

A Promising Growth?

Figure 1: Real GDP Growth Rate of Selected ASEAN Countries

(in percent)
2013 Q2 2016

Under the Aquino administration, the Philippines

was referred to as a transitioning or rising tiger
economy. Despite criticisms on lagging investment
numbers and the slow rate of poverty eradication,
there had been a sense of hope for the Philippine
economy.
The Second Quarter of 2016, the last quarter of
that administration, saw a 7 percent growth on the
countrys gross domestic product (GDP), higher
than the 6.8 percent posted the previous quarter1
and faster than Malaysia and Indonesia at 4 and
5.2 percent GDP growth during the same period,
respectively.
This growth is driven by the Services sector,
particularly Trade, Real Estate, and Other Services,3
according to the Philippine Statistics Authority
(PSA). While the Services and Industry sectors
expanded 8.4 and 6.9 percent, respectively, the
Agriculture sector declined by 2.1 percent.4 The
figures show that on one hand, labor productivity
from the Industry sector has been comparably
higher than the other sectors (see Graph 2).

Source: BSP2

Figure 2: Labor Productivity, by Industrial Origin

(in pesos, at constant 2000 prices)
Q1 2014 Q2 2016

Source: PSA National Accounts5

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September 2016

Figure 3: Sectoral Contribution to GNI Growth, by Industrial Origin

(constant 2000 prices)
Q1 2014 Q2 2016

Source: PSA National Accounts6

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ECONOMIC SNAPSHOTS

On the other hand, the Services sector leads

as having the most contribution to gross national
income (GNI) growth, which rose to 6.8 percent
from the previous years 5.4 percent.7 Consistent
with previous quarters, the Agriculture sectors labor
productivity and overall economic contribution has
continuously lagged behind other sectors. The
present administration has promised to bridge that
gap, which has been prioritized in the 10-point
economic agenda.8
The countrys economic growth was also
buoyed by strong public spending, with sustained
expenditures in public construction and government
consumption. Government spending for the first half
of 2016 amounted to P1,221.3 Billion, accelerating
by 13.9 percent from the same period last year. This
was driven by strong infrastructure and other capital
expenditures (up by 52.3 percent), mostly from DPWH
road infrastructure programs and projects, the AFP
modernization program under the DND and some
capital outlays of SUCs. Maintenance expenditures
also rose by 20.8 percent due to the expansion of
social services, as well as election-related spending.9

PSA noted that per capita GDP and per capita

GNI both improved by 5.2 percent and 5.1 percent,
respectively, from 4.2 percent and 3.6 percent in 2015.

Figure 4: Annual Average Inflation Rates in the Philippines

2011 August 2016

Alongside improved growth is easing inflation,

now at 1.8 percent from 1.9 percent in July 2016.10
This was within the Bangko Sentrals forecast of 1.62.4 percent for August 2016.11 Inflation in NCR went
up to 1.2 percent in August 2016 from 1.0 percent
in the previous month. However, it decelerated for
Areas Outside NCR (AONCR) to 2.0 percent in August
from 2.1 percent in July.
Graph 4 shows a trend of declining inflation since
2014. BSP says that so far, the resulting average
inflation rate is below governments target of 2 to 4
percent for 2016.13
Generating employment was crucial for the
Aquino administration. Both job creation and tenure
are being eyed by the current Duterte government
for possible shifts in policy, as proposals to remove
end of contract or contractualization have surfaced.
The Department of Labor and Employment issued a
memorandum aimed at reducing endo practice by
50 percent by the end of 2016.14

Source: BSP12

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September 2016

Figure 5: Unemployment Rate (in percent) among Selected ASEAN Countries

2013 Q1 2016

The employment rate has climbed to 94.6

percent in July 2016 from 93.5 at the same
point last year.15 Both unemployment and
underemployment meanwhile declined to 5.4 and
17.3 percent from 6.5 and 21 percent, respectively.
The Labor Force Survey (LFS) in April 2015 also
saw marginal improvements in employment and
unemployment, with rates at 93.9 percent and 6.4
percent, respectively.16
Workers in the Services sector remained to have
the highest share of employment at 55.3 percent,
followed by those in the Agriculture Sector at
26.9 percent and Industry sector at 17.8 percent.17
Among the regions, CALABARZON (7.6%), National
Capital Region (NCR) (6.5%), Central Luzon (6.2%),
and Northern Mindanao (6.1%) were the regions
with the highest unemployment rates,18 PSA
added.

Source: BSP19

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ECONOMIC SNAPSHOTS

Despite the decline in unemployment, the

Philippines still has the highest compared to some
of its neighbors.

In terms of protecting workers, the Duterte

administration also has plans for Filipinos working abroad. Aside from creating a department
dedicated to their concerns, he also promised
to crack down on illegal recruiters.20 Personal
remittances from Overseas Filipinos (OFs) grew
by 4.8 percent to US$2.6 billion in June 2016,
bringing a total of US$14.6 billion for the first
semester of 2016.21 This was 3.1 percent higher
than the level posted in the same period in
2015.
Meanwhile, cash remittances amounted to
US$2.3 billion in June 2016,22 a 4.8 percent
increase from 2015. However as of the time of
writing, the figure shows a slowing growth for
remittances (see Graph 6).
BSP added that 80 percent of cash remittances
came from the United States, Saudi Arabia, the
United Arab Emirates, Singapore, the United
Kingdom, Japan, Qatar, Kuwait, Hong Kong,
and Germany.24
Foreign direct investments (FDI) also saw
upturns with net inflows of US$4.2 Billion for
the first semester of 2016, 94.9% higher than
the US$2.2 Billion recorded for the same period
a year ago.25 However, net inflows for June 2016
only amounted to US$238 million, declining by
40.9 percent from the US$404 million posted
in the previous year26 Figure 7 shows that the
Philippines still lags behind FDIs among ASEAN
countries, even lower than Vietnam.

Figure 6: Overseas Filipinos Cash Remittances Level and Growth Rate

(2011 1st Semester 2016)

Source: BSP23

Figure 7: Net FDI Flows of Selected ASEAN Countries (in million US $)

2013 Q2 2016

Source: BSP27

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September 2016

Despite relatively lower levels, the Philippines FDI

grew more rapidly compared to these countries.
Moreover, FDI commitments with the countrys
investment promotion agencies increased by 11.5%
to P40.4 Billion in the second quarter, fuelled by the
growing foreign interest in manufacturing, construction,
and business process outsourcing.29 For the BSP, this
indicator of investor confidence is due to the countrys
sound macroeconomic fundamentals and its noninflationary GDP growth (combination of low inflation
and high growth), as well as positive growth prospects
for the Philippine economy.30

The Asian Development Banks (ADB) 2016 updated outlook raised growth forecasts to 6.4% for 2016 and
6.2% for 2017, due to robust domestic demand and supported by favorable macroeconomic fundamentals.
However, ADB also cautioned against a number of development challenges. The disparity in regional
growth is pronounced, with Metro Manila and Central Luzon accounting for two-thirds of GDP growth.
Moreover, while poverty incidence has declined, it is still heavily concentrated in Visayas and Mindanao.
Underemployment is at a historical low, but labor productivity in the agriculture sector has yet to reach its
full capacity. The ADB also noted that the country needs higher revenues to support public investments,
which is crucial since the country lags behind other ASEAN nations in terms of infrastructure quality.32

Figure 8: Growth Rate of Net FDI Flows of Selected ASEAN Countries

(in percent)
2013 Q2 2016

The Development Budget Coordination Committee

(DBCC) is targeting 6-7 percent growth for 2016, lower
than what was set by the Aquino administration at
6.8-7.8 percent. The lower target was attributed to the
tapering effect of election spending, slow agricultural
output due to El Nio, weak infrastructure due to
seasonality and weak external trade. A 7-8 percent
annual growth for the remainder of the Duterte
administration was also set.31

Source: BSP34

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ECONOMIC SNAPSHOTS

ECONOMIC REPORTS:
2016 WEF Global Competitiveness Report,
IMD World Competitiveness, and BSP Consumer
and Business Expectations Survey

Table 1: 2016 Global Competitiveness Index Philippines Performance Overview

The Philippines ranking slipped by 10 notches, landing in 57th

place out of 138 countries in the 2016 World Economic Forum-Global
Competitiveness Report. The country falls behind Singapore (2nd),
Thailand (34th), and Indonesia (41st), but is a few notches higher than
Vietnam (60th).
The country dropped in 8 of the 12 pillars of the survey, with large
declines in Goods Market Efficiency (down 19, from 80th to 99th),
Technological Readiness (down 15 from 68th to 83rd), Institutions
(down 14, from 77th to 91st), Innovation (down 14, from 48th to
62nd) and Business Sophistication (down 10, from 42nd to 52nd). The
countrys ranking also dropped in Infrastructure, Labor Market Efficiency,
and Market Size. On a more positive note, gains were recorded in
Higher Education and Training, Health and Primary Education, and
Macroeconomic Environment.33
Despite the lower ranking, the report noted that the Philippines is in
the flat zone, where countries are close to each other in terms of their
Global Competitiveness Index (GCI) score. Additionally, the WEF cited
the Philippines, along with Cambodia and China, as one of the most
improved economies in the region. However, the Philippines was also
tagged as one of the emerging economies with an education system
that could potentially see reductions in its future human capital.34
The WEF also conducted an Executive Opinion Survey, where
respondents were asked to select the 5 most problematic factors for
doing business in the country. The most commonly cited factors were
inefficient government bureaucracy, inadequate supply of infrastructure,
corruption, tax rates and tax regulations.35

Source: WEF36

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Figure 9: 2016 IMD World Competitiveness Scoreboard

Meanwhile, the country slipped back one notch

to 42nd place out of 61 economies in the 2016 IMD
World Competitiveness Report. The country was still
in 4th rank among the five ASEAN nations included
and 12th among the 14 Asia-Pacific economies.37
The report measures competitiveness based on
the following factors: Economic Performance,
Government Efficiency, Business Efficiency and
Infrastructure.
The Global Competitiveness Yearbook cited
major improvements in the country, particularly as
it moved up the ranks in Business Efficiency and
Infrastructure. The National Competitiveness Council
said that while the area of Economic Performance
declined, this was abated by developments in
international investments (up 7 places from 53rd to
47th), employment (up 7 places from 26th to 19th),
and domestic economy (up 1 place from 32nd to
31st).39 The creation of the Philippine Competition
Commission and the latest reforms to ease business
procedures were also cited to have contributed to
these improvements.

Source: IMD38

110

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The tables show that over the past five years, the
country has ranked the lowest or in the bottom half
among these ASEAN countries. Its performance was
particularly poor in infrastructure and government
efficiency. However, there may still be hope
for infrastructure development as the current
administration aims to spend higher on public
infrastructure with P7 trillion from 2017 until 2022.41
Next years proposed budgetary allocation for public
infrastructure is at P860.7 billion, 13.8 percent higher
than what was allocated in 2016.42
On the other hand, the consumer outlook seems
to be more optimistic of the Philippine economy.
In BSPs latest Consumer Expectations Survey,
consumer outlook improved for Q3 2016, with the
optimists outnumbering the pessimists for the first
time since the nationwide survey started in Q1
200744 with confidence index (CI) at 2.5 percent
from -6.4 percent for Q2 2016.

Table 2: 2016 IMD World Competitiveness Ranking of Selected ASEAN Countries

Source: IMD40

Table 3: Business Efficiency and Infrastructure Rankings

According to survey results, this optimism was

because of the following reasons: (a) improvements
in the peace and order situation; (b) availability
of more jobs; (c) stable prices of commodities;
(d) anticipated increase in salaries; (e) effective
government policies; (f ) assumption into office of
the new administration as well as its pronounced
campaign against drugs; and (g) assistance from
government such as the Pantawid Pamilyang Pilipino
Program (4Ps).46
Consumer confidence is measured across three
component indicators: the countrys economic
condition, family financial situation and family

Source: IMD43

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September 2016

11

Figure 10: Overall Consumer Outlook Index in the Philippines

2007 2016

income. For the upcoming quarter, consumer confidence on

the countrys economic condition and family financial situation
both improved, with CIs for both indicators at an all-time high
at 9.5 percent and -2.2 percent, respectively, since Q1 2007. 47
It was the consumer outlook on the countrys economic
condition that registered the biggest improvement among
the three indicators for the current quarter, next quarter and
the year ahead.48 Meanwhile, the outlook on family income
remained at 0.2 percent. By income group, BSP added that
the low-income group was more optimistic across the three
Indicators.
However, business outlook on the economy turned slightly
less optimistic for Q3 2016, with the overall CI at 45.4 percent
from 48.7 percent in the Q2 2016.49

Source: BSP45

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According to BSPs latest Business Expectations Survey,

respondents attributed their less optimistic outlook to the
following factors: (a) interruption of business activities
during the rainy season, (b) slack in demand during the
planting and closed milling seasons, (c) lower consumer
demand as households prioritized enrolment expenses, (d)
implementation of stricter new mining policies that put some
mining concessions on hold, (e) closed fishing season in Davao
Gulf from July to September, (f ) stiff competition, and (g)
concerns over the weak global economy.51

Even across sectors, business sentiment was less upbeat for

the Third Quarter and more upbeat for the Fourth Quarter.
However, BSP said that this is with the exception of the
construction sector, whose outlook was more favorable for the
current quarter and deteriorated slightly for the next quarter.52
Though firms in the industry sector were pessimistic due to
sluggish production activities, those in the agriculture and
services sector were favorable.

Figure 11: Overall Business Confidence Index

Q1 2011 Q3 2016

Further, firms that expected better financial conditions

continued to outnumber those that said otherwise53 as the
financial conditions index improved to 1.5 percent for Q3 2016
from 1.3 percent in the previous quarter.
The employment outlook index for the next quarter was
also steady at 23.6 percent from 23.8 percent in the last
quarters survey. This indicates a positive projection of more
firms continuing to hire new employees than those that said
otherwise. Observations were particularly optimistic in the
wholesale and retail trade and industry sectors, steady in
services, and less upbeat in construction.54

Source: BSP50

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September 2016

13

ENDNOTES:

Philippine Statistics Authority. (August 2016). Philippine
economy posts 7.0 percent GDP growth in 2nd Quarter; 6.9
percent in first half of 2016. Retrieved from: http://psa.gov.ph/
content/philippine-economy-posts-70-percent-gdp-growth2nd-quarter-69-percent-first-half-2016

Bangko Sentral ng Pilipinas. (2016). Selected economic indicators: Real GDP growth rate. Retrieved from: http://www.bsp.
gov.ph/statistics/spei_new/tab48_sas.htm

Ibid.

Philippine Statistics Authority. (August 2016). Philippine

economy posts 7.0 percent GDP growth in 2nd Quarter; 6.9
percent in first half of 2016. Retrieved from: http://psa.gov.ph/
content/philippine-economy-posts-70-percent-gdp-growth2nd-quarter-69-percent-first-half-2016

Philippine Statistics Authority. (2016). National Accounts of

the Philippines. Retrieved from: http://psa.gov.ph

Ibid.

Ibid.

Number 5: Promote rural and value chain development

toward increasing agricultural and rural enterprise productivity
and rural tourism (ADRi Second Quarter 2016 Economic Snapshots, page 11)

Department of Budget and Management. (June 2016).

Highlights of National Government Disbursement Performance. Retrieved from http://www.dbm.gov.ph/wp-content/
uploads/DBCC/2016/June_Highlights%20of%20NG%20Disbursements%20FTM%20of%20June%20and%20for%20the%20
First%20Semester%202016.pdf

Philippine Statistics Authority. (September 2016). Summary Inflation Report Consumer Price Index (2006=100): August
2016. Retrieved from: http://psa.gov.ph/statistics/survey/price/
summary-inflation-report-consumer-price-index-2006100-august-2016

10

11

14

September 2016

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ECONOMIC SNAPSHOTS

Bangko Sentral ng Pilipinas. (September 2016). August infla-

tion lower at 1.8 percent. Retrieved from: http://www.bsp.gov.

ph/publications/media.asp?id=4162

24

Ibid.

Bangko Sentral ng Pilipinas. (September 2016). FDI Net Inflows Increase by 94.9 Percent for the First Semester of 2016.
Retrieved from http://www.bsp.gov.ph/publications/media.
asp?id=4171.

25
12

Ibid.

13

Ibid.

Philippine Information Agency. (2016, July 26). DOLE finalizing memorandum to reduce endo practice by 50%
in 2016. Retrieved from: http://news.pia.gov.ph/article/
view/1141469453128/dole-finalizing-memorandum-to-reduceendo-practice-by-50-percent-in-2016

26

Philippine Statistics Authority. (September 2016). Employment rate in July 2016 is estimated at 94.6 percent. Retrieved
from:
http://psa.gov.ph/content/employment-rate-july2016-estimated-946-percent

28

1 4

2016 IMD World Competitiveness Scoreboard. Retrieved

from: https://www.imd.org/uupload/imd.website/wcc/scoreboard.pdf
rg.ph/node/1277

38

39

Ibid.

Ibid.
2016 IMD World Competitiveness Overall Ranking and Competitiveness Factors. Retrieved from: https://www.imd.org/uupload/imd.website/wcc/Overall_ranking_5_years.pdf

40

Bangko Sentral ng Pilipinas. (2016). Selected economic indicators: Net Foreign Direct Investments Flows. Retrieved from:
http://www.bsp.gov.ph/statistics/spei_new/tab48_sas.htm

27

Philippine Star. (2016, August 15). Duterte admin to spend

P7T for infra in next 6 years. Retrieved from: http://www.philstar.
com/business/2016/08/15/1613736/duterte-admin-spend-p7tinfra-next-6-years

41
15

16

ADRi Second Quarter 2016 Economic Snapshots, page 6

Philippine Statistics Authority. (September 2016). Employment rate in July 2016 is estimated at 94.6 percent. Retrieved
from:
http://psa.gov.ph/content/employment-rate-july2016-estimated-946-percent

17

18

Ibid.

Bangko Sentral ng Pilipinas. (2016). Selected economic indicators: Unemployment rate. Retrieved from: http://www.bsp.
gov.ph/statistics/spei_new/tab48_sas.htm

19

ABS-CBN News. (May 2016). Duterte to create department for OFWs. Retrieved from: http://news.abs-cbn.com/
halalan2016/global-filipino/05/16/16/duterte-to-create-department-for-ofws

20

Bangko Sentral ng Pilipinas. (August 2016). Personal

remittances reach US$14.6 billion in first half of 2016. Retrieved from: http://www.bsp.gov.ph/publications/media.
asp?id=4144&yr=2016

21

Bangko Sentral ng Pilipinas. (August 2016). Personal

remittances reach US$14.6 billion in first half of 2016. Retrieved from: http://www.bsp.gov.ph/publications/media.
asp?id=4144&yr=2016

22

Ibid.

Glorani, R, (2016), Committed Foreign Direct Investments

on the Rise as of First Half. Business World. Retrieved from:
http://bworldonline.com/content.php?section=TopStory&title
=committed-foreign-direct-investments-on-the-rise-as-of-firsthalf&id=133524

29

30

Ibid.

De Vera, B. (2016). Duterte admin cuts 2016 GDP growth

target to conservative 6-7%. Philippine Daily Inquirer. Retrieved
from: http://business.inquirer.net/211648/duterte-admin-cuts2016-gdp-growth-target-to-6-7

42

Ibid.

2016 IMD World Competitiveness Overall Ranking and Competitiveness Factors. Retrieved from: https://www.imd.org/uupload/imd.website/wcc/Overall_ranking_5_years.pdf

43

31

Asian Development Outlook 2016 Update. Retrieved from:

https://www.adb.org/sites/default/files/publication/197141/
ado2016-update.pdf

Bangko Sentral ng Pilipinas. (September 2016). Consumer

expectations survey: Third Quarter 2016. Retrieved from: http://
www.bsp.gov.ph/downloads/publications/2016/CES_3qtr2016.
pdf

44

32

National Competitiveness Council. (2016). Philippines slides

10 notches to 57th place in the 2016 WEF Global Competitiveness Report. Retrieved from: http://www.competitive.org.ph/
stories/1315

45

Ibid.

46

Ibid.

47

Ibid.

48

Ibid.

33

The Global Competitiveness Report 2016-2017. Retrieved

from:
http://www3.weforum.org/docs/GCR20162 0 1 7 / 0 5 Fu l l R e p o r t / T h e G l o b a l C o m p e t i t i v e n e s s R e port2016-2017_FINAL.pdf

34

35

36

Ibid.
Ibid.

National Competitiveness Council. (2016). PH ranking slips

one notch to 42nd place in the 2016 IMD-World Competitiveness Report. Retrieved from: http://www.competitive.org.ph/
node/1277

Bangko Sentral ng Pilipinas. (August 2016). Business expectations survey: Third Quarter 2016. Retrieved from: http://www.
bsp.gov.ph/downloads/Publications/2016/BES_3qtr2016.pdf

49

50

Ibid.

51

Ibid.

52

Ibid.

53

Ibid.

54

Ibid.

37

Bangko Sentral ng Pilipinas. (2016). Overseas Filipinos (OF)

remittances. Retrieved from: http://www.bsp.gov.ph/publications/tables/2016_08/news-08152016a1.htm

23

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September 2016

15

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
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