Philippines Macroeconomic Updates

December 2016
Table of Contents

Policy Agenda 3
Favorable Macroeconomic Trends 7
Firm Institutional Foundations through Structural Reforms 21
Infrastructure Development 25
Sound and Strengthening Government Finances 31
Strong External Position 42
Sound Financial System 48
Economic Outlook 52
The President and the Economic Team 62
About the Investor Relations Office 65

2
Policy Agenda of the Duterte Administration
Vision for the Philippines
Vision for the
Philippines
Broad strategies to
achieve the vision
*Refer to Vision 2040: http://2040.neda.gov.ph/
By 2022
Poverty rate reduced from 26.3% in 2015 to 17% by 2022
Law abiding country
Peace within the country and with neighbors
Achieve high middle income status (USD3,000 to USD4,100 GNI per capita)
By 2040*
Extreme poverty eradicated
Inclusive economic and political institutions offering everyone equal opportunities
Achieve high income status (USD3,000 to USD 12,000 GNI per capita)
President Duterte signed on 11 Oct 2016 Executive Order No. 5 adopting Ambisyon 2040, a 25-year long-term
vision to eliminate poverty, as a guide for development planning in the country.
Sustain economic growth of at least 7% every year for one generation
Shift the source of growth from consumption to investment
Massively invest in
Health
Infrastructure
Education
Life-long training
Social protection
Research and development
Tax policy reforms
Lower personal income tax and corporate tax
Index oil excise tax to inflation
Levy tax on sugary and fatty products
Expand the VAT base
Reform property taxes
Economic reforms: secure property rights, enhance competition, improve food security, simplify regulations, and
relax foreign ownership restrictions
The National Economic and Development Authority (NEDA) is coordinating the formulation of the Philippine
Development Plan (PDP) for the period 2017-2022. The proposed PDP Framework will be anchored on the countrys
long-term vision or the AmbisyonNatin2040 and will translate the Presidents 0-10 Socioeconomic Agenda into
concrete plans, strategies and programs.
4
 10-Point Socioeconomic Agenda of the Duterte Administration
Strong mandate from people ensures political capital to advance transformational reforms that will move the economy to even higher
growth plane and improve welfare of Filipinos. Action-oriented, results-driven leadership style of the President boosts prospects for a
more robust investment climate characterized by common compliance to law and order in a more conducive regulatory environment
Economic Agenda Legislative Agenda1

Continue and maintain current macroeconomic policies, including Proposed FY 2017 Budget of PHP3.35tr
fiscal, monetary, and trade policies. Shift to a federal system of government
Comprehensive Tax Reform program
Institute progressive tax reform and more effective tax
collection, indexing taxes to inflation. Reduce in personal and corporate income tax rates
Increase competitiveness and the ease of doing business. This Increase excise on all petroleum products & index to inflation
Levy a tax on sugary products and index to inflation
effort will draw upon successful models used to attract business
to local cities (e.g., Davao), and pursue the relaxation of the Adjust sin taxes
Constitutional restrictions on foreign ownership, except as Amendments to loosen the Bank Secrecy Law
regards land ownership, in order to attract foreign direct Emergency powers to solve transport and traffic problems
investment. The Bangsamoro Basic Law without unconstitutional provisions
Accelerate annual infrastructure spending to account for 5% of Creation of the Peoples Broadcasting Corp. to replace PTV-4, with separate
GDP, with PPP playing a key role. television channels for Muslims and the Lumad
Promote rural and value chain development toward increasing Whistleblower Protection Act
agricultural and rural enterprise productivity and rural tourism. Creation of a Single Department to Handle Overseas Filipino concerns
Ensure security of land tenure to encourage investments, and Universal health insurance through the Philippine Health Insurance Corp
address bottlenecks in land management and titling agencies. Amendments to the Anti-Money Laundering law, particularly to make tax evasion
2
Invest in human capital development, including health and as a predicate crime to money laundering
education systems, matching of skills and training to meet the Amendments
2
to the 1996 Passport Law to extend validity of passport
demand of businesses and the private sector. PPP Act
Exemptions from the salary standardization law for BIR and BOC personnel2
Promote science, technology, and the creative arts to enhance 3
innovation and creative capacity towards self-sustaining, Freedom of Information covering the Executive Branch of Government
Budget Reform Act4
inclusive development.
Streamlining the Government Act4
Improve social protection programs, including the governments
Military and Uniformed Personnel (MUP) Compensation and Pension Reform4
CCT program, to protect the poor against instability and
Amendments to Anti-Terrorism Law5
economic shocks.
Amendments to Anti-Cyber Crime Act5
Strengthen implementation of the Responsible Parenthood and
Passage of an Act Creating the Department of Housing and Urban Development5
Reproductive Health Law to enable especially poor couples to
Amendments to the National Defense Act to Revise Reserve Officers Training
make informed choices on financial and family planning.
Corps5
1Based on the State of the Nation Address of President Rodrigo Duterte on July 25, Reinstatement of the death penalty5
2016 Freedom of Information Act5
2Based on pronouncements of Economic Managers
3On July 24, 2016, President Duterte signed an Executive Order implementing 4Based 5
on the Presidents 2017 Budget Message
freedom of information in the Executive Branch 5http://www.rappler.com/nation/146324-list-priority-bills-duterte-administration
Ample Political Capital to Pursue Difficult Structural Reforms
Continued Favourable Prospects under the Duterte Administration 86% Performance and Trust Ratings
Performance & Trust Ratings of President Rodrigo R. Duterte
President Rodrigo R. Duterte obtained overwhelming margin of more than 6mn vs. his September 25 October 1, 2016 / Philippines (in %)
closest rival at the May 2016 national elections
Most Filipinos are satisfied with his performance in the first 3 months:
Performance and Trust Ratings at 86% based on Sep 2016 Pulse Asia survey
Very good net satisfaction and Excellent trust ratings based on 3Q Social
Weather Survey (SWS) at 64% and 76%, respectively
Based on BSPs Business Expectations Survey, the confidence index for Q4 2016 while
lower compared to the previous quarter remained positive at 39.8%
Optimism of domestic-oriented companies increased at 48.8% in Q4 2016 from
44.9% a quarter ago on the back of robust domestic demand
The percentage of businesses with expansion plans in the industry sector for Q1
2017 increased to 31.7% from 28.1% last quarter
Consumer sentiment posts highest reading with a positive index for Q3 2016 based on
BSPs Consumer Expectations Survey. According to respondents, their optimism
during the current quarter was due to improvements in the peace and order situation,
and availability of more jobs, among others

Net trust rating of Excellent at +76% Net satisfaction rating of Very good at +64%

6
Source: Social Weather Station, Pulse Asia, BSP
Favorable Macroeconomic Trends
Economic Outperformance to Continue under the Duterte Administration
Sound economic management and transformational reforms to accelerate growth and improve welfare of Filipinos
Favorable macroeconomic trends Commitment to ensuring medium-term
supported by strong domestic demand,
increasing contribution of investments
Imperatives of fiscal sustainability
Efforts to embark on a sustainable public revenue and
and services to GDP, an emerging higher
value-adding manufacturing sector and
the Duterte spending path include reforming the tax system through a
comprehensive tax reform package, institutionalizing
favorable demographic profile Administration transparency and accountability in granting fiscal
incentives, reducing tax evasion and instituting stronger
IMF raised its forecasts for ROPs GDP growth to 6.4%
public finance accounting and management standards
from 6.0% in 2016 and to 6.7% from 6.2% in 2017

Positive sentiment reflected in consumer and business

Achieve Foster a Law Progress in strengthening the fiscal position on declining
expectations surveys. Emerging as one of the top Lasting Abiding debt and manageable fiscal deficit provides greater fiscal
space to accelerate spending on poverty reducing
promising destinations of FDIs based on United Nations
Conference of Trade and Development (UNCTD)s World
Peace Society measures as well as implement countercyclical policies in
the event of a shock
Investment Report 2016
ROPs debt profile shows minimal refinancing risks; debt
Favorable demographics, policy focus and budgetary
allocation towards regional development and education Reduce affordability continues to improve with lower debt service
burden
and social protection to tackle poverty and inequality Poverty
reducing growth Acceleration of infrastructure and
Firmer institutional foundations bode well for industries development to bring about
greater governance, competitiveness reforms more robust growth across the
and quest for lasting peace Credible and effective monetary archipelago, create jobs and uplift the
policy helps the economy stay lives of more Filipinos
Accelerating anti-corruption reforms and strengthening law
and order underpin the governments growth agenda
resilient to domestic and external
Infrastructure remains a priority sector with public
challenges spending targeted to accelerate to account for 5.1%
Important governance and economic reforms have been
institutionalized over the years BSP has ample monetary policy space and has at and 5.4% of GDP in 2016 and 2017, respectively
its disposal a wide range of tools, including Infrastructure push will benefit from a robust PPP
Institutions and citizenry eager for more reforms that are
macroprudential measures to stem any emerging pipeline. Topmost in the governments agenda is
supportive of propelling long term economic growth and
risks and financial stresses
ensuring political stability easing bottlenecks to accelerate implementation
Continued solid growth in a low inflation
Stronger institutions and more stable political environment Focus is on high-impact projects that increase the
environment
have been positively recognized internationally, including productive capacity of the economy
their impact on bolstering the Philippines economic Diversified sources of foreign exchange
Stepped up agriculture and manufacturing
fundamentals (remittances, IT-BPO, and tourism) support the
development plan will create more jobs, particularly for
countrys BOP and cushion economy from external
ROP has achieved significant improvements in measured low-skilled labor
stresses
governance and competitiveness across the years

Solidifying gains from these is top agenda 8

Economy on Higher Growth Trajectory
Real GDP Growth (6-year moving average)
GDP (constant 2000 prices)

6-yr moving average 6.2% 2010-2015 ave

8 1971-1976; 2010-2015
1972-1977;
7
1973-1978

0
1955-1960

1957-1962
1959-1964
1961-1966

1963-1968
1965-1970

1967-1972
1969-1974

1971-1976
1973-1978

1975-1980
1977-1982

1979-1984

1981-1986

1983-1988

1985-1990

1987-1992

1989-1994

1991-1996

1993-1998

1995-2000
1997-2002

1999-2004

2001-2006

2003-2008

2005-2010

2007-2012

2009-2014
-1

Source: National Economic and Development Authority (NEDA) Staff Calculations

9
Solid Economic Performance Amidst Global Economic Turbulence
One of the fastest growing economies regionally and amongst similarly and higher rated peers
Real GDP growth (%)
8.7
FY 2010-14 average 2015 Q1-Q3 2016 2016F 2017F
7.4 7.6 7.6
7.2 7.3 7.0
6.7
6.2 6.4
5.8 5.8 5.9 5.8
4.9* 5.2 5.3 5.4
5.0 4.9
4.8 4.8

3.9 3.9
3.8*
3.3 3.2 3.3 3.3 3.2 3.5*3.1
3.0 3.1 2.9
2.9 2.7 2.6
2.3 2.4
2.3*2.2 2.2
1.8
1.3
0.8
0.3*
0.2 0.1

(0.5)

India Panama Philippines Indonesia Thailand Turkey Colombia Spain Slovenia South Africa
(BBB-/Baa3/BBB-) (BBB/Baa2/BBB) (BBB/Baa2/BBB-) (BB+/Baa3/BBB-) (BBB+/Baa1/BBB+) (BB+/Baa3/BBB-) (BBB/Baa2/BBB) (BBB+/Baa2/BBB+) (A/Baa3/BBB+) (BBB-/Baa2/BBB-)

Note: 2016 and 2017 Forecast based on IMF WEO October 2016 update
*Latest available data is 1H2016
Ratings: S&P/Moodys/Fitch
According to the National Economic and Development Authority (NEDA), estimated potential output for 2016 is 6.4% to 6.9% while IMF placed
it at 6.5%, aided by the success of ongoing structural reforms. NEDA estimates potential output to rise to 6.9% to 7.9% by 2022
This surpasses the countrys estimated potential output prior to the global financial crisis (4-5% in 2000s), and is in contrast to the declining
trend in potential growth across many emerging markets
With increasing investment rate and young and educated workforce, there is sufficient scope for potential growth to rise further, aided by
greater capital formation
Over the medium-term, the Duterte administration aims for a steady acceleration of growth (7.0-8.0%) supported by sustained and deepened
structural reforms. These include comprehensive tax reform, sustained investment in infrastructure, human capital development, easing of
restrictions on foreign investments, reduction of cost of doing business, and strengthening of agro-industrial linkages
The continued positive economic outturns bolster confidence that the policy track taken will further uplift the welfare of a greater number of
and most especially the marginalized Filipinos. The Duterte Administration targets to reduce poverty incidence to 17.0% by 2022
Source: PSA; International Monetary Fund (IMF); Bloomberg L.P. 10
Source: PSA
Economic Rebalancing Towards a More Broad Based Growth
Investments and services increasingly becoming major drivers of growth
GDP breakdown by component
Contribution to growth: demand (%) Contribution to growth: supply side (%)
7.0% 7.0%
6.2%
6.2% 5.7%
5.7% 5.4 4.5%
4.5% 4.4
2.8% 3.3 2.8% 3.7
2.4 1.1
0.6 3.7
0.7 0.6 2.8
0.4
0.3 4.9
3.3 3.8 4.2
2.5 1.8
-0.3 -0.8 1.2 2.4 2.7
-2.5 0.7 1.9
-5.4
1990-1999 2000-2009 2010-2015 Q1 - Q3 2015 Q1-Q3 2016

1990-1999 2000-2009 2010-2015 Q1-Q3 2015 Q1-Q3 2016 Agriculture Industry Services
Consumption Government Investment Net Exports
Capital formation remains strong and is an increasingly key driver of growth
Gross capital formation (PHP bn, constant prices) GDP breakdown by expenditure (%)
-1.6
+15.1% Household 22.7 -0.1
+27.7% +5.2% Expenditure
1,805 +23.8% -6.5
26.3
+2.8% -4.3% 1,490 1,568 1,556.5 Government
1,217 1,257.2 Spending 10.9 0.8
1,165
Capital 11.2 Q1-Q3
Formation 2016
Net Exports
68.2
2011 2012 2013 2014 2015 Q1-Q3 Q1-Q3 Statistical
2015 2016 Discrepancy
Construction Durable Equipment Others 68.1

Source: PSA 11
Note: Numbers may not add up due to rounding
Q1-Q3 2015
 Rising Investments Highlight Confidence in ROPs Growth Prospects
ROP is one of the top 15 destinations of investments, along with Australia, France and Malaysia, by multinational enterprises (MNEs)
for 2016-2018 based on UNCTADs World Investment Report 2016. Further liberalization of industries and efforts to improve business
operating environment are expected to attract more investments
Sustained inflows from foreign investors and bright prospects highlight confidence in ROPs fundamentals
Net Foreign Direct Investment Flows* (USD bn) Total Approved Foreign Investment **(USD bn)
5.7 5.8 6.8
5.4 6.5
6.0
+71.1% 5.4
3.7 4.3 4.2
3.2 3.2
2.0 +9.2%
1.1 1.3 1.4

2010 2011 2012 2013 2014 2015 Jan-Aug Jan-Aug 2010 2011 2012 2013 2014 2015 H1 H2
2015 2016 2015 2016
Increasing investments in manufacturing ROP gaining attractiveness as an FDI destination
Net FDI - Sector, 2012-2015 (%) Average Growth of FDI, 2012-2015 (%)
Mining and 100.00 88.63
Quarrying, 5% Others, 9%
Manufacturing,
49% 80.00
Wholesale and 60.03
Retail Trade, 60.00
7% 9%
Real Estate,
40.00 32.43

20.00 12.68 9.38

Water Supply, 4.15
Sewerage, and
Waste 0.00
Finance and -0.68 -1.98 -2.85
Insurance, 15% -20.00
TH TW PH VN IN SG ID2 CH MY
In order to attract massive flow of domestic and foreign investments and create more jobs, the Department of Trade and Industry DTI) is pushing to modernize
BOI incentive regime, to be at par with ASEAN countries; remove nationality requirement and export-bias; provide menu of incentives, and strengthen regional
investment promotions
Investors confidence in the favourable growth prospects of the country buoyed BOI-approved investments to PHP324.5bn, up 35.5% in the first 11 months
of 2016. For 2016, BOI investment approvals are expected to grow by 10-15%
Source: PSA, NEDA, BSP, UNCTAD, Bloomberg; * BOP Concept; ** Investment approved by the Philippines Investment Promotion Agencies Board of Investments (BOI), Clark Development Corporation (CDC), Philippine
12
Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Authority of the Freeport Area of Bataan (AFAB), BOI-Autonomous Region of Muslim Mindanao (BOI-ARMM), and Cagayan Economic Zone
Authority (CEZA); amount of approved investments converted to USD
 Manufacturing and Agribusiness to Buoy Growth and Create Jobs
Economy increasingly supported by a vibrant manufacturing Roadmap for the structural transformation of a globally
sector competitive Philippines manufacturing sector
Real growth (%) Phase I Phase II Phase III
14
GDP Manufacturing 2014 - 2017 2017 - 2021 2021 - 2025
12
10
Rebuild capacity of Deepen participation
8 7.1 Shift to high value
existing industries, in regional/global
added activities,
6 strengthen emerging production networks
investments in
4 6.9 industries, maintain upstream industries Become hubs in
2
competitiveness of auto, electronics,
comparative Link and integrate
0
machinery,
advantage industries industries
garments, food

Industry development is getting a big push

Manufacturing sector targeted to contribute 30% to the countrys GDP by 2020 from the current 23% under the Comprehensive National Industrial
Strategy (CNIS) while share of jobs to total is targeted to reach 15% from the current 8%
DTI intensifying support programs to promote Micro Small & Medium Enterprises (MSMEs) through: trainings and capacity-building; one-town-one
product (OTOP); next generation Negosyo Centers (Go Negosyo Act); shared service facilities/fabrication laboratory (FABLAB); innovation centers;
incubation centers & coworking spaces; and access to finance
Manufacturing Resurgence Program - will rebuild the existing capacity of industries, strengthen new ones, and maintain the competitiveness of
industries with comparative advantage. The goals: close the gaps in the supply chain, provide access to raw materials, and expand domestic markets
and exports
PHP 289bn program allocation in 2016 GAA from PHP239bn in 2015
Comprehensive Automotive Resurgence Strategy (CARS) Program - PHP27bn (USD600mn) worth of incentives to local assemblers who
can produce 200,000 units for a single model over a six-year period
Toyota and Mitsubishi were accepted under the program
SMEs in the car parts manufacturing sector that stand to benefit from the program
Targets to generate 200,000 new jobs, bring in USD1.2bn in fresh investments and stimulate local demand by increasing vehicle sales to
USD9.2bn
Agriculture is seen as a potential growth driver that can create more jobs for less skilled workers
Accelerate production of high value crops - key words are processing and value-adding
Regain the countrys status as No. 1 coconut producer; support banana, rubber, pineapple, oil palm, etc. production
13
Establish modern harvest and post-harvest facilities
Source: PSA, DTI, DA
Industry Roadmapping Project
Elevating the development and growth of local industries as competitive players in the global market
36 Roadmaps completed

Manufacturing Agribusiness Services

1. Aerospace 1. Processed Fruit-Dried Mango 1. Book Publishing

2. Automotive 2. Processed Shrimp/Prawns 2. Information Technology and Business
3. Auto Parts 3. Seaweeds/Carrageenan Process Management (IT-BPM)
4. Bamboo 3. Health Care Services
5. Biodiesel 4. Mass Housing
6. Cement 5. Printing
7. Ceramic Tiles 6. Retirement
8. Chemicals
9. Coco coir
10. Copper and Copper Products
11. E-Vehicles
12. Electronics
13. Integrate Circuit (IC) Design
14. Furniture
15. Gifts and housewares
16. Holiday decor
17. Iron and Steel
18. Manufacturing
19. Metalcasting
20. Motorcycle
21. Natural Health Products
22. Petrochemicals
23. Plastics
24. Paper
25. Rubber Products
26. Shipbuilding
27. Tool and Die

Industry Roadmaps -42 total sectoral roadmaps, 36 of which are completed (such as manufacturing, chemicals, copper products, rubber products, IT-BPM,
electronics, aerospace, etc.) while 6 are still being finalized. These sectoral roadmaps are the building blocks of the Manufacturing Industry Roadmap (MIR) and
the Comprehensive National Industrial Strategy (CNIS)
The industry roadmaps serve as basis for effecting policies and implementing programs that support the development and growth of industries including
14
government funding to support its key initiatives
Sustained Low Inflation Environment
BSP policy stance successfully balances growth and Latest baseline forecasts suggest inflation to be close to lower
inflation end target in 2016 and within target bands in 2017-2018
GDP, CPI volatility (20Y Standard Deviation, 2001-2020F) BSP Private Sector Economists Survey (Mean forecast for full year, %)

Poland
1.7 CPI volatility 5.0
1.6 2016 2017 2018 target range
1.8 GDP volatility
Colombia 1.5 2017: 2.7
Philippines 1.6
1.7
4.0 2018: 2.8
Spain 1.5
2.3
1.0
Mexico 2.2
3.0
1.7
Thailand 2.3
1.1
Peru 2.4 2.0
2.2
Panama 2.9 2016: 1.8
3.0
Iceland 3.3 1.0
Kazakhstan 2.8
4.1
3.2
Uruguay 3.6
2014 2015 2016
Source: IMF World Economic Outlook, October 2016
Inflation target: 3.0 1.0 % for 2015-2018

Inflation remains benign demonstrating monetary policy credibility

Headline CPI (yoy, %)
8.3

5.5 4.6
4.2 4.1

2.9 3.8
3.2 1.4 1.6
3.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Oct 2016
Inflation Target Band Headline CPI
Source: BSP; PSA 15
Promoting More Effective Monetary Transmission Mechanism
Interest Rate Corridor to enhance effectiveness of monetary policy
Strengthen the relationship between BSPs policy rate and money market interest rates
Help limit interest rate volatility
Provide the BSP another tool to siphon excess liquidity
Provide opportunity for counterpart banks to manage internal liquidity
Key features:
Reconfiguration of the BSPs existing facilities
Introduction of Term Deposit Auction Facility (TDF)
As of 29 November, the TDF has absorbed PHP490bn from the system

Old Structure Interest Rate Corridor Structure

Repurchase rate (RP)6.0% Overnight Lending Facility3.5% Ceiling

Reverse Repurchase (RRP) rate 4.0% Overnight Reverse Repurchase Facility3.0% Policy Rate
--- Term Deposit Facility (7 and 28 day tenors)
Special Deposit Account rate 2.5% Overnight Deposit Facility2.5% Floor

Other reforms in the pipeline

Amendments to BSP Charter

Expand mandate to include financial stability to allow BSP to oversee all nonbank credit provision
Allow BSP to issue its own debt securities
Increase the BSPs capitalization by PHP 150bn, payable in three years
In the area of bank regulations, provide immunity from lawsuits for personnel to allow the BSP to more effectively perform its function as regulator
Payments and Settlements System Bill
The proposed bill provides a legal framework to guarantee that payment and settlement systems in the country are efficient, safe, reliable, affordable
and meet global standards. The bill also empowers the BSP to regulate all types of payment and settlement systems in the country
16
Source: BSP; Bloomberg L.P.
Efficient Mobilization of Resources to Help Sustain Economic Growth
PH financial system evolving to be more responsive to the needs of
the citizenry and able to channel resources to productive activities
Key Strategic Initiatives
Enabling Enables banks and other financial service providers to
Regulatory deliver a wide range of financial services saving,
Framework credit, insurance, payments and remittances to all
System will promote electronic payments and
interoperability to facilitate efficiency, lead to lower
business costs, drive innovation and possibly increase
National Retail
Payment System consumer expenditure. Greater access to payment or
transactional accounts can be an effective on-ramp to a
broader range of financial services
National Coordinated Roadmap to ensure policy coherence,
Strategy for maximize partnerships, and address duplication to
Financial
Inclusion (NSFI) improve financial access
Survey to provide accurate benchmark on the state of
National
Survey on financial inclusion in the country, support evidence
Financial based policy making and provide for an adequate
Inclusion measurement of progress
The Philippines is consistently ranked one of the best, placing 3rd globally in
2014 EIU Report, across a range of indicators on financial inclusion, behind
only Peru and Colombia
World Bank, in a blog article Philippines pioneers approach to monitor and
evaluate the national financial inclusion strategy, lauded ROP citing The
Philippines pioneering and unique approach to gather relevant data on activities,
inputs and indicators to enable collaborative reporting by the various implementing
agencies [of the NSFI].
Based on Brookings Institute's 2016 Financial and Digital Inclusion Project Report:
Advancing Equitable Financial Ecosystems, ROP gained the biggest improvement in
overall score in digital and financial inclusion.
The Financial Inclusion Steering Committee (FISC), chaired by the BSP, was
institutionalized in June 2016 through EO No. 208. FISC provides strategic direction,
guidance and oversight in the implementation of the NSFI
Increased access to finance and improved usage of financial services
Archipelagic barrier poses a big challenge to financial access. 36.2% of
1,634 cities/municipalities without banking presence. BSP is at the
forefront of ensuring increased access to credit particularly for
microenterprises.
Philippine banks physical presence continues to expand 10,936 as of Q2
2016 from 7,585 in 2001
Micro-banking offices are increasing 617 as of Q2 2016 from 251 in 2011
Microfinance
No. of micro-deposit accounts 2.9mn as of Q2 2016 from 1.1mn in 2012
Amount of micro-deposits PHP6.3bn as of Q2 2016 from PHP2.3bn in 2012
Amount of microfinance loans PHP11.7bn as of Q2 2016 from PHP8.4bn in
2012
Micro, Small and Medium Enterprises (MSMEs)
As of Q2 2016, direct lending to Micro and Small Enterprises and Medium
Enterprises amounted to PHP199.21bn and PHP267.98bn, respectively,
benefitting 1.4mn MSMEs
Government financial institutions to come up with financing packages to
capacitate SMEs
Highlighted Programs
BSPs Credit Surety Fund (CSF)- credit enhancement scheme which aims to
increase the credit worthiness of MSMEs that are experiencing difficulty in
obtaining loans from banks due to lack of acceptable collaterals, credit knowledge
and credit track records. As of Dec 2015: 45 CSFs established nationwide; PHP
2.3bn lent to MSMEs; CSF has been institutionalized into law (RA No. 10774
dated 6 February 2016)
DTIs Business Development Services e.g., 1) Shared Service Facilities
(SSF) which provides equipment for common use of MSMEs; and 2) SME Roving
Academy which provides learning programs designed to promote
entrepreneurship and skills enhancement
Proposed PHP 1bn regional credit access for MSMEs for construction of
additional SSFs among others. 17
Sources: EIU; BSP, DTI; NSFI National Strategy on Financial Inclusion
Building Up Human Capital and Improving Social Protection
Increasing per capita income Rising average income
Per capita income at current prices, USD
Per Capita GNI (US$ PPP basis)

x11 9,358
91,322 8,8
7,953 8,422
6,870 7,377
6,392

41,510 x5
6,958 7,324 7,776
16,604 x2 5,735 6,122 6,545
5,069
8,302
2014 in 10 yrs in 20 yrs in 30 yrs
Year 2006-10 2011 2012 2013 2014 2015 2016*
Sustained economic growth has enabled the acceleration in growth of average average
incomes of households. According to latest World Bank estimates, the average
income of Filipinos can double within 10 years and grow eleven-fold in GDP per capita (PPP basis) GNI per capita (PPP basis)
30 years at the current pace of economic growth (WB cited 6% annual growth)

Social reforms and programs to reduce peoples vulnerabilities and build resilient and empowered individuals and communities

Sin Tax Reform Law (RA No. 10351)

Expected to generate revenue to finance investments in health, including enabling 14.7mn poor to be enrolled under the National Health Insurance
Program (NHIP), upgrading of medical facilities and financing additional medical assistance programs
Responsible Parenthood and Reproductive Health Act of 2012 (RA No. 10354) will be put into full force and effect
Mandates the provision and delivery of essential services that are expected to significantly reduce maternal deaths, including clearly-defined
responsibilities of national and local government agencies
Full implementation of Magna Carta for Women from agencies up to barangay level to protect womens rights
Amendments to the Expanded Senior Citizens Act (RA No. 10645)
Provision of mandatory Philhealth coverage for all senior citizens

Note: GNI is significantly larger than GDP in the Philippines owing to worker remittances that supplement residents domestically-generated income, and is a stronger measure of wealth; 2016 Per
Capita Income data is annualized as of 1Q-3Q 2016
Source: NEDA; World Bank Report No. 93530-PH, January 2015 18
Building Up Human Capital and Improving Social Protection
Social reforms and programs to reduce peoples vulnerabilities, and build resilient and empowered individuals and
communities

Strengthening access to education and training for life skills

Increase spending on education and incorporate mandatory education about the effects of drugs
Intensify and expand Alternative Learning System programs
Enactment of the Kindergarten Act of 2012 (RA No. 10157)
Provides for mandatory implementation of universal kindergarten
Enhanced Basic Education Act of 2013 (RA No. 10533)
Institutionalises the implementation of the K to 12 program, which helps align the countrys basic education system with
international standards
The K to 12 Program covers 13 years of basic education with the following key stages: Kindergarten to Grade 3; Grades 4 to 6;
Grades 7 to 10 (Junior High School); Grades 11 and 12 (Senior High School)
In SY 2016-2017, the Department of Education (DepEd) began implementation of Senior High School, a 2 year specialized
upper secondary education
The additional years will equip students with skills for work, entrepreneurship or higher education to better prepare them
for the future
Three tracks available for senior high school students:
Academic: Business, Accountancy, Management (BAM); Humanities, Education, Social Sciences (HESS); and Science,
Technology, Engineering, Mathematics (STEM)
Technical-Vocational
Livelihood
The proposed 2017 budget for DepEd of PHP570.4bn will sustain the K to 12 program through construction of nearly 37,500
classrooms, hiring of 53,831 additional teachers and provision of scholarships in private schools for 2.7mn students

19
Building Up Human Capital and Improving Social Protection

Social reforms and programs to reduce peoples vulnerabilities, and build resilient and empowered individuals and communities

Ladderized Education Act of 2014 (RA No. 10647)

Empower workers by making tertiary education available to them
Comprehensive & Unified Student Financial Assistance UniFAST (RA No. 10687)
Speed up the delivery of government scholarships/ student financial assistance for qualified beneficiaries and adopting uniform standards for
selection and retention
Improving health access and quality
Provide universal health insurance for all Filipinos
Strategic thrusts: a) achieve health-related Millennium Development Goals (MDGs) of improving maternal and child health and combating
priority infectious and non-communicable diseases; b) provide financial risk protection through expansion in the enrolment and benefit
delivery of the National Health Insurance Program (NHIP); c) improve access to quality health care by upgrading public hospital and health
facilities, ensuring adequate competent health human resources and securing the availability of essential medicines
Expansion of social protection
Public social assistance has also expanded significantly in recent years through conditional cash transfers (CCTs) or the Pantawid Pamilyang
Pilipino Program (4Ps) Philippines has the third largest CCT coverage in the world, behind Brazil and Mexico, according to the IMF
Dual objectives of 4Ps:
social assistance a) health grant equivalent to PHP500 per household every month, or a total of PHP6,000 every year; and b)
education grant equivalent to P300 per child every month for ten months, or a total of PHP3,000 every year (up to a maximum of
three enrolled children only)
social development through programs such as health check-ups for pregnant women and children aged 0 to 5; deworming of
schoolchildren aged 6 to 14; enrolment of children in day care, elementary and secondary schools; and family development sessions
CCT budget amounts to PHP62.7bn in 2016 with 4.4mn beneficiaries and PHP78.7bn proposed in 2017 with 4.62mn beneficiary-families
Provide assistance to beneficiaries of Pantawid Pamilyang Pilipino Program (4Ps) or CCTs who graduate from the program to become
independent and self-reliant
Proposed to be expanded to include rice subsidies to poorest families
2017 proposed budget for CCT fund includes PHP23.4bn rice allowance for 3mn CCT-beneficiary
Eligible households will be given 20 kilos of rice for 12 months starting 2017

20
Firm Institutional Foundations Through Structural Reforms
Long Track Record of Purposeful Structural and Policy Reforms
Year Selected Structural/Policy Reforms in the Philippine Economy

1993 Creation of the Bangko Sentral ng Pilipinas (RA No. 7653)

1994 Liberalization of foreign bank entry (RA No. 7721)
1995 Liberalization of the telecommunications industry (RA No. 7925)
1996 An Act to Further Liberalize Foreign Investments, Amending for the Purpose RA7042 (RA No. 8179)
1997 Privatization of water services (MWSS) (RA No. 8041)
1998 Deregulation of the oil industry (RA No. 8479); Adoption of consolidated bank supervision
2000 Philippine E-Commerce Act (RA No. 8792)
2001 Liberalization of the power sector (EPIRA) (RA No. 9136)
2002 Inflation Targeting Framework; Special Purpose Vehicle Act (RA No. 9182); PhilPass
2002 Government Procurement Reform Act (RA No. 9184)
2004 Securitization Act; Adoption of Basel 2; Financial Sector Forum (FSF)
2005 Expanded value-added tax (E-VAT) (RA No. 9337); Fixed Income Exchange
2006 Wholesale Electricity Spot Market (WESM)
2007 Risk-based bank supervision

2009 Privatization of National Transmission Corporation (TransCo) and National Power Corporations (NPC) assets

2011 EO 29 on Open Skies Policy; Adopted phased-immigration to Basel III

2011 Government-Owned-and-Controlled Corporations Governance Act of 2011 (RA No. 10149)

2012 Amendments to Sin Tax Law (RA No. 10351)

22
Long Track Record of Purposeful Structural and Policy Reforms
Year Selected Structural/Policy Reforms in the Philippine Economy

2012 Amendments to the Anti-Money Laundering Law (RA No. 10365)

2013 Act Allowing the Infusion Of Foreign Equity In The Capital Of Rural Banks (RA No. 10574)

2014 Comprehensive Agreement on the Bangsamoro

2014 Go Negosyo Act [promotes the development of micro, small, and medium enterprises ] (RA No. 10644)

2014 Ladderized Education Act (RA No. 10647)

2014 Full Entry of Foreign Banks in the Philippines (RA No. 10641)

2015 Philippine Competition Act (RA No. 10667)

2015 Act Allowing Foreign Vessels to Transport and Co-Load Foreign Cargoes for Domestic Transhipment (RA No. 10668)

2015 Department of Information and Communications Technology Act of 2015 (RA No. 10844)

2015 Tax Incentives Management and Transparency Act (RA No. 10708)
Amendments to the Act to Facilitate the Acquisition of Right-of-Way Site or Location for National Government Infrastructure Projects (RA No.
2016
8974)
2016 Amendments to the Philippine Deposit Insurance Corp. (RA No. 10846)

2016 Customs Modernization and Tariff Act (RA No. 10863)

2016 Operationalizing in the Executive Branch Full Public Disclosure and Transparency (Executive Order (EO) No. 2)

2016 Amendment to Investment Restrictions for Adjustment, Lending and Foreign Companies and Investment Houses (RA No. 10881)

2016 Approving and Adopting the Twenty-five-year Long Term Vision Entitled Ambisyon Natin 2040 as Guide for Development Planning (EO No. 5)

23
Relentless Pursuit of Structural Reforms
Super Majority Coalition in both Houses of Congress and convening of LEDAC* will help facilitate passage of priority
legislative agenda

House of Representatives Senate

Based on speech of House Speaker Pantaleon Alvarez on July
25, 2016 during the opening of Congress
Federal parliamentary system through Constitutional
Convention
Re-imposition of the death penalty for heinous crimes
Emergency powers for the President to address Metro
Manila Traffic
Amendment of the Government Procurement Act. or RA
No. 9184, as amended
Freedom of Information Law
Simplified Income Taxation
Legislative Franchise for Mining Firms
Exportation of Processed Ore only
Increase penalties presently in the statutes for the non-
payment of minimum wage and address contractualization
SSS Pension Hike
During the 25 July 2016 inaugural address of Senate President Aquilino
Pimentel III, he said that the Senate will support the legislative initiatives
that President Rodrigo Duterte envisions as necessary to promote public
welfare.
He also said that the following essential elements of the Program of
Government for Change that majority senators have agreed upon will
hopefully, lay the basis for the development and progress of our country
and people:
Adoption of a Federal System of Government
Reform the taxation system to make it more just, progressive
All-out search for peace
All-out war against crime, drugs, corruption
Strengthen the rule of law
Reform the budget, declare war on waste
Work for sustainable, inclusive economic growth
Protect the environment
Deliver quality education, quality health care
Fight abuse and the abusive
Focus on the needs and situation of the helpless, impoverished members
of Philippine society, especially the sick, the elderly, and the children,
because they need the help of government more than the others

LEDAC is composed of 20 members with the President as Chair and the following as members:
Vice President (Vice Chairman); Senate President; Speaker of the House of Representatives; Seven members of the Cabinet designated by
the President; three members of the Senate designated by the Senate President (nominated are Sen. Franklin Drilon, Sen. Vicente Sotto
III, and Sen. Ralph Recto); three members of the House of Representatives designated by the Speaker of the House (nominated are Cong.
Rodolfo Farias, Cong. Danilo Suarez, and Cong. Dakila Carlo Cua); representative of the Local Government Units (LGUs); representative
from the Youth Sector; representative from the Private Sector 24
*Legislative-Executive Development Advisory Council
Infrastructure Development
The Duterte Administrations Infrastructure Plan: Build Build Build
Accelerate public infrastructure spending to account for 5.1% of GDP (PHP756.4bn) in 2016, 5.4% of GDP (PHP860.7bn) in 2017 and further to 7.1% of
GDP by 2022 to expand further the countrys productive capacity.
Projects expected to create jobs, increase incomes and boost the economy, and deal with problems such as traffic congestion, insufficient and inefficient transportation system.
In the long run, the infrastructure investments are expected to propel the economy to grow 7-8%
The budget of DPWH, a key infrastructure agency, increased by 30.1% to PHP397.1bn in 2016 from PHP304.1bn in 2015 . Its 2017 budget is proposed to increase by 15.5% to
PHP 458.6bn
Closer coordination between major infrastructure agencies such as NEDA, DPWH, DOTr and BCDA to facilitate project implementation
Successful coordination and implementation ensure completion of priority projects listed below within 3-5 years timeframe

Priority Projects (announced on 3 November 2016)

Bridges and Roads Railways, Urban Mass Transport, Airports and Seaports New and Better Cities

NLEX-SLEX Connector Road reduces travel time
from Alabang to Balintawak to 30 minutes which
usually takes more than an hour
Santa Monica - Lawton Bonifacio Global City
Link Bridge cuts down the number of vehicles
passing EDSA by 100,000
UP - Miriam - Ateneo Viaduct 80% decrease in
travel time
Iloilo-Guimaras-Negros-Cebu Link Bridge
allows travel by car and bus
Davao City Bypass Construction Project
reduces travel time from Digos, Davao del Sur to
Panabo, Davao del Norte to 45 minutes from the usual
2-hour travel
Investment Mix
Sea Ports
Manila Clark Railway - Guaranteed 1 hour from
Metro Manila to Clark International Airport
Metro Manila Bus Rapid Transit System fast
and reliable schedule of bus trips in EDSA
Mindanao Railway 2 hours travel time from Davao
to Surigao and CDO ensures freshness of produce
Regional Airport Development new and
modernized airports for increased accessibility
Roll-on/Roll-off (RoRo) Ports Development -
accessibility and affordability of travel within the
country
3%
3%
Clark International Airport New Terminal
Building first worldclass airport in the Philippines
that will reduce traffic and congestion at NAIA
Clark Green City the first of many new cities; a
long-term solution to congestion and traffic woes in
Metro Manila
BGC to NAIA Bus Rapid Transit (BRT) System
15 minutes travel time from Fort Bonifacio to NAIA
Subic-Clark Cargo Railway Project connection
of Subic Airport and Clark airport that will decongest
Metro Manila with cargo trucks and reduce the price of
goods
Jobs Created
120,000 97,500

BRT & Other Transport 19%

18%
730,000
Others
675,000
5%
Airports 195,000
2,000,000
Rail, Roads & Bridges
52%
New Cities 26
Source: Presidential Communications Office
Infrastructure Buildup to Increase Productive Capacity
Measures to Facilitate Infrastructure Development
Administrative measures
Sustain PPP Program to include also unsolicited projects and also pursue hybrid schemes (government to build then tap private sector for
O&M)
Execute expenditure reforms from budget preparation to project implementation to ensure speedy development of critical infrastructure
Step up right-of-way acquisitions to speed up delivery of projects
Started implementation of the following policies to improve and streamline the Governments approval processes of major public investment
projects: (1) Updated the economic hurdle rate from 15 percent to 10 percent to facilitate the economic justification for more projects; (2)
Raised the cost of projects that will require Investment Coordination Committee (ICC) approval from PHP1bn to PHP5bn to declog the ICC
project pipeline approval; (3) Streamlined ICC review procedures for minor changes in scope, design, cost, and extension of implementation or
loan/grant validity of projects; and (4) Streamlined the NEDA Board and ICC membership i.e. NEDA Board membership down to 11 from 22
[new composition: President, Secretaries of NEDA, DOF, DTI, DPWH, DBM, DOTr, DOE, Executive Secretary, Chairperson of MINDA, and
Deputy Governor of BSP] while the ICC has been limited to 6 members, composed of the Secretaries of DOF, NEDA, DBM, DOE, the Executive
Secretary, and Governor of BSP
Public Investment Program Online system (PIPOL) allows online submissions by agencies of their priority programs and projects, including
comprehensive details and status updates. It also allows NEDA to review and validate agency submissions, as well as to generate reports
Implement 24/7 construction work: higher expense to be offset by reducing economic cost of delays; will result in jobs and generate multiplier
effects e.g., related enterprises such as convenience stores
Legislative support
RA No. 8975 or An Act to Ensure Expeditious Implementation of Government Infrastructure Projects - Prohibits lower courts from issuing
temporary restraining orders on national government infrastructure projects covered by the Build-Operate-Transfer Law (BOT Law)
RA No. 10752 or An Act Facilitating the Acquisition of Right-of-Way (ROW) Site or Location for National Government Infrastructure Projects
Proposed critical measures to address institutional, legal and policy issues
Amend the Electric Power Industry Reform Act (RA No. 9136)
Amend the Build-Operate-Transfer (BOT) law (RA No. 7718)
Amend the IRR of the Government Procurement Law (RA No. 9184)
Amend the Water Code of the Philippines (RA No. 1067)
Create National Transport Policy

27
Source: Expenditures and Sources of Financing (BESF) 2017 - Department of Budget and Management (DBM)
Infrastructure Buildup to Increase Productive Capacity
Addressing Metro Manila traffic and flooding
An interagency task force led by the Department of Transportation (DOTr) has been created to manage traffic on all national roads in Metro Manila to solidify
traffic enforcement under one chain of command
The Inter-Agency Committee on Traffic (IACT) includes personnel from the DOTr, Metro Manila Development Authority, Philippine National Police-Highway
Patrol Group (PNP-HPG), Land Transportation Office (LTO), and Land Transportation Franchising and Regulatory Board (LTFRB).
The IACT removed the window hours for the number coding scheme along major thoroughfares in Metro Manila i.e., EDSA, C5, Roxas Boulevard, Alabang-
Zapote Road and roads within the cities of Mandaluyong, Las Pias, and Makati
Request grant of emergency powers for the President/Executive Branch of the government to manage, mitigate and solve the traffic and congestion across the
country for 3 years unless withdrawn sooner by Congress. The following are its proposed salient provisions : 1) decongest traffic in highly urbanized areas; 2)
establish a single authority to manage traffic; 3) expedite procurement processes for transportation projects; 4) limit the issuance of temporary restraining
orders and injunctions to the Supreme Court; exempt key transportation projects from restrictive audit rules; 5) expedite expropriation process for Right-of-Way
acquisitions; and 6) reorganize the DOTr to provide enough manpower in implementing projects. Status: The Senate Committee on Public Services chaired by
Senator Grace Poe concluded public hearings on the emergency powers on 22 September 2016. Ongoing reconciliation between Congress and Senate on draft
bill on draft bill granting emergency powers to the President. DOTr submitted to the Senate a list of infrastructure projects that reflects costs and timelines for
each project with and without emergency powers to convince and make Congress understand better the necessity for an emergency power
Use of Batangas and Subic ports to decongest Manila ports
Revival of the operation of the Pasig River Ferry Service System
Expansion of point to point (P2P) bus services (Existing: Trinoma (North EDSA) to Glorietta 5 (Makati); Robinsons Galleria (Ortigas) to Park Square Makati
(Makati); Alabang Town Center (Alabang) to Greenbelt 1 (Makati); North EDSA (North EDSA) to SM Megamall (Ortigas) and Fairview to Makati
Deployment of more Premium Airport Shuttle Buses
Consider a cable-car system and putting up pontoon bridge in Pasig River for Makati Business District
Maximize the use of existing roads - coordinate with LGUs to map out secondary routes and to consult various stakeholders, including public transport operators
Intensify anti-colorum campaign and out-of-line apprehension including the removal of terminals
Improve capacity of existing mass transit system and station experience by:
reducing queuing time at ticketing stations by having ticket stalls in malls and convenience stores
providing extra customer service for waiting passengers e.g., free WIFI
increasing the number of running trains from 16 trains to 20 trains
increasing the train speed from 40 [kph] to 60 [kph]
reducing headway time from 5 minutes to 3 minutes
extending operating hours from 9:30 p.m. to 10:30 p.m.
addressing delays in the procurement of additional trains
Implement structural mitigation measures to address the perennial flooding in Metro Manila and neighbouring areas and put up new pumping stations in
strategic places
Support infrastructure for growth
Construct more access roads and tourism gateways to service centres and tourist sites
Road development projects to support modern agriculture; expand and improve the construction and rehabilitation of roads and bridges, irrigation facilities
Review power mix with end goal of ensuring adequate power supply at affordable cost 28
Sustained Implementation of the PPP Program
Projects awarded amounting to
15 USD7.05bn*
Status
No. of
Projects
Est. Project
Cost (USD bn)
Sustaining PPP development
Bid out shovel ready projects PROJECTS UNDER IMPLEMENTATION
Pursue solicited and unsolicited projects
Encourage LGU PPP projects Awarded 15 7.0*
Develop and implement hybrid PPP projects (e.g., government to build, private sector to PPP PIPELINE
operate and maintain)
President Rodrigo Duterte has announced that his administration would honour existing Projects under procurement 13 7.5
government contracts and projects awaiting implementation and speed up the roll-out of For approval of relevant government
3 5.1
projects under the PPP programme by streamlining the procurement system and reducing bodies
red tape. This bodes well for the construction and infrastructure sector. We expect rail and
airport projects to gain traction and a slow transition from coal to renewables. BMI For finalization of project structure 2 111.9**
Research, Philippines Infrastructure Report (November 2016)
Projects with ongoing studies 3 0.1
The Philippines has one of the best performing Public-Private Partnership (PPP) Under conceptualization or development 17 TBD
programs in Asiagovernment is in the drivers seat when it comes to
infrastructure development, bringing in the private sector for expertise, capacity, Sub-total for PPP Pipeline 38 124.6
and relevant experienceThe Philippine PPP Center has done much to reduce TOTAL 53 131.6***
some of the roadblocks to PPP implementationIndeed, there are promising *Amount does not include premium payments. Change in the total cost of awarded projects from USD4.8bn
opportunities ahead for the Philippines successful PPP program, already a regional to USD4.4bn accounts for (1) exclusion of O&M cash support of MPOC and approved minimum bid price of
CALA and (2) inclusion of variation cost (for MCX and NAIA Expressway) and ODA component (for LRT Line
leader. With improvements, the Philippine PPP program will go even further in
1 Cavite Ext. and O&M)
reducing the infrastructure gap in the Philippines, and become a model for ASEAN **Amount includes reclamation cost of USD100mn
infrastructure spending. Jesse Ang, Principal Investment Officer, ***This does not include 16 projects with no estimated cost yet.
Status as of 16 November 2016; USD 1 = PHP 45.00
International Finance Corp. PPP Asia (26 November 2015)

Rapid Response of Administration for Infrastructure Development

The NEDA Board approved the following major projects last 14 September 2016,
including PPP:
Metro Manila Flood Management Project, Phase I (PHP23.5bn)
Metro Manila Bus Rapid Transit (BRT) EDSA (PHP37.8bn)
Increase in Passenger Terminal Building (PTB) Area of the Bicol International
Airport (PHP4.8bn)
Change in Scope of the New Bohol Airport Construction and Sustainable
Environment Protection Project (PHP7.8bn)
Ninoy Aquino International Airport (NAIA) PPP Project (PHP74.6bn)
On 14 November 2016, the NEDA Board approved 8 projects as well as the ICC guidelines on
processing projects that will require Chinese support for the conduct of pre-investment and
investment activities. Out of the 8 approved projects, 6 are infrastructure while 2 are agriculture
projects but with infrastructure component:
Improvement/Widening of General Luis Road (Quezon City to Valenzuela City ) (estimated cost
is PHP3.0bn if 24/7 work schedule is adopted and PHP2.8bn if through regular work schedule)
Plaridel Bypass Road Project (PHP10.5bn)
New Cebu International Container Port Project (PHP9.2bn)
North-South Railway - South Line Project (PHP170.7bn)
Malitubog-Maridagao Irrigation Project, Stage 2 (PHP5.4bn)
29
New Nayong Pilipino at Entertainment City (PHP1.5bn)
Awarded Projects to Help Close the Infrastructure Gap
Awarded Projects Indicative Project Private Proponent Status Target
Cost* Completion
(USD mn) Date
1. Daang Hari-SLEX Link Road Project - Construction of a new 4-km 4-lane toll 49.6 Ayala Corporation Started operation on 24 July 2015 Completed
2. PPP for School Infrastructure Project (PSIP) Phase I - Design, financing and 219.8 Citicore Megawide As of 15 Dec 2015: 9,296 classrooms (100%) completed Completed
construction of about 9,303 one-storey and two-storey classrooms, including furniture Consortium Inc. & Bright and delivered
and fixtures Future Educational Facilities
3. NAIA Expressway (Phase II) Project - Construction, operation and maintenance 398.4 Vertex Tollways Devt. Inc. (a As of 23 September 2016: 94.14% completed April 2017
(O&M) of a 4-lane, 7.75 km elevated expressway and 2.22 km at-grade feeder road wholly owned subsidiary of San
Miguel Corporation)
4. PPP for School Infrastructure Project (PSIP) Phase II - Designing, financing, 85.8 Megawide Construction As of 31 August 2016: 2,626 classrooms (60.13%) TBA
and constructing of 4,370 one-storey, two-storey, three-storey and four-storey Corporation, Consortium of BSP completed
classrooms, including furniture, fixtures, and toilets & Co., Inc. & Vicente T. Lao
Construction
5. Automatic Fare Collection System (AFCS) - Decommissioning of the old- 38.2 AF Consortium Operational since December 16, 2015 Completed
magnetic-based ticketing system and replacing the same with contactless-based smart
card technology on LRT Line 1 and 2 and MRT Line 3
6. Mactan-Cebu International Airport Passenger Terminal Building - 389.3 Megawide-GMR (India) As of 30 September 2016: 30.83% completed June 2019
Construction of a new world-class passenger terminal building and the operation of the Consortium
old and new facilities
7. LRT Line 1 Cavite Extension and O&M O&M of existing LRT-1 and 11.7 km 1,442.2 Light Rail Manila Consortium Financial Closure achieved on 11 February 2016; and April 2019
extension of the current LRT 1 starting from Baclaran Station to the future Niyog Station (LRMC) Ongoing soft renovation and upgrades of LRT Line 1
in Bacoor, Cavite existing system and other pre-construction activities
8. Southwest Integrated Transport System - Design, construction, financing, O&M 55.6 MWM Terminals Contract signed on 24 April 2015; and Notice to Proceed March 2018
of a 4.59ha ITS terminal issued by the DOTr on 17 October 2016
9. Cavite-Laguna Expressway - Financing, design, construction, O&M of a 4-lane, 787.3 Metro Pacific Investments Corp Contract signed on 10 July 2015; and Ongoing review of June 2021
44.63 km closed-system tolled expressway draft Detailed Engineering Design and other pre-
construction activities
10. South Integrated Transport System - Design, construction, financing, O&M of a 115.6 Ayala Land Incorporated (ALI) Contract signed on 26 January 2016; and Ongoing April 2018
4.7ha ITS terminal Independent Consultant procurement and pre-
construction activities
11. Bulacan Bulk Water Supply Project - Financing, detailed design, construction, 542.2 Consortium of San Miguel Groundbreaking ceremony held on April 15, 2016; and September
and maintenance of conveyance facilities, treatment facilities and water source Corporation and Korea Water Ongoing pre-construction activities 2018
Resources Corporation
12. Metro Manila Skyway Stage 3 (MMSS-3) Project - The MMSS-3 Project is an 831.8 Citra Central Expressway As of 25 August 2016: 15.239% completed January
elevated expressway over its entire length from Buendia, Makati to Balintawak, Q.C. Corporation (CCEC) 2018
with a distance of about 14.82 kms. and also includes improvement works in selected
at-grade sections.
13. MRT Line 7 Project - Financing, design, construction, O&M of the 23-km. 1,540.0 San Miguel Corp. Groundbreaking ceremony held on April 20, 2016; and September
elevated railway line with 14 stations from San Jose Del Monte, Bulacan to MRT 3 Ongoing pre-construction activities 2019
North Ave. in Quezon City and the 22-km. asphalt road from Bocaue Interchange of
the North Luzon Expressway (NLEX) to the intermodal terminal in Tala
14. Civil Registry System IT Project (Phase II) - Computerization of the civil 35.3 Unisys Public Sector Services Contract signed on 30 September 2016 TBA
registry operations of the Philippine Statistics Authority (PSA) Corp.
15. NLEx-SLEx Connector Road - Construction, O&M of a 8 km. 4-lane elevated 515.6 Metro Pacific Tollways MPTDC and its subsidiary MNTC accepted the NOA on TBA
expressway over the Philippine National Railway (PNR) right of way Development Corp. (MPTDC) September 26, 2016
and its subsidiary Manila
North Tollways Corporation
(MNTC)
*Indicative project cost does not include premium payments 30
Source: PPP Center
Sound and Strengthening Government Finances
Institute Progressive Tax Policy Reform and More Effective Tax Collection
Administrative measures to complement proposed legislative fiscal
Tax effort is back on a higher trajectory reforms to ensure healthy fiscal position

14.2
Revenue impact from administrative measures is estimated
to reach PHP200bn or 1% of GDP by 2019
13.6 13.6 13.6
13.5
13.3
Proposed administrative measures at the BIR and BOC
12.9
Simplify tax system to expand the tax base, modernize
governance, reduce corruption and inefficiency, and cut red tape
12.4
12.2 Expand BIRs electronic filing saturation (current baseline of
12.1
62.5% or 22mn returns in 2015)
Expand BIRs Large Taxpayer Service which monitors 3,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Sep taxpayers and improve taxpayer segmentation for better
2016
management of revenue base
Rationalize the import permit requirements for BOC
Rigorous tax administration continues to yield positive results
Craft IRR of Customs Modernization and Tariff Act (RA No.
NG Revenue (% of GDP), BIR and BOC Revenue (PHP mn) 10863) with inputs from stakeholders
Adopt random audit of shipment
1,600,000 17 Peg valuation of goods to prevailing real time prices in the
15.1 15.8 15.9* 16
international market
1,400,000 14.9 15
1,433,302

14.5 14 Accelerate the RATE, RATS and RIPS program and work closely
1,334,762

1,200,000 14.0 14.0 13

1,293,226

13.4 with DOJ to speed up resolution of pending cases

1,216,661

12
1,000,000 11
1,057,916

10
924,146

800,000 9 Other legislative measures being studied to support

369,277

367,534
822,623

8
304,925

321,298
289,866
265,108
259,241
750,287

collection efficiency
220,307

600,000 7
6
400,000 5 Exempt BIR and BOC employees from Salary Standardization
4
200,000 3 Law
2 Increase fiscal autonomy of BIR and BOC
0 1
2009 2010 2011 2012 2013 2014 2015
Jan-Oct
2016
Revenue-to-GDP BIR Reveneus BOC Revenues
Sources: Department of Finance (DOF), Bureau of the Treasury (BTr) 32
*Q1-Q3 2016
Proposed Tax Reform Packages to Broaden the Tax Base
Priority Legislative Measures
The Comprehensive Tax Reform Package which aims for a simpler, more equitable and efficient tax system with a goal of lowering the tax rate at the same time
broadening the tax base and increasing revenues
Lower personal income and corporate tax rate to be competitive with the region to boost spending power of wage earners and encourage investment inflows
Revenue impact from package 1 of the tax policy reform is estimated to reach PHP400bn or 2% of GDP by 2019
Package 1 Personal income tax (PIT) and consumption
tax
Adjust brackets to correct income creeping
Reduce PIT max rate to 25% from 32%, except for the
highest income earners to maintain progressivity
Shift to modified gross system to simplify PIT system
Status: Draft Bill submitted by the Department of Finance
to the House of Representatives on Sep 26, 2016
Other Reforms in the Pipeline
Package 2 Healthy tax
Package 3 Corporate income tax (CIT)
Reduce CIT rate to 25% from 30%
Simplify other corporate income tax provisions to
improve compliance
Package 4 Property tax
Lower estate and donors tax rate as well as rate of
transaction taxes on land (DST, transfer tax,
registration fees)
Package 5 Capital income tax
Reduce tax on interest income earned on peso deposit
and investment from 20%-10%
Package 6 Other tax measures as needed
Offsetting Measures
Expand VAT base by limiting exemptions to raw food and other necessities (e.g., education, health)
Low income consumers and businesses are already protected by the marginal threshold which
can be adjusted if needed
Use targeted programs to protect the poor and vulnerable
Increase excise on all petroleum products and index to inflation
Relax strict bank secrecy laws for fraud cases
Make tax evasion as a predicate crime to money laundering
Levy tax on sweetened beverages and index to inflation
Increase excise on alcohol after the current sin tax measures
Rationalize fiscal incentives to be more transparent, targeted, performance-based, & time-bound
sunset provisions to existing incentives
Expand the coverage of the Fiscal Incentives Review Board to include all incentive recipients
beyond GOCCs
Replace the 5% gross income earned tax rate to a reduced CIT rate of 15%
Limit VAT zero-rating to direct exporters
Give full VAT refund in cash, abolish tax credit certificates
Rationalize valuation of properties
Increase valuation closer to market prices
Review valuation every 3 years and adjust accordingly
Harmonize capital income tax rates for dollar deposits and investment, dividends, equity, fixed
income rates towards 10%
Increase tax on stocks traded in the stock market from 0.5% to 1% on gross selling price
Tax on fatty food, luxury items such as automobiles, yachts and jewelry, lottery and casino
Mining taxes
33
Strengthened Public Finances and Debt Dynamics
Republics fiscal commitment is enshrined in laws and administrative issuances:
Presidential Decree No. 1177 provides for the automatic appropriation of principal and interest payments on public debt
The 1987 Philippine Constitution requires all foreign loans may only be incurred pursuant to the BSPs law and regulations
Republic Act (RA) No. 245 and DOF Order 141-95 or An Act Authorizing the Secretary of Finance to Borrow to Meet Public Expenditures Authorized By
Law, mandates issuance of T-bonds shall not be shorter than 1year and not longer than 25 years
RA No. 7653 or New Central Bank Act mandates BSP to maintain adequate reserves to meet demands for foreign currency
Letter of Intent 158 and Administrative Order 99: all foreign borrowing is required to be submitted to the Monetary Board for approval-in-principle
RA No. 4860 or the Foreign Borrowings Act tasked BSP to promulgate and enforce measure to reduce external debt service requirements
Administrative Order (AO) No. 270 - Prescribing the Implementing Rules and Regulations of the Local Government Code of 1991: The appropriated
aggregate budgetary amount of local government units (LGUs) shall not exceed the estimates of income
Republics credit profile strengthened by market-oriented practices of managing debt
Debt Management: Strategic and proactive approach to debt management has enhanced the portfolio risks profile and reduced the cost
of borrowing for the Government
Subsidy Expenditures: Unlike many peers, ROP expenditures is not encumbered by large structural subsidies
Diversified Sources of Financing: Government is shifting towards domestic markets for PHP denominated debt, while retaining options
to tap comparatively cost-effective financing from markets other than USD bonds (e.g. Samurai Bonds, Global Peso bonds, Euro Bonds,
Dimsum Bonds) as well as external official development financing
Bond Sinking Fund: The Fund assures investor of the Governments capability to repay maturing Peso-denominated debt as it falls due
Strategic Guidelines Set for the 2013 2014 2015 2014 2015 2016 2017 2018
Liability Management Program Actual Actual Actual Program
a. Reduce debt service payments (Interest
18.8 16.8 14.7 17.0-19.5 15.5-18.5 14.3-16.9 12.6-15.5 10.9-14.1
payments/Revenue, %)
b. Minimize foreign exchange risk by
reducing foreign currency denominated
34.3 31.6 32.9 29.0-33.7 28.6-32.6 29.9-32.7 30.5-32.5 29.9-31.8
debt (as % of total debt stock, excludes
Global Peso Notes)
c. Minimize financing risks by:
Minimizing debt maturing in one
9.9 6.2 4.9 Not more than 15%
year (% of total)
Maintaining average maturity of
10 9.9 10.1 7-10 years
debt portfolio (in years)
34
* Excludes Global Peso Notes
Sources: Bureau of the Treasury
Sound Fiscal Position
Manageable fiscal deficits
National Government (NG) Revenue, Expenditure and Deficit (% of GDP), General Government Revenue (% of GDP)

21.5 22.7
21.0 21.0
17.0 16.7 16.7 17.7 16.9 18.0
16.5 16.0 16.8 16.3 16.8
15.7

15.6 16.5 15.6 15.8 15.9

14.4 14.0 14.0 14.5 14.9 15.1
13.4

-1.0 -0.2 -0.9 -1.4 -0.6 -0.9

-2.6 -2.0 -2.3 -2.1
-3.7 -3.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Sep 2016

NG Revenues/GDP NG Expenditures/GDP NG Deficit/GDP Gen. Gov. Revenues/GDP

Healthy primary balance

NG Primary Surplus (% of GDP)
3.9
3.7

2.7 2.6
2.0
1.4 1.4
0.8 0.7

-0.2 -0.2
0.3
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Sep 2016

Primary Surplus/GDP

35
Sources: DOF, BTr
Sustainable Fiscal Revenue and Spending Path
Sustained improvement in revenue collection with National Government revenue-to-GDP of 15.9% in Jan-Sep 2016

National Government Fiscal Performance

Actual Actual
2016 Outlook1
Jan-Oct Jan-Oct Jan-Sep
2015
2016 2015 2016
YoY Growth (%)
PHP Bn % of GDP PHP Bn % of GDP PHP Bn % of GDP

Total Revenues 1,821.4 1,768.0 3.0 15.9 2,109.0 15.8 2,256.7 15.5

Tax Revenues 1,629.6 1,505.1 8.3 14.2 1,815.5 13.6 2,044.0 14.1

Bureau of Internal
1,293.2 1,190.6 8.6 11.3 1,433.3 10.8 1,620.0 11.2
Revenues

Bureau of Customs 321.3 300.7 6.8 2.8 367.5 2.8 409.0 2.8

Non-Tax Revenues 191.8 262.9 (27.0) 1.7 293.3 2.2 210.7 1.5

Bureau of the Treasury 91.1 97.4 (6.5) 0.8 110.0 0.8 n.a. n.a.

Privatization 0.6 62.7 (99.1) 0.0 62.8 0.5 2.0 0.0

Expenditure 2,037.4 1,820.6 11.9 18.0 2,230.6 16.8 2,645.6 18.2

Surplus/(Deficit) (216.0) (52.6) 310.9 (2.1) (121.7) (0.9) (388.9) (2.7)

Primary Surplus 49.8 219.3 (77.3) 0.3 187.7 1.4 n.a. n.a.

1Emerging outlook or projection for the year approved by the DBCC on Jul 5, 2016
n.a. not available
Note: Some values may not sum up to exact figure due to rounding
Source: DOF, Budget of Expenditures and Sources of Financing (BESF) 2017 - Department of Budget and Management (DBM)
36
Declining Debt Service Burden
No bunching of maturities; amortization is spread out over the long-term
As of End Jun 2016 (PHP bn)

343 290
273
301 173 0
302 313 128 156 78 234 217 143
166
199 73 28 225
187 17 0 32 215
155 143 148 131 50 141 138 89 145 24 20
81 99 107 100 84 97 110
49 58 61 51 51 52 36 32
2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041-2056
Jun 2016

Domestic External

Steady decline in the Republics interest service burden

Interest payments / NG revenue (%) and Interest payments / NG expenditure (%)

36.9 36.7
35.4

31.7

31.1
29.2 29.7 24.8 24.4
23.6
27.0 22.6
20.5 20.4
23.3 18.8
21.4 16.8
14.7 15.4
19.6 19.3 14.9 14.6
17.9 17.6 17.2 13.0
16.2
13.9
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jan-Oct Jan-Oct
Jan-Oct IP/Rev Jan-Oct IP/Exp Interest Payments/Revenue Interest Payments/Expenditure 2015 2016

Source: BTr
37
Fiscal Deficit is Increasingly being Funded from Domestic Sources
Ample domestic liquidity allows ROP to source majority of its
Sustained decline in debt/GDP ratio financing needs from domestic market minimizing FX risks
NG debt /GDP and GG Debt /GDP (%) Total debt breakdown (%)
68.5
59.2 61.4
54.7 54.8
51.6 53.9 52.4 51 51.5 48 44
49.2 44 41
44.2 44.1 44.3 45.4 44.7 43.1* 43 44
42.2 41.4 40.6 42 42 36 34 33 35 36
39.2
36.4 36.3 35.4 **
64 66 67 65 64
56 56 59 57 56 58 58
52

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 end-
National Gov't Debt General Gov't Debt Sep
External Domestic 2016
* End Sept 2016
**End June 2016
Long-dated debt profile reduces refinancing risk
Domestic debt breakdown (%) External debt breakdown (%)

27 29

44
41 54 90 96 100 100 100 100 100
100 100
70
26 78 79 82 83 84
30 20 14
29 12 10 8
19 10
10 8 9 7 7 8 10 4
2003 2005 2010 2011 2012 2013 2014 2015 end-Sep 2003 2005 2010 2011 2012 2013 2014 2015 end-Sep
2016 2016
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Unless otherwise stated, graphs pertain to National Government (NG) debt
38
Sources: BTr, DOF
Markets Recognize Philippines Strong Credit Quality

5Y sovereign CDS levels (basis points)

400 Philippines (Baa2/BBB/BBB-) Slovenia (Baa3/A/A-) Peru (A3/BBB+/BBB+) Thailand (Baa1/BBB+/BBB+)

Mexico (A3/BBB+/BBB+) Malaysia (A3/A-/A-) Indonesia (Baa3/BB+/BBB-) Colombia (Baa2/BBB/BBB)

350

300

250

204.338 Colombia
200 192.387 Mexico
181.514 Indonesia
172.106 Malaysia
150
131.888 Philippines
124.359 Peru
102.372 Slovenia
100 96.532 Thailand

50

(Moodys/S&P/Fitch)
Source: Bloomberg L.P. (Data as of 21 November 2016) 39
Sophisticated Debt Management
Innovative liability management exercises have been consistently met with strong investor interest

Jan 2012 Nov 2012 Jan 2014 Jan 2015 Sep 2015 Feb 2016

1st Asian issuer Largest global 1st one-day 1st benchmark Domestic debt 1st trade
to launch a tender offer accelerated USD transaction swap will coming out of
transaction in ever done by a Switch Tender announced in result in EM Asia in
2012 sovereign in Offer executed 2015 PHP2.4bn 2016
Asia ex-Japan by an Asian savings on
Lowest ever Lowest coupon Concurrent
sovereign interest
coupon (4.20%) Deal swapped ever achieved execution of
achieved by an higher-cost Received expense in the
by the ROP for one-day
Highlights of Asian sovereign FCY- aggregate first year
a USD issue of accelerated
Transaction for a bond denominated offers of over any tenor Minimum switch tender
greater than the debt with USD 2.6bn in coupon of offer
Lowest coupon
10-year tenor lower-cost notional value 3.625% for
(3.95%) ever Lowest-
LCY- and accepted 10Y and
Lowest ever achieved in the coupon by
denominated USD 870mn 4.625% for
coupon (5.0%) 25Y/30Y tenor ROP at 3.7%
debt with notional with a 25Y
achieved for the by an Asian for a 25-year
longer tenors purchase price
ROP in the 25- sovereign debt
of USD 1.08bn
year tenor Resulted in
NPV savings of
over USD
14mn

Order book
Oversubscription 8.3x 7.8x 9.0x 9.2x 3.9x 6.7x

Source: Bureau of the Treasury; Bloomberg L.P. 40

Deepening Capital Markets Provide Funding Options
Strong confidence witnessed from ROPs benchmark bond issuances have paved the way for the successful capital raising efforts of
domestic corporate entities, who are able to increasingly tap both local and international capital markets, to meet their funding needs
Expansion plans of firms increasingly financed by capital market
Issuer Expansion Projects
South Luzon Tollway Corp Listed in PDEX in May 2015 bonds worth PHP7.3bn to fund road building activities
Completing the construction of tollroad 4: Sto. Tomas, Batangas to Lucena, Quezon
8990 Holdings Inc. On Jul 16, 2015 raised PHP9bn in their maiden bond issuance in order to secure diversification of their long term financing in
constructing houses for the masses
Aboitiz Equity Ventures, Inc. Issued in Aug 2015 this is the largest corporate bond issuance (PHP24bn) in 2015. The issuance is for planned acquisitions
and further investments e.g., take active part in infrastructure sector
Filinvest Land, Inc. Issued PHP8bn worth of bonds in Aug 2015 to develop 19.2 hectares of Cebus South Road Properties (SRP) that they won
through bidding
SM Prime Holdings, Inc. On Nov 25, 2015 raised PHP20bn in order to support the funding needs of their mall expansion programs
On Jul 26, 2016 raised PHP10bn to sustain their development roadmap which includes provincial expansions where there are
huge growth potentials
SMC Global Power Holdings Issued an aggregate of PHP15bn worth of bonds in Jul 2016 to support the current building of additional capacities for their
Corp Greenfield power plants in Limay, Bataan and Malita, Davao.
Shelf registration program boosts corporate bond issuance. Taking advantage of the program to date are SM Prime Holdings Inc., Ayala Corp., SMC
Global Power Holdings Corp., DMCI Project Developers Inc., Ayala Land Inc. The SEC has been active in promoting efficiency-related measures such this shelf
registration program, seen as a step in improving the quality of business regulation. Of the total PHP 137bn fixed rate and deferred coupon paying bonds for the period
January-July 2016, PHP121bn were registered under this system.

Funding of corporates through the market remains robust IPOs well-received despite ongoing global volatilities

New Bond Listings, 2013-2016 IPOs, 2013- 2016

2013 2014 2015 2016* 2013 2014 2015 2016*
Number of Issuers 9 19 11 9 Number of Issuers 4 5 4 3
Average Issue Size (PHP bn) 9.3 10.1 9.8 8.0
Total Amount (PHP bn) 61.0 14.5 5.2 55.6
Total Amount (PHP bn) 83.5 191.9 107.4 71.7 *as of November 2016

*as of November 2016

Issuer names still in the pipeline includes Ayala Land, Inc., Double Dragon Shakeys (a popular pizza chain) IPO has been approved by PSE for listing
and GT Capital on 25 November 2016.
41
Strong External Position
Robust External Profile Lends Resiliency to Global Economic Stresses
The Philippines posted 13 consecutive years of current account surplus from 2003-2015
Balance of payments (USD mn)

15,243

9,236
11,400
5,085
8,556 6,421 2,616
3,769
2,410 1,684
89 634

Net Unclassified Items Financial Account

Capital Account Current Account

Overall BOP Position -2,858

2005 2006 2007 2008 2009 2010 2011 2012 r/ 2013 r/ 2014 r/ 2015 r/ 1H 2015 1H 2016
Note: Beginning 2005, the BOP is based on IMFs BPM6

BOP surplus in 2015 was USD2.6bn, a reversal from the BOP deficit recorded in 2014 of USD2.9bn. In 2016, BOP is
projected to remain in surplus of USD2.0bn. BOP position as of end-Oct 2016 is USD1.5bn
ROPs current account continues to be in surplus at USD778mn at end-June 2016, supported by robust remittances from
overseas Filipinos (OFs), substantial Business Process Outsourcing (BPO) revenues and increasing tourism receipts. The
2015 current account posted a surplus of USD8.4bn, equivalent to 2.9% of GDP

Source: BSP
43
Structural and Sticky Current Account Surplus Provides Buffer Against Shocks
Business Process Outsourcing (BPO) and increasingly tourism sector act as additional, strong economic engines,
helping ensure resiliency of ROPs external payments position against external stresses

BPO a strong driver of employment and revenues Tourism receipts provide key support to the current account

BPO employment (000s) and revenues (USD bn) International visitor receipts (USD bn) and arrivals (mn)

+13.9% +12.6%
Arrivals 6.5*
revenue
Revenues Growth
1,800
Receipts
growth in
4.8* 5.0*
in 2015 4.4 arrivals
Employment 3.8
1,146 3.4 3.5
1,044 3.0
958 2.5
858
777 4.0
640 3.6
527
371 424
236 298

4.5 6.1 7.1 8.9 11 13.2 15.8 18.0 20.5 22.9 38.9 3.5 3.9 4.3 4.7 4.8 5.4 6.0
3.4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2022P 2010 2011 2012 2013 2014 2015 2016P Jan-Aug Jan-Aug
2015 2016
Sustained growth of remittances over the years
Overseas Filipinos' cash remittances (USD bn) +4.0%
growth in
2015
24.6 25.6 26.8 +4.8%
21.4 23.0
18.8 20.1 19.1 20.0
16.4 17.3
12.8 14.5
10.7
8.6

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016P Jan-Sep 2015 Jan-Sep 2016

*Exchange Rate: USD1=PHP44.4 for 2014; USD1=PHP45.5 for 2015 ; [Jan-Aug 2015: USD1=PHP44.836 and Jan-Aug 2016: USD1=PHP46.895; 2016 projection based on DOT statements]
Sources: BSP, Department of Tourism, IBPAP
44
Notes: OF Remittances projection for 2016 computed based on actual 2015 data and MB approved 2016 growth projections
Remittances Growth Remains Strong and Diversified
Even during periods of conflict in the Middle East,
ROP experienced positive remittance growth Diversified sources of remittances
Domestic Credit to Private Sector (% of GDP, 2014)*
Gross Loans/Deposits Ratio (%)
Overseas workers YoY growth
remittance (USDbn) 2008 2015
Falling Oil USD 16.4 bn USD 25.8 bn
30 Prices
30%
Others
Middle Others 0%
Middle
East 0%
East
15% Asia
23%
Asia 15%
25 25.0% 25%
12%

Europe
Arab Spring Rise of Isis 16%
20 20%
19.4%
Oceania Europe
1% 16%
Cedar
Revolution Americas Oceania Americas
15 15% 56% 2% 44%
13.7%
13.2%
12.8%

Iraq
10 War 10% YoY net cash remittances growth averaged 10.9% for 2003-
Israeli-
7.4% 2015, highlighting the consistency and strength of remittance
Lebanon 8.2% 7.20%
Conflict 7.2% growth in ROP over the past decades
Shia 6.3%

5
Insurgency in 5.6%
5%
Remittances come from diversified sources, the largest coming
Yemen
from Americas (44%)
4.60%

Middle East contributes only 23% towards total

remittances; Asia increasingly a source
0 0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Based on historical evidence and current outlook, ongoing
tensions in the Middle East are unlikely to significantly impact
Overseas worker's remittance YoY growth
remittances to ROP
Low oil prices have not shown any visible impact on
Sources: BSP for remittances data remittance thus far 45
Healthy External Finances Mitigate Against BOP Stresses
while helping smoothen volatility in the foreign exchange
Reserve buffer provides protection against external market by enabling the necessary adjustments in a continued
payments shocks volatile global environment
FX reserves (USD bn) and months of import cover Implied Volatility (YOY %, as of November 21, 2016)
90.0 9.9 14 Indonesia Malaysian Korean Japanese Philippine Chinese
FX reserves 11.5 11.6
11.6 9.9 10.3 Rupiah Ringgit Won Yen Peso Renminbi Thai Baht
80.0
10.4 12 13.10
12.90
70.0 75.3 12.15 12.05
Import cover 9.2 83.8 83.2 85.1 10
60.0 80.7
62.4 79.5
50.0 6.7 6.4 8
7.75 7.72
40.0 5.1 6 6.93
4.6 44.2
30.0 37.6
33.8 4
20.0
23.0
18.5 2
10.0
0.0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Oct-16

Sustained decline in external debt-to-GDP ratio underscores ROP enjoys a healthy level of international reserves of
the health of external finances USD85.1bn as of Oct 2016, sufficient to cover 9.9 months of total
imports
External debt (USD bn) and external debt/GDP (%)
Adequate reserves help guard against external shocks and
73.6 75.6 80.0 78.5 77.7 77.5 77.7
underscores the ability of ROP to pay back any foreign currency
61.6 66.5 65.2 64.7
61.4 denominated debt
The Philippines is now a net external creditor nation to the IMF.
59.7
Furthermore, the Philippines is a fully participating member of the
50.2
44.5 Chiang Mai Initiative Multilateralization (a USD240bn swap facility of
37.6 38.4 36.9 which ROP has a committed contribution of USD9.1bn; ROP may
33.7 32.0
28.9 27.3 26.5 26.2 borrow up to 2.5 times its contribution), enhancing the strength of
ROPs external and FX positions

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 BSP and Bank of Japan also recently entered into a peso-yen swap
External Debt External Debt Ratio 2016 facility under a cross-border liquidity arrangement
46
Source: BSP, Bloomberg
Export Market Diversified
To further diversify its export market, ROP plans to improve access in both domestic and international markets and maximize gains in FTAs :
increase inbound and outbound trade missions;
participate in exhibitions and trade fairs;
focus on ASEAN as market for ROP products (ASEAN population: 620mn); and
maximize availment of EU-Generalised Scheme of Preferences Plus (GSP+), pursue renegotiation of Japan-Philippines Economic Partnership Agreement
(JPEPA), push for ratification of Philippines and the Europe Free Trade Association (EFTA) Free Trade Agreement (PH-EFTA FTA)
In December 2014, it gained stronger foothold in Europe with the approved application of the Philippines for the EU-GSP+. The Philippines is the first ASEAN
country to join the GSP+. This initiative covers 6,274 products, all of which are subject to zero duty.
o The countrys beneficiary status has helped increase exports to EU by 6.8% in 2015
In April 2016, ROP and EFTA states Iceland, Liechtenstein, Norway and Switzerland signed a FTA. The PH-EFTA FTA has a comprehensive coverage,
including trade in goods (industrial and agricultural goods, fish and other marine products), rules of origin, trade facilitation, trade in services, investment,
competition, protection of intellectual property rights, government procurement and sustainable development.
The direct effect of Brexit on the Philippines is seen as minimal - merchandise exports and imports between the UK and ROP is small, accounting for only
0.9% and 0.5% of the total in 2010-2015, respectively
ROP is expected to benefit from existing trade agreements: ASEAN Free Trade Agreement (AFTA), ASEAN-Australia-New Zealand Free Trade Agreement
(AANZFTA), ASEAN-China Free Trade Agreement (ACFTA), ASEAN-India Free Trade Agreement (AIFTA), ASEAN-Japan Comprehensive Economic Partnership
Agreement (AJCEPA), ASEAN-Korea Free Trade Agreement (AKFTA)
APEC Trade Repository, a single online reference point on APEC economies' trade and tariff mechanisms with the objective of further promoting APEC's work
on transparency, connectivity and trade facilitation, was launched in November 2015
The Philippines will now implement the Trade Facilitation Agreement (WTO-TFA) as it complied with its Category A Notification commitments that covered
areas of customs administration
The country's export industry benefits from a revitalized manufacturing sector and its continued linkage with the agriculture sector
Updated Philippine Export Development Plan approved in February 2016 sets the targets and strategies for the growth of the exports industry

ROPs diversified export markets act as buffer for softening global demand
Exports by destination (USD bn)
EU China Japan USA ASEAN Others 13.9
15.5 15.3
15.6 12.9
14.8 19.6 15.6 9.2 8.5
8.8
4.8 4.5 11.2 9.8 8.7
4.2 4.4 8.3 8.8
8.6 8.2 3.4 7.6 7.1 7.4
6.8 12.0 13.9 12.4
7.3 7.7 7.8 8.9 9.9
5.7 5.5 6.2 8.0 6.4
2.9 5.7 6.1 6.2 7.0
8.5 8.4 7.9 6.6 5.9 5.9 6.6 6.7 7.2
2007 2008 2009 2010 2011 2012 2013 2014 2015
47
Source: PSA. DTI, NEDA. For more details on the PEDP please refer to this link - http://www.dti.gov.ph/emb/images/PEDP_2015-2017_Executive%20Summary%20_28as_of_09_Mar2016_29.pdf; on EU
GSP+ please refer to this link - http://www.dti.gov.ph/emb/index.php/emb-focus-2/eu-gsp
Sound and Stable Financial System
Robust Banking System
Asset quality of the banking system remains extremely strong Prudent NPL coverage ratios will ensure that the banking
with an NPL ratio of only 1.6% system is well-prepared for any unforeseen shocks
Gross loans (PHP bn) and NPL ratios (%) of U/KBs NPL coverage ratio (%) of U/KBs
9.0
6,144.62
8.0
7.0
135.6
6.0
5.0
4.0
3.0
1.6 2.0
1.0
0.0

Loans outstanding NPL ratio

is supported by strong balance sheets with capitalization

Sustainable profitability of banking sector levels well above international norms
Net profit of U/KBs (PHP bn) 2016 Q3: Capital adequacy ratio (%) of U/KBs
PHP101.7bn
16.1

15.4

BSP Regulatory Requirement: 10%

International Standard: 8%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Note: Banking system statistics refers to universal and commercial banks data Solo basis Consolidated basis
Source: BSP
49
Banking System Poses Minimal Risk
Limited exposures of banks mitigate the systems potential risk from contingent liabilities
Strong deposit base and low leverage support banking sector Potential contingent liabilities of the banking sector is smaller
funding than neighbors given size of the sector
Gross Loans/Deposits Ratio (%) Philippine Banking System Domestic Credit to Private Sector (% of GDP, 2015)*

73.3 73.5
72.4 Philippines 41.9
71 70.7 71.23
69.7 70
69.3
68.1 68.4 Indonesia 39.1

64.5 64.4 Malaysia 125.2

Korea 140.6

China 155.3

Thailand 151.3

Steady decline in non-performing real estate loans despite Residential Real Property Price Index to help better assess
higher real estate exposure trends in housing prices
Real estate exposure (PHP bn) and Non-performing real estate loans ratio (%) (%, year-on-year)
20 17.9 18.4
3.7 18
3.6 3.8
3.6 16
3.3 3.2 3.4 14 12.8
3.2 9.7 11.3
12
2.8 2.8 3.0 10 8.6 9.2 9.4
2.6 2.6
8.3
2.6 2.8 6.3
2.5 8 5.9
2.3 2.6
2.2 6 5.1
2.1 2.1 2.4 4.3
2.0
1516 1554 2.2 4 2.7
814 843 900 940 1007 1035 1116 1159 1221 1273 1359 1432 1623 1.8
2.0 2
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 0
2012 2013 2014 2015 2016 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Real estate exposure Non-performing real estate loans ratio Overall National Capital Region (NCR) Areas outside NCR
50
Sources: BSP; *World Bank
Ahead of the Curve: BSP Continues to Strengthen Financial Intermediation
Higher minimum capital standards than Basel recommendations; early adoption in January 2014 of Basel
III capital requirements
BSP requires banks to carry out stress tests twice a year on the effect of a 20% and 50% write off of
Sound regulatory various credit exposures (including real estate) on banks balance sheets. Based on latest stress test, the
banking system can withstand significant decline in real estate prices. Banks would have enough capital to
framework for banks
meet the minimum regulatory requirement.
Measures to strengthen credit underwriting standards (e.g., focus on cash flow analysis and ability-to-pay)
and consumer protection standards (e.g., institutionalize disclosure and transparency, financial awareness
and education)

Stepping up surveillance of
real estate sector
BSP broadened the coverage of banks real estate activities that it monitors, expanding reporting
guidelines which now covers loans to developers of socialized and low-cost housing, and to individuals,
and credit supported by non-risk collaterals of Home Guarantee Corp. Moreover, banks are also required
to report their investments in real estate securities
BSP will require banks to put up additional capital rather than limit exposure to the real estate sector. In a
new prudential guideline, banks must meet the requirement of 10 percent capital adequacy ratio (CAR) of
qualifying capital while its subsidiary thrift banks will have to maintain a common equity tier 1 (CET1)
level of at least six percent of qualifying capital. These two specific thresholds reinforces the macro-
prudential policy that banks must have sufficient capital to absorb any possible shock on its credit
exposures
Banks are permitted to purchase developers previously issued loans to buyers only if the loans meet
minimum standards
BSP has generated Residential Real Estate Price Index using information from banks' approved housing
loan applications to provide a tool in assessing the real estate and credit market conditions in the country

Stronger policy coordination
to ensure early
identification and mitigation
of system risks and warning
signals
Created a high-level Financial Stability Committee at the BSP
Institutionalized the Financial Stability Coordination Council, with purview over financial crisis
management, non-bank sources of credit, capital flows management, capital market reforms, and
corporate leverage
Establish a system-wide Crisis Resolution Framework for the Philippine Financial System

Source: BSP; IMF 51

Economic Outlook
ROP Expects Continued Robust Growth in the Medium-Term
The Philippine economy is now on a higher growth trajectory with increasing contribution from the manufacturing
sector, infrastructure investment, and robust services sector

2015 2016 2017 2018 2019 2020 2021 2022

Actual
Projections2/

Real GDP Growth (%) 5.8 6.0-7.0 6.5-7.5 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0 7.0-8.0

Dubai Crude Oil (USD/bbl) 50.9 35-50 40-55 45-60 50-65 50-65 50-65 50-65

Inflation (%, average)1/ 1.4 2.0-4.0 2.0-4.0 2.0-4.0

364 Days T-bill Rate (%) 2.08 2.0-4.0 2.5-4.0 2.5-4.0 2.5-4.0 2.5-4.0 2.5-4.0 2.5-4.0

LIBOR, 6 mos (%) 0.5 0.8-1.8 1.0-2.0 1.5-2.5 1.5-2.5 1.5-2.5 1.5-2.5 1.5-2.5

Exchange Rate (PHP/USD) 45.5 45-48 45-48 45-48 45-48 45-48 45-48 45-48

Balance of Payments (USD, bn) 2.6 2.0 3/

Current Account (USD, bn) 8.4 5.83/

OF Cash Remittances (USD, bn) 25.8 26.83/

Merchandise Exports a/(% growth) -13.1 3.0 6.0 8.0 10.0 10.0 11.0 11.0

Merchandise Imports a/ (% growth) -3.2 7.0 10.0 11.0 12.0 12.0 13.0 13.0

Gross International Reserves (USD, bn) 80.7 82.73/b/

Sources: PSA, BSP, Bloomberg
1/ Inflation target range for 2016-2018
2/ Assumption adopted by the DBCC on July 5, 2016
3/ MB approved on 26 May 2016; OF remiitances computed based on MB approved growth
a/ Based on Balance of Payments and International Investment Position Manual, 6th Ed. (BPM6)
b/ without revaluation 53
r/ revised; NA Not Applicable
Expected Drivers of Growth in 2016

Household consumption: remittance inflows, better employment prospects, strong

consumer confidence, low inflation, low interest rates
Government spending: expansion of human development and social protection programs
(i.e., conditional cash transfer (CCT), K to 12, health, etc.)
Demand Side
Investment: public construction, including infrastructure and reconstruction; private
construction
Exports of services: good prospects for Business Process Management (BPM) and tourism

Low petroleum prices

Real estate, renting, business activities in response to demand from the BPM sector
Construction and infrastructure development
Supply Side Tourism-related services
Wholesale and retail trade
Manufacturing resurgence

Source: NEDA 54
Risks to Growth and Opportunities
Vigilant and well-positioned against the downside risks to growth

Fragile growth in Japan and European Union

Slowdown in large emerging economies, particularly China
Uncertainties over Brexit
External Asynchronous monetary policies in major developed economies
Geopolitical tensions in the Middle East, extended period of low oil prices
Maritime dispute in the West Philippine Sea

Natural hazards, potential La Nia

Delays in infrastructure and reconstruction projects
Domestic
Logistics bottlenecks
Closure of mines

While at same time watchful of opportunities

Closer economic integration in the ASEAN and with other neighbors which would open up new sources of capital and markets
Philippine hosting of ASEAN meetings in 2017
Commitment to continue current macroeconomic policies and programs, sustain reform momentum
Resumption of peace talks with National Democratic Front (NDF), Moro Islamic Liberation Front (MILF), Moro National
Liberation Front (MNLF)

Source: NEDA, DOF 55

2017 Proposed National Budget: A Budget for Real Change
Focus on Social Services to empower human capital
development Infrastructure and Other Capital Outlays gets a big allocation
2017 Proposed Budget by Sector, PHP bn and % Share 2017 Proposed Budget by Expense Class, PHP bn and % Share

Department 2017 2016 Share of Total Allocation to LGUs*

NEP* GAA Budget (%) Personnel Services
PHP554.9bn, 16.6%
(PHP billion) 2017 2016 PHP997.0bn, 29.8%
Support to GOCCs
Social Services 1,344.8 1,119.8 40.1 37.3 PHP131.5bn, 3.9%

Economic Services 924.0 834.0 27.6 27.8 PHP3,350bn

General Public Services 581.8 498.0 17.4 16.6
Infrastructure and
Debt Burden 351.6 419.3 10.5 14.0 other Capital Outlays Maintenance Expenditures
Defense 147.8 130.7 4.4 4.4 PHP780.6bn, 23.3% PHP534.5bn, 16.0%
Debt Burden
Total 3,350.0 3,001.8 100.0 100.0 PHP351.6bn, 10.5%

2016 General Appropriations Act *Includes other transfers to LGUs

94.9% of 2016 agency budgets were released as of Sep 2016
Improved absorptive capacity of agencies with 92.9% utilization rate of cash allocation as of Sep 2016; DPWH utilization rate at 98.5%
2017 Proposed Budget
PHP3.35tn proposed budget for 2017 is 11.6% higher than the PHP3.002tr budget for 2016. It is equivalent to 21% of GDP
The 2017 until 2022 budgets will support the Presidents promise to improve the countrys infrastructure, invest in human resources, modernize agriculture and
rural development, and develop lagging regions
Strictly compliant with the Supreme Court decision on the Disbursement Acceleration Program (DAP) and the Priority Development Assistance Fund (PDAF)
Congress and Senate have approved the proposed budget. Bicameral conference ongoing to reconcile differences betweeen Congress and Senate versions. Budget
is expected to be passed before end-2016
Highlights of the 2017 Proposed budget:
Infrastructure outlays for 2017 is equivalent to 5.4% of GDP to make it at par with ASEAN countries
Proposed budget of PHP31.5bn for Mindanao Logistics Infrastructure Network to pay equal attention to connecting lagging regions with growth centers
Proposed budget of PHP6.9bn for Technical Education and Skills Development Authority (TESDA) to support 293,333 enrollees to its Training-for-Work Scholarship
program
Proposed budget of PHP4.3bn for full implementation of the Responsible Parenthood and Reproductive Health Law
PHP78.7bn proposed allocation for conditional cash transfer (CCT) program for 4.62mn beneficiary families 56
Source: DBM BESF 2017 and DBM Presentation to Congress on Aug 22, 2016; *National Expenditure Program
2017 Proposed National Budget: A Budget for Real Change
Higher allotment for infrastructure and social development agencies Proposed Infrastructure Outlays Budget, PHP Billion
Budget of Top Departments, 2017 vs. 2016
Particulars 2017 2016 2015
Department 2017 NEP* 2016 GAA Growth Infrastructure Outlays 860.7 756.4 575.7
(%)
PHP % PHP % Percent of GDP (%) 5.4 5.1 4.3
billion Share billion Share Growth Rate (%) 13.8 31.4 66.3
of which:
Education 567.6 16.9 433.4 14.4 31.0
Road Networks 328.2 298.1 223.5
Public Works and Highways 458.6 13.7 397.1 13.2 15.5 Flood Control Systems 75.8 69.0 48.3
Seaport Systems 2.7 1.8 2.7
Interior and Local Govt. 150.1 4.5 125.4 4.2 19.7
Airport Systems 5.7 9.6 12.3
Health 144.2 4.3 125.0 4.2 15.4 School Buildings 124.6 91.3 72.5
National Defense 134.5 4.0 117.7 3.9 14.3 Hospitals and Health Centers 10.0 19.2 9.5
Irrigation Systems 26.0 23.6 26.5
Social Welfare and Devt. 129.9 3.9 110.9 3.7 17.1
Other Infrastructure Assets 224.5 170.4 131.4
Transportation 55.5 1.7 44.3 1.5 25.2
Agriculture 45.3 1.4 48.9 1.6 (7.5) Proposed Education Budget, PHP Billion

Environment & Natural Resources 29.4 0.9 22.3 0.7 31.9 Particulars 2017 2016 2015
Finance 23.0 0.7 20.2 0.7 13.6 Education 649.6 501.8 373.6
Growth rate (%) 29.4 34.3 14.4
Total Budget 3,350.0 3,001.8 11.6 Basic Education 571.5 435.4 311.1
Growth rate (%) 31.3% 40.0% 13.0%
2017 expenditure priorities show commitment to accelerate infrastructure Department of Education 567.56 433.38 309.90
development Department of Science and Technology 3.9 2.0 1.2
Road Networks gets the highest share of the infrastructure budget at 38.1% or Tertiary Education 75.1 61.6 57.0
PHP328.2bn Growth rate (%) 22.0 8.0 24.0
School buildings will receive a budget of PHP124.6bn or 14.5% share of the State Universities and Colleges 58.8 49.7 47.7
infrastructure budget Commission on Higher Education 13.4 9.7 7.0
Spending for human capital development and a more agile and competitive Department of Science and Technology 3.0 2.3 2.2
work force through education will be boosted with provision for basic and tertiary Technical-Vocational Education
education growing by 31.3% and 22.0%, respectively
Technical Education and Skills Devt.
Authority 6.9 6.9 5.6
Growth rate (%) 0.1 22.7 5.3 57
Source: DBM DBM Presentation to Congress on Aug 22, 2016
2017 Proposed National Budget: A Budget for Real Change
Proposed Social Protection Budget, PHP bn Proposed Health Budget, PHP bn

Particulars 2017 2016 2015 Particulars 2017 2016 2015

Social Protection 169.6 159.6 128.6 Health 151.5 132.7 105.0

Growth rate (%) 6.3 24.1 0.5 Growth rate (%) 14.1 26.5 23.5
Welfare and Social Protection Programs of which:
Department of Social Welfare and Department of Health 94.1 81.1 64.1
Development 129.9 110.9 110.1 Growth rate (%) 16.0 26.5 37.8
Growth rate (%) 17.1 0.7 27.8 of which:
Conditional Cash Transfer 78.7 62.7 54.8 Preventive and Promotive Health Programs 24.6 19.5 15.5
Social Pension for Indigent Senior 17.9 8.7 5.7 Health Facilities Enhancement Program 21.9 26.9 13.4
Citizens 4.3 2.3 3.3
Responsible Parenthood Program
Kalahi-CIDDS NCDDP 10.7 11.0 14.7
Philippine Health Insurance Corp.
Sustainable Livelihood Program 9.6 9.6 4.6
National Health Insurance Program 50.2 43.9 36.3
Supplementary Feeding Program 3.4 4.3 2.8
Growth rate (%) 16.0 26.5 37.8
Labor and Employment
Department of Labor and Employment 13.5 11.9 7.7
Growth rate (%) 13.4 54.1 3.9
Social Housing 21.7 32.4 6.0 The proposed budget of PHP13.5bn for the Department of Labor and
Employment will be utilized primarily for the implementation of livelihood
Growth rate (%) -32.9 444.1 -76.9
programs, Special Program for Employment of Students, Rural and
National Housing Authority 12.6 30.5 4.2 Emergency Employment Program and Job Start Program
Relocation (DOTr) 7.4
National Home Mortgage Finance
2017 proposed budget is consistent with the governments goal of
Corporation 1.5 1.0 1.0
investing to ensure a healthy population with budget for health sector
Social Housing Finance Corporation 0.3 0.9 0.8 growing by 14.1% or PHP151.5bn
Energization of Households 4.5 4.4 4.8
Growth rate (%) 3.1 -9.9 -44.2
Department of Energy 2.7 1.9 2.8
National Electrification Administration 1.8 2.5 2.0

58
Source: DBM DBM Presentation to Congress on Aug 22, 2016
Medium-Term Fiscal Program
2016 2017 2018 2019
PHP Billion
Outlook Growth (%) Projection Growth (%) Projection Growth (%) Projection Growth (%)
Revenues 2256.7 7.0 2481.5 10.0 2990.1 20.5 3326.5 11.3
% of GDP 15.5 15.6 17.0 17.2
Tax Revenues 2044.0 12.6 2313.0 13.2 2821.3 22.0 3155.5 11.8
% of GDP 14.1 14.5 16.1 16.3
BIR 1620.0 13.0 1829.2 12.9 2189.7 19.7 2435.9 11.2
BOC 409.0 11.3 467.9 14.4 614.8 31.4 701.9 14.2
Non-Tax Revenues 210.7 -8.7 166.5 -21.0 166.8 0.2 169.0 1.3
% of GDP 1.5 1.0 0.9 0.9
Privatization 2.0 -96.8 2.0 0.0 2.0 0.0 2.0 0.0
% of GDP 0.0 0.0 0.0 0.0
Disbursements 2645.6 18.6 2959.7 11.9 3517.1 18.8 3907.3 11.1
% of GDP 18.2 18.6 20.0 20.2
Current Operating Expenditures 1973.1 10.5 2208.5 11.9 2424.2 9.8 2672.7 10.3
% of GDP 13.6 13.9 13.8 13.8
of which Interest Payments 327.7 5.9 334.9 2.2 349.5 4.4 385.8 10.4
% Share of Total Disbursements 12.4 11.3 9.9 9.9
Capital Outlays 655.7 50.4 734.4 12.0 1076.1 46.5 1217.8 13.2
% of GDP 4.5 4.6 6.1 6.3
Net Lending 16.8 73.2 16.8 0.0 16.8 0.0 16.8 0.0
% of GDP 0.1 0.1 0.1 0.1
Deficit -388.9 -478.1 -526.9 -580.7
% of GDP -2.7 -3.0 -3.0 -3.0
Financing Mix (%)
External 23.0 20.0 20.0 20.0
Domestic 77.0 80.0 80.0 80.0

Consolidated Public Sector Financial Position -222.8 -310.7

% of GDP -0.015 -0.019
Nominal GDP 14528.9 15937.4 17564.7 19358.0

Source: Budget of Expenditures and Sources of Financing (BESF) 2017 - Department of Budget and Management (DBM) 59
Ensuring Manageable Debt

Sustained decline in debt/GDP ratio

National Government Debt /GDP (%)

42.7 Projected NG Debt

40.9
39.1
37.5 37 35.9 35.4

2016 2017 2018 2019 2020 2021 2022

Total borrowings in 2017 expected to reach PHP631.3bn and will be used to:
finance the PHP478.1bn deficit
settle PHP89.3bn maturing debt obligations
contribute PHP45bn to the Bond Sinking Fund; and
maintain cushion of cash in the Treasury
Maintaining heavy bias for domestic borrowing while at the same time optimizing available concessional loans from development
partner
Improving revenue collections through comprehensive tax reform, spending on the right priorities and keeping fiscal risks in
check to grow the economy are key to meeting debt targets
Debt/GDP is expected to decline over time, as the expanded fiscal spending is expected to drive the growth momentum

60
Continued Favorable Macroeconomic Backdrop Bolster Economic Outlook
Early indications are that domestic economic activity should remain
robust, supported not only by the governments continued efforts to
increase infrastructure spending, but also from broader strength in
income and sentiment. On that basis, our forecast for real GDP growth to
stay solidly above 6% is driven by domestic demand, which we expect to
continue growing above 8% (following double-digit growth this year). Q3
GDP data showed that growth momentum remains strong. The basic
dynamic of growth enjoying a significant lift from investment spending
and robust consumer spending also looks likely to continue. Indeed, we
believe the large investments in infrastructure have helped to raise trend
growth in the Philippines, and we now expect the economy to grow by
6.8% in both 2016 and 2017, before moderating to 6.5% in 2018.
Barclays, November 2016
Q3 GDP growth beat expectations, rising to 7.1% y-o-y from 7.0% in Q2
led by still strong investment spending. This underscores our view that the
quality of growth is improving. Given that year-to-date GDP growth has
averaged 7%, we are raising our 2016 GDP growth forecast to 6.9% from
6.7%. Despite the noise from President Dutertes controversial rhetoric,
we expect this government to make more progress on infrastructure
spending than its predecessor and boost reforms, particularly by cutting
red tape and implementing comprehensive fiscal changes (see Asia Special
Report - Philippines: Beyond words, 20 October 2016). The continued
strength in domestic demand will provide significant buffers against
downside risks from external factors, including the impact of President-
elect Trumps proposed policies. - Nomura, August 2016
There is indeed upside risk to our current full-year GDP forecast given
the very strong performance in the third quarter - Moodys,
November 2016.
Growth and investment dynamics across Emerging Markets has become
more complicated in recent weeks due to uncertainty in developed
markets, but we believe the Philippine growth story is relatively
straightforward. Investment and private consumption, prompted by
fiscal expansion and steady remittances growth, respectively, should
fuel growth through 2018 (estimate). HSBC, November 2016
The Philippine economy expanded a firmer-than-expected 7.1% over
a year ago (oya) in 3Q16 (J.P. Morgan: 6.6%oya; Consensus:
6.7%oya). In sequential terms, growth was up 4.8%q/q, saar last
quarter. In relative terms, growth in the Philippines has bucked the
regional trend in recent years, with growth outperforming the region.
The 3Q16 GDP print affirms that relative strength, leading us to revise
our 2016 growth forecast up to 6.8%oya from 6.4% in the prior
forecast. 3Q16 print reaffirms ongoing domestic demand strength.
Domestic demand, in particular fixed investment, drove the expansion
in 3Q16. - JP Morgan, November 2016
The outlook for the Philippine economy remains favorable despite
external headwindsThe Philippine economy has performed well in
recent years with rising potential growth and strong macroeconomic
fundamentals and is broadly in line with potential while the outlook for
inflations is well within the target band. IMF, November 2016
We have not seen significant changes in macroeconomic policies in the
country and we havent seen domestic policies turning more negative for
foreign investors. Overall, despite (his) rhetoric, if he continues to pursue
economic policy among these lines, we could actually see improvements
for economic support for the rating. S&P, November 2016
61
The President and the Economic Team
President Rodrigo R. Duterte, 16th President of the Philippines
President Rodrigo Roa Duterte was born on March 28, 1945 in Maasin, Southern Leyte to Vicente Duterte and Soledad Roa who were
both civil servants. His mother was a public school teacher while his father was a government worker.
Duterte traces his roots to the Visayas. He spent his early years in Danao, Cebu, the hometown of his father. But his lineage has also
direct ties from Mindanao as his mother hails from Cabadbaran, Agusan del Norte while his paternal grandmother was a Maranao.
In 1949, when Duterte was four years old, his family resettled in the then-undivided Davao where his father Vicente later entered the
political arena and was elected governor of the province and served from 1959 to 1965.
Duterte graduated in 1968 with a Bachelor of Arts degree in Political Science at the Lyceum of the Philippines University and obtained a
law degree from San Beda College of Law in 1972. He passed the bar exam that same year. He served as special counsel and later on
became a city prosecutor at the City Prosecutors Office in Davao City from 1977 until 1986, when he was appointed as OIC Vice Mayor of
Davao City.
He ran and successfully won the mayoralty post in 1988. Since then, Duterte has not lost an election. He is among the longest-serving
mayors in the Philippines and has been Mayor of Davao City for seven terms, totalling more than 22 years. He has also served as vice-
mayor and as congressman of the citys first congressional district.
On May 9, 2016, Duterte won a landslide victory as the Philippines 16th President. He was officially proclaimed by a joint session of the
Philippine Congress on May 30, 2016. He is the first Mindanaoan President and the first local chief executive to get elected straight to the
Office of the President.

63
Seasoned Professionals Leading the Philippine Economy
Agency Appointee Brief Profile

Department of Finance Former BOD of RCBC Capital Corp., Agriculture Secretary under Pres. Corazon Aquino, President of Philippine
Carlos Dominguez
Airlines, Chairman of Planters Bank

Bureau of Internal Revenue Cesar Dulay Lawyer, former Commissioner of the Integrated Bar of the Philippines

Bureau of Customs Nicanor Faeldon Former Marine Captain

National Economic and Development

Dr. Ernesto Pernia University of the Philippines Economics Professor Emeritus; former ADB Lead Economist
Authority

Former Budget Secretary under Pres. Joseph Estrada; Professor at the University of the Philippines School of
Department of Budget Management Dr. Benjamin Diokno
Economics

Former Vice President of RFM Corporation, Executive Director of Go Negosyo, a non-stock, non-profit organization
Department of Trade and Industry Ramon Lopez
that seeks to promote entrepreneurship in the country

Department of Energy Alfonso Cusi Former Chief of Manila International Airport Authority and Civil Aviation Authority of the Philippines

Former President and CEO of Clark Development Corporation (an economic zone north of Manila and formerly a US
Department of Transportation Arthur Tugade
Military Air Base)

Department of Public Works and Former Congressman, Lone District of Las Pias City, Metro Manila; was re-elected Congressman for the 17th
Mark Villar
Highways Congress

Former Governor and Vice Governor of North Cotabato, Mindanao, credited for bringing down poverty incidence in
Department of Agriculture Emmanuel Piol
his province to 25.6% in 2009 from 41.6% in 2000

Former President of the National Association of Independent Travel Agencies, the biggest travel association in the
Department of Tourism Wanda Corazon Teo
Philippines

Served as senior vice president for corporate and regulatory affairs of Globe Telecom; Asia Pacific representative
Department of Information and
Rodolfo Salalima and vice chairman of the International Telecommunication Union (ITU) Council Working Group for the Amendment
Communications Technology
of the ITU Constitution and Convention
64
Investor Relations Office
Investor Relations Office
Promoting excellence in investor relations. Enhancing sovereign value
Strengthening the Investor Community 15 Years and Beyond
The effective implementation of the Governments economic program and its
success depends on regular two-way dialogue between economic policy makers
and the investment community.
The Investor Relations Office (IRO) was established in July 2001 to strengthen
the countrys relations with investors and other stakeholders by promoting
active channels of information flow and dialogue between economic policy
makers and investors.
Based in the Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), the
IRO has a dedicated staff comprised of trained economists and communication
specialists who work with colleagues in the BSP and the economic agencies to
implement a wide-ranging program of investor relations activities.
As the Government has implemented its economic reform program over the last
fifteen years, the IROs program of investor outreach has helped to ensure that
investor decisions benefit from a comprehensive understanding of the progress
in reforms and what they mean for the economic fundamentals of the
Philippines.
In turn, the Governments economic reform program has made the economy
relatively more resilient amid the global financial and economic crisis.
With stable macroeconomic fundamentals, the Philippines remains as one of the
most viable economies for investments in the emerging market.
The IRO is proud to have played a role in communicating the successes of the
Governments reform program in the last fifteen years and is committed to
continuing its efforts to promote the Philippine economy.
Serving Philippine and International Stakeholders
The IRO provides services to a wide range of stakeholders the Governments
economic agencies, financial institutions, credit rating agencies, bilateral and
multilateral organizations, domestic and foreign investors, the diplomatic corps,
business people, the media and the general public. All services to its stakeholders
are underpinned by a set of fundamental principles: transparency, accessibility,
timeliness, consistency and feedback.
The IRO adopts a multi-pronged approach to serving its stakeholders through:
Dissemination of key economic and financial information about economic policy
objectives and performance
Seeking market feedback on current and proposed policy measures
Providing feedback to economic policy-makers about investor sentiment
Facilitating candid and constructive dialogue between policy-makers and
investors
66
 Investor Relations Office
Promoting the Philippine economy at home and abroad
The IRO undertakes a range of initiatives to build awareness among domestic and international investment audiences around the Governments economic
reform program, promote specific investment opportunities in the Philippines and facilitate information exchange and dialogue between key economic policy
decision-makers in the Government and domestic/international investors. These initiatives include:
Regular Economic Briefings to update the business community, media and industry organizations on the countrys economic performance
Investor Roadshows to bring the Governments resilient economic performance record, commitment to sound economic management and responsible
reform to members of the international financial community
Media Briefings to raise awareness of the Governments progress in economic reforms and plans for ongoing reforms
Government Policy Roadshows to increase the business communitys understanding of government policy measures to generate support for the policy
implementation process
Investor Teleconferences to provide timely updates on key economic performance indicators
E-mail service to keep investors and other investors abreast of data releases on a regular basis
An English Language website, www.iro.ph, to provide a wide range of easily accessible information about the Philippines economic performance and the
governments economic policies

Contact Information
For further information about the Investor Relations
Office, or about the Philippine economy, please
contact:
Editha L. Martin
Investor Relations Office
Bangko Sentral ng Budget and Bangko Sentral ng Pilipinas
Finance Secretary Economic Planning Transportation Trade and Industry
Pilipinas Governor Management
Secretary Secretary Arthur Secretary A. Mabini St. cor. P. Ocampo St.
Carlos Dominguez Secretary Benjamin
Tugade Ramon Lopez
Malate Manila, Philippines 1004
Amando M. Tetangco, Jr. Ernesto Pernia Diokno
Tel: (632) 708-7487 / (632) 303-1581
Email: emartin@bsp.gov.ph
Fax: (632) 708-7489
Website: www.iro.ph

Tourism Secretary Agriculture Secretary Energy Secretary Public Works and Highways Information and
Wanda Teo Emmanuel Piol Alfonso Cusi Secretary Mark Villar Communications
Technology Secretary 67
Rodolfo Salalima
Philippines Macroeconomic Updates
December 2016