Republic of the Philippines Investor Presentation October 2017
Table of Contents Strengthening Credit Profile……………………… .....................................................................3 Favorable Macroeconomic Trends.........................................................................................5 Healthy External Position…... ...............................................................................................12 Sound and Stable Financial System…………… ......................................................................18 Sound and Strengthening Government Finances.................................................................20 Infrastructure Development…………. ...................................................................................29 Investor Relations Office Brochure………………………………………………………………………32 2
Strengthening Credit Profile
Sustained Strengthening of the Philippines’ Credit Profile Metric 2013 * 2014 2015 2016 2017 Credit Ratings Fitch • BBB-/stable BBB-/stable BBB-/positive BBB-/positive BBB-/positive Moody’s Baa3/positive Baa2/stable Baa2/stable Baa2/stable Baa2/stable • S&P BBB-/stable BBB/stable BBB/stable BBB/stable BBB/stable • Real GDP Growth Rate (%) 7.1 6.1 6.1 6.9 6.4 (Jan-Jun) 8,302 GDP Per Capita** (USD), PPP Concept 6,546 6,952 7,333 7,886 (Annualized) 9,943 GNI Per Capita** (USD), PPP Concept 7,953 8,425 8,870 9,408 (Annualized) Inflation Rate (2006 = 100) (%) 3.0 4.1 1.4 1.8 3.1 (Jan-Sep) National Government Interest Payments 18.8 16.8 14.7 13.9 13.9 (Jan-Aug) (as % of Revenues) Fiscal Balance (as % of GDP) -1.4 -0.6 -0.9 -2.4 -2.1 (Jan-Jun) Tax Revenue (as % of GDP) 13.3 13.6 13.6 13.7 14.2 (Jan-Jun) General Government Debt (as % of GDP) 39.2 36.4 36.2 34.6 NA Gross International Reserves (USD billion) 83.2 79.5 80.7 80.7 81.7 (end-Aug) ‒ Import Cover (months) 11.6 9.9 9.9 8.9 8.6 (end-Aug) Overseas Filipinos’ Cash Remittances (USD billion) 23.0 24.6 25.6 26.9 p/ 16.1 (Jan-Jul) Foreign Direct Investments (USD billion) 3.7 5.7 5.6 r/ 8.0 r/ 3.6 (Jan-Jun) Current Account (as % of GDP) 4.2 3.8 2.5 r/ -0.3 r/ -0.2 (Jan-Jun) External Debt (as % of GDP) 28.9 27.3 26.5 24.5 r/ 23.5 (Jan-Jun) * ROP achieved investment grade status in 2013, followed by series of upgrades from S&P, Fitch and Moody’s ** At current prices p/ preliminary r/ revised 4 NA not available Source: BSP’s Selected Economic and Financial Indicators, DOF, BTr
Favorable Macroeconomic Trends
Philippines is Expected to Remain as One of the Fastest Growing Economies in Asia GDP growth of selected Asian economies 8.0 2016 Q1 2017 Q2 2017 2017Proj 2018Proj 7.4 6.9 6.9 6.9 6.8 7.0 6.8 6.7 6.7 6.7 6.6 6.5 6.5 6.4 6.4 6.3 6.3 6.2 6.1 5.8 6.0 5.7 5.6 5.4 5.3 5.2 5.1 5.0 5.0 5.0 5.0 4.8 4.2 4.0 3.7 3.7 3.5 3.3 3.2 3.0 2.0 1.0 0.0 India Philippines China Vietnam Indonesia Malaysia Thailand (BBB-/Baa3/BBB-) (BBB/Baa2/BBB-) (A+/A1/A+) (BB-/B1/BB-) (BBB-/Baa3/BBB-) (A-/A3/A-) (BBB+/Baa1/BBB+) Rating: S&P/Moody’s/Fitch 6 Source: PSA; International Monetary Fund (IMF) WEO October 2017; Bloomberg L.P.; BSP SPEI for Q1-Q2 2017 GDP Growth Rates
Economic Rebalancing Towards a More Broad-Based Growth Consumption and services as major drivers of growth GDP breakdown by component Contribution to growth: demand (%) Contribution to growth: supply side (%) 7.0 6.9 7.0 6.9 6.1 6.9 6.3 6.3 6.4 6.1 6.4 5.7 4.5 4.0 3.0 2.7 1.4 0.9 2.8 0.2 4.5 0.8 0.7 4.5 0.5 0.7 4.2 0.3 3.7 0.4 3.8 4.8 5.0 4.4 4.0 4.0 0.3 3.9 3.3 2.5 2.8 -0.3 -0.6 -1.3 2.8 -3.1 -4.5 -6.6 1.8 2.3 2.8 2.8 2.4 2.2 1.2 0.7 0.4 0.5 0.2 0.1 0.0 -0.1 -0.3 1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017 1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017 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 (%) +23.7% H1 2017 -7.4 67.7 11.3 28.3 2,275 +18.4% +4.2% 1,838 +27.9% H1 2016 -7.2 68.1 11.6 27.5 +9.7% +2.8% -4.3% 1,553 1,490 1,217 1,197.3 1,165 1,091.5 2016 -7.8 69.3 10.5 28.0 2015 -3.8 69.3 10.3 24.2 2011 2012 2013 2014 2015 2016 H1 2016 H1 2017 Household Expenditure Government Spending Construction Durable Equipment Others Capital Formation Net Exports Source: PSA 7 Note: Numbers may not add up due to rounding
Rising Investments Highlight Confidence in Philippine Growth Prospects Sustained inflows from both foreign and local investors and bright prospects highlight confidence in ROP’s fundamentals Net Foreign Direct Investment (FDI) Flows* (USD bn) Average Growth of FDI, 2012-2016 (%)* 97.1 9.0 8.0 8.0 78.7 7.0 5.7 5.6 6.0 5.0 3.7 3.6 4.0 3.2 33.8 3.0 2.0 27.8 2.0 1.1 11.5 7.7 6.1 1.0 0.0 -0.5 2010 2011 2012 2013 2014 2015 2016 Jan-Jun -8.1 2017 -16.3 TH TW PH VN IN SG ID CH MY KR Increasing FDIs in manufacturing ROP is in the top 15 investment destinations of • choice by multinationals for 2017-2019 based Average Percent Share by Industry, 2012-2016 on UNCTAD’s World Investment Report 2017. Others Construction Mining and 4% 2% Quarrying 4% 2017 Investment Climate Statements of the US • Wholesale and Retail Trade State Department’s Bureau of Economic and 6% Manufacturing Real Estate Business Affairs cites ROP’s increased 37% 9% Water Supply, attractiveness as FDI destination Sewerage, and Waste Management 14% Arts, Enternainment Finance and and Recreation Insurance 11% 13% 8 Source: PSA, NEDA, BSP, UNCTAD, Bloomberg; * BOP Concept
Economy Performed Well in 2016; Growth Momentum Expected to Continue in the Medium-term Incremental Capital-Output Ratio Total Factor Productivity 10 9.5 9 2.5 2.1 8 2.0 2.0 7 6.4 6 1.5 5 4.2 3.7 4 1.0 3 0.5 2 0.5 1 0.0 0 0.0 1989-1992 1993-2001 2002-2009 2010-2017Q2 1989-1992 1993-2001 2002-2009 2010-2017Q2 9 Source: BSP Staff estimates
Sustained Low Inflation Environment Inflation remains manageable demonstrating monetary policy credibility Headline CPI (yoy, %) 8.3 4.6 5.5 4.2 4.1 3.1 2.9 3.8 1.8 1.4 3.2 3.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Sep '17 Inflation Target Band Headline CPI Source: BSP; PSA Inflation condition supportive of growth GDP, CPI volatility (20Y Standard Deviation, 2001-2020F) 1.5 Poland CPI volatility GDP volatility 1.4 1.7 Colombia 1.5 1.6 Philippines 1.6 2.9 Uruguay 1.9 0.8 Mexico 2.0 1.4 Spain 2.2 1.8 Thailand 2.2 1.0 Peru 2.2 2.1 Panama 2.4 3.2 Kazakhstan 3.1 3.1 Iceland 3.7 10 Source: IMF World Economic Outlook, April 2017
ROP Expects Continued Robust Growth in the Medium-Term The Philippine economy is now growing on higher growth plane with increasing contribution from the manufacturing sector along with robust infrastructure investment, and solid services sector 2017 2018 2015 Actual 2016 Actual Projections /3 Real GDP Growth (%) 6.1 r/ 6.9 r/ 6.5-7.5 7.0-8.0 Dubai Crude Oil (USD/bbl) 50.9 41.3 40-55 45-60 Inflation (%, average) 1/ 1.4 1.8 2.0-4.0 2.0-4.0 Exchange Rate (PHP/USD) 45.5 47.5 48-50 48-51 Balance of Payments (USD, bn) 2.6 -0.4 -0.5 2/ NA Current Account (USD, bn) -1.0 r/ -0.6 2/ NA 7.7 OF Cash Remittances (USD, bn) 25.6 26.9 28.0 2/ NA Merchandise Exports (% growth) Per BPM6 -13.3 -1.1 r/ 5.0 2/ 7.0 Per PSA -5.3 -2.4 r/ 7.0 3/ 9.0 Merchandise Imports (% growth) -1.0 17.7 r/ 10.0 2/ 10.0 Per BPM6 8.7 18.3 r/ 11.0 3/ 11.0 Per PSA Gross International Reserves (USD, bn) 80.7 80.7 80.5 2/ NA Sources: PSA, BSP, Bloomberg 1/ Inflation target range for 2017-2018 2/ Assumption approved by the MB May 18, 2017 3/ Assumption adopted by the DBCC June 9, 2016 a/ Based on Balance of Payments and International Investment Position Manual, 6th Ed. (BPM6) 11 NA: Not Available p/: preliminary
Healthy External Position
Healthy External Finances Shield the Economy from External Shocks … while helping smoothen volatility in the foreign exchange Reserve buffer provides protection against external payments market by enabling the necessary adjustments in a continued shocks… volatile global environment FX reserves (USD bn) and months of import cover Implied Volatility (YOY %, as of September 29, 2017) 11.6 11.5 9.9 8.9 8.6 9.9 11.6 10.4 10.6 75.3 9.2 83.8 83.2 10.0 80.7 62.4 79.5 8.3 81.7 6.7 80.7 6.4 6.9 6.3 5.1 44.2 4.6 5.0 5.0 37.6 33.8 23.0 18.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aug Thai Baht Chinese Philippine Malaysian Indonesia Japanese Korean Won 2017 Renminbi Peso Ringgit Rupiah Yen FX reserves Import cover Sustained decline in external debt-to-GDP ratio underscores the health of external finances External debt (USD bn) and external debt/GDP (%) 80.0 75.6 78.5 77.5 73.6 77.7 74.8 72.5 61.6 66.5 65.2 64.7 61.4 59.7 50.2 44.5 38.4 37.6 36.9 33.7 32.0 28.9 27.3 26.5 24.5 23.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 end-Q2 2017 External Debt External Debt Ratio 13 Source: BSP, Bloomberg
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