IN THIS ISSUE:

Latest Economic Performance:

Philippines Competitiveness, Second Quarter GDP Growth,
Poverty & Inequality

State of the National Economy:

Average Growth, Foreign Direct Investments, &
Overall Business Confidence Index

Recent Economic Studies:

Other Selected Economic Indicators

economic
snapshots
QUICK FACTS AND FIGURES OF THE PHILIPPINE ECONOMY

QUARTERLY
 CURRENT
ECONOMIC
SITUATION
This issue will give an overview of the state of the
Philippines in relation to in its goals of promoting
economic growth, accelerating poverty reduction
and minimizing inequality. Moreover, the
Snapshots will briefly discuss other factors
of economic growth, such as the degree
of investor confidence, foreign
direct investments, inflation rates
and overseas remittances.
The latest economic
indicators will also
be presented.

2 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

Philippines Competitiveness, 2nd Quarter
GDP Growth, Poverty and Inequality Figure 1: Gross Domestic Growth of Selected Asian Economies
(Sem 1 2015 and FY 2015 and 2016)
Following its improved ranking last year, the Philippines
has continued to improve its international competitive-
ness, moving up another five places to 47th among 140
economies in the World Economic Forum (WEF)s Global
Competitiveness Index 2015-2016. In the WEFs accompa-
nying report, the body notes that the Philippines has been
doing well in terms of macroeconomic environment and
business sophistication1.

In the same vein, the National Economic Development

Authority (NEDA), during its recently held Philippine Eco-
nomic Briefing, reported that despite difficulties in the
global economy, the Philippines has become one of the
fastest growing economies in Asia. Just as importantly,
NEDA reported that it expected the country to maintain
this standing over the next year.
However, with less than one year remaining in office,
the Aquino administration has yet to realize its target of
reaching 7 8% growth. For the second quarter of 2015,
the Philippines gross domestic product (GDP) reached 5.6
Source: NEDA
percent, higher than the 5 percent revised growth in the previous quarter but notably lower
than the 6.7 percent reported for the same period in 2014. According to the National Statistical
Coordination Board (NSCB), this second quarter growth was driven by the Services sector... and
supported by the growth of Manufacturing and Construction. Per capita GDP, arguably a better
measure of economic growth, grew at 3.8%, a slower rate than the 4.9% posted the previous year.
The NSCB explains this as resulting from the increased size of the Philippine population, which
reached 101.4 million in that period2.

ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 3


Figure 2: Philippines Annual GDP Growth and Headcount Poverty Rates
In spite of such growth, the countrys high poverty
rate persists. According to the World Banks Poverty
Calculator3, although decreasing, Philippine poverty
stands at 18.96 %. It is also one of the highest among
developing economies in the ASEAN region, as seen
in Figure 3.

On top of outpacing Philippine growth, and as

seen in the figure below, Vietnam has also reduced
poverty at a faster clip. The country reduced its 2006
poverty rate of 21.44% to 2.44% in 2012; the Philip-
pine poverty rate, which stood at 22.88% in 2003 and
18.95% in 2012, has barely budged in comparison.
By 2009, even Cambodia, one of the less developed
Source: World Bank4 ASEAN countries, had a lower poverty rate than the
Philippines.

In another recently released WEF report, the Inclu-

Figure 3: Poverty Rates of Low-Middle Income Countries in ASEAN
sive Growth and Development Report 2015, the Phil-
ippines has the highest inequality among the lower
middle income countries in the ASEAN region. The
country is surpassed by Indonesia, Vietnam, Thailand
and Laos, with the latter having the lowest inequality.

At the same time, The Philippines is one of the best-

ranking in the region in terms of providing equal ed-
ucation opportunities for its population. Aside from
reducing income inequality, WEF notes that it is also
important to focus on reducing inequality of oppor-
tunity: It is imperative to provide opportunities for
the poor and vulnerable to access education, health,
Source: World Bank
and other basic services which can improve their hu-

4 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

man capital... Improving the human capital of those at the bottom is fundamental to ultimately ensuring that they can
access jobs and earn a livelihood.5

Figure 4: Spending on Social Services Per Capita (PHP, Constant Prices)

Source: Department of Budget and Management

For the past 15 years, support for education has expanded. However, WEF notes that although access to the educa-
tion system has improved, the country still has scope for improvement, and its quality needs to be improved to better.6
Providing better education would also contribute to efforts to generate employment and reduce poverty.

Conditional cash transfers, a redistributive policy aimed at ameliorating extreme levels of poverty has reduced inequal-
ity, as can be observed in pre- and post-transfer Gini measures in the graph below. Nevertheless, both measures in the
Philippines are still higher than those of regional counterparts.

ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 5

 Figure 5: Inequality in Lower Middle Income ASEAN Countries

Source: WEF7

Stratbases Albert Del Rosario Institute (ADRi) has always stressed that inequality has to be tackled to fully reap the
benefits of economic growth. One of the drivers to boost this is through employment generation. This is especially
crucial as the Philippines is closing in on its demographic window, which would entail maximizing the productive
capacities of the young working population. And as it implies, this will only be realized if the necessary conditions are
present--available opportunities for a capable labor force.

6 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

 Figures 6 & 7: Unemployment and Underemployment Rates (%) and
Employment Generated 2010 2015 (000)

Source: Philippine Statistics Authority

The Philippine Statistics Authority (PSA) reports lower unemployment but higher underemployment rates.
So far, an upward trend is also seen in employment generation.
ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 7
 In contrast, Social Weather Stations (SWS) in its lat-
est quarterly survey found that 23.2 percent of adults
reported joblessness, 4.1 points higher than its pre-
Figure 8: SWS Joblessness Rate and NSO Unemployment Rate in the Philippines
vious survey but 2.2 points lower than the 2014 av-
(September 1993 June 2015)
erage.8 SWS survey results are strikingly higher than
National Statistics Offices unemployment rate of 6.5
percent.

The survey also found that 36% of respondents are

optimistic that more jobs will be available in the next
12 months, in contrast to 33 percent saying that it
will not change, and 19 percent saying that it will de-
crease. This gave a Net Optimism on job availability
score of +17 (% more jobs minus % fewer jobs), ac-
cording to SWS.10

Other Factors of Philippine Growth

Despite a GDP growth rate that came below expec-

tations, government officials and economists remain
optimistic for Philippine economic performance. One
reason is the expansion of foreign direct investments Source:SWS9
(FDI) in the country, attributed to higher investor
confidence because of an improved perception of

8 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

Philippine governance. Even NEDA reports that the creasing over time. US$383 million in June 2015, almost four times the US$54 mil-
Philippine economy has started to be more invest- lion net inflows recorded in the previous year, 11 but lower than
ment- and industry-driven. Figure 8 shows that the Furthermore, data from the Bangko Sentral ng inflows recorded the previous month.
contribution of investments in output has been in- Pilipinas (BSP) shows net investment inflows of

Figure 9: Average Growth (%) in Demand Sides Figure 10: Average Growth (%) in Supply Side Figure 11: Foreign Direct Investments in the Philippines
(January 2015 June 2015)

Source:NEDA Source:NEDA Source:BSP12

ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 9

 The bulk of these investments was in the form of eq-
uity capital investments, which amounted to US$214
million. These investments, BSP data reveals, were in
manufacturing, real estate, wholesale and retail trade, Figure 12: Overall Business Confidence Index
administrative and support services, and information (Q1 2010 Q3 2015)
and communication activities.13

A low and stable inflation rate might have also add-

ed to the Philippines advantage for investments. It
was recently reported that inflation continued to ease
to 0.8 percent in July from 1.2 percent in June. The
July inflation rate was within the BSPs range forecast
of 0.5-1.3 percent for the month. Further, its average
inflation rate for the year of 1.9 percent is even below
the Governments inflation target range of 3.0 percent
1.0 percentage point for 2015.14

Remittances from overseas Filipinos continue to

increase, boosting our national incomes growth.
Cash remittances, growing by 0.5 percent, reached
US$2.1 billion in July 2015, bringing total remittances
for January-July 2015 to US$14.2 billion, 4.8 percent
higher than the US$13.5 billion recorded in the same Source:BSP17
period last year.15 BSP notes that the bulk of cash re-
mittances were from the United States, Saudi Arabia,

110 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

 the United Arab Emirates, the United Kingdom, Singa-
pore, Japan, Hong Kong, and Canada.

Figure 13: Most Problematic Factors for Doing Business Contrary to all of this, the most recent business
expectations survey of the BSP shows that business
outlook on the economy turned less optimistic for Q3
2015, with the overall confidence index (CI) declin-
ing to 41.4 percent compared to 49.2 percent16 in the
previous quarter.

According to survey respondents, their less buoy-

ant outlook was due to expected slack in demand
during the rainy season, lower crop production as a
result of the El Nio, and lower consumer spending, 18
among others. Moreover, major business constraints
identified in the report were domestic competition
and insufficient demand leading to low sales volume.

In WEFs Global Competitiveness Index alone, sev-

eral constraints have been identified as affecting in-
vestor confidence, one of which is the countrys inef-
ficient state of infrastructure.
Source:WEF19
Despite being deemed a priority, the government
has yet to make a serious dent in improving infrastruc-

ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 11

 Other Selected Economic Indicators

ture. The government has made efforts in acceler-

ating its public infrastructure spending from 2.7
percent in 2014 to 4.3% in 2015 and might even
ramp up further to 5.0 in 2016. Such a substantial
impact on the economy would also be possible
through improving investor confidence and in-
creasing private sector investments in infrastruc-
ture, such as through the Public-Private Partner-
ship (PPP) pipeline and in other sectors.

Source:NSCB21

112 October 2015 3rd QUARTER ECONOMIC SNAPSHOTS

ENDNOTES:

1
Business sophistication concerns two elements that are
intricately linked: the quality of a countrys overall business
networks and the quality of individual firms operations and
strategies. These factors are especially important for countries
at an advanced stage of development when, to a large extent,
7
Raw data from WEF Inclusive and Development Report 2015 19
World Economic Forum. (September 2015). Global Competi-
tiveness Report 2015 2016. Retrieved from: http://www.wefo-
8
Social Weather Stations. (September 2015). Second Quarter rum.org/reports/global-competitiveness-report-2015-2016
2015 Social Weather Survey: Adult joblessness rises to 23.2%;
10% lost their jobs involuntarily, 11% resigned. Retrieved from: DBM. Philippine Economic Briefing.
20

the more basic sources of productivity improvements have http://www.sws.org.ph/pr20150910.htm

been exhausted. The 12 pillars of competitiveness. Retrieved 21
National Statistical Coordination Board. (September 2015).
from: http://reports.weforum.org/global-competitiveness-re- Ibid.
9
Statwatch Philippines. Retrieved from: http://www.nscb.gov.ph/
port-2014-2015/methodology/ stats/statwatch.asp
10
Ibid.
2
National Statistical Coordination Board. (August 2015). Phil-
ippine Economy posts 5.6 percent GDP growth; 11
Bangko Sentral ng Pilipinas. (Sepetmber 2015). Foreign Di-
5.3 percent in first half of 2015. Retrieved from: http://nap.psa. rect Investments Yield Net Inflows in June 2015; First Semester
gov.ph/sna/2015/2nd2015/highlights.asp Level Hits US$2 Billion. Retrieved from: http://www.bsp.gov.ph/
publications/media.asp?id=384
3
PovcalNet is an interactive computational tool that allows
you to replicate the calculations made by the World Banks 12
Ibid.
researchers in estimating the extent of absolute poverty in
the world. PovcalNet also allows you to calculate the poverty 13
Ibid.
measures under different assumptions and to assemble the
estimates using alternative country groupings or for any set of Bangko Sentral ng Pilipinas. (August 2015). July inflation
14

individual countries of the users choosing. PovcalNet is self-
contained; it has reliable built-in software that quickly does the
relevant calculations for you from the built-in database.
4
World Bank. (2015). PovcalNet. Retrieved from: http://ire-
search.worldbank.org/PovcalNet/
edges lower to 0.8 percent. Retrieved from: http://www.bsp.gov.
ph/publications/media.asp?id=3803&yr=2015
15
Bangko Sentral ng Pilipinas. (September 2015). Personal re-
mittances reach US$15.7 billion in January-July 2015. Retrieved
from: http://www.bsp.gov.ph/publications/media.asp?id=3861

5
World Economic Forum. (September 2015). The inclusive
growth and development report 2015. Retrieved from: http://
www3.weforum.org/docs/Media/WEF_Inclusive_Growth.pdf
16
Bangko Sentral ng Pilipinas. (August 2015). Business expec-
tations survey: Third Quarter 2015. Retrieved from: http://www.
bsp.gov.ph/downloads/Publications/2015/BES_3qtr2015.pdf

6
World Economic Forum. (September 2015). The inclusive 17
Ibid.
growth and development report 2015. Retrieved from: http://
www3.weforum.org/docs/Media/WEF_Inclusive_Growth.pdf 18
Ibid.

ECONOMIC SNAPSHOTS 3rd QUARTER October 2015 13

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