The headline inflation rate dropped to 5.1 percent in December, putting the full-year inflation rate above the central bank's target range. The Consumer Price Index (CPI) slowed from 6.0 percent in November to 5.1 percent in December, year-on-year.
... See More + The main contributors to the lower inflation rate in December were lower food and transport prices as a result of the fall in international oil prices, the provisional rollback of jeepney fares in select areas, and the large rice supply during the ongoing harvest season. Nevertheless, the full-year average inflation rate increased from 2.9 percent in 2017 to 5.2 percent in 2018–above the central bank's 2-4 percent target range. Excluding volatile food and energy items, the core inflation rate also decreased from 5.1 percent in November, year-on-year, to 4.7 percent in December. The full-year average core inflation rate reached 4.1 percent in 2018, up from 2.5 percent in 2017. On November 16, the central bank raised its key policy rate by 25 basis points to 4.75 percent, resulting in a total increase of 175 basis points in 2018. The Philippine Stock Exchange index (PSEi) continued its modest recovery in December for the second consecutive month. The PSEi rose by 1.3 percent, month-on-month, in December, following a 3.2 percent expansion in November, to close the year at 7,466. However, the index fell by an average 12.8 percent in 2018 – a reversal from the 25.1 percent gain registered in 2017. In line with other countries in the region, the PSEi displayed a strong momentum in early 2018 (it exceeded 9,000 in January), then fell sharply due to a combination of domestic (e.g. rising inflation) and external headwinds (e.g. trade tensions, US Fed monetary tightening) that resulted in significant net foreign selling throughout the year. Total net foreign selling reached Php57.1 billion in 2018, compared to net foreign buying of Php54.8 billion in 2017, reflecting an overall risk aversion to emerging market economies. ex fell by an average 12.8 percent in 2018—a reversal from the 25.1 percent gain.
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Newsletter 133927 JAN 01, 2019
Qian,Rong; Cruz,Kevin Thomas Garcia; Lazaro,Karen Annette Ducat; Endo,Isaku; Diop,NdiameDisclosed
The Philippines registered its widest merchandise trade deficit in October as imports continued its strong expansion and export growth remains subdued.
... See More + Import growth accelerated to 21.4 percent year-on-year in October from 17.4 percent a year ago, although slightly less than the 26.1 percent growth in September. Faster import growth was fueled by robust import growth in raw materials and intermediate goods (22.2 percent) and capital goods (21.2 percent). Meanwhile, merchandise export growth moderated to 3.3 percent year-on-year in October from 17.4 percent a year ago, slightly higher than the 0.8 percent growth in September. Softer export growth was primarily driven by the sharp growth slowdown in electronics products (0.6 percent in October 2018 vs 28.6 in October 2017), and the contraction of agriculture exports (-13.7 percent in October 2018 vs 16.1 percent in October 2017). As a result, the Philippines’ merchandise trade deficit widened to its largest level so far in 2018 at 4.2 billion US dollars, which is 62.9 percent higher than the merchandise trade deficit during the same period a year ago.
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Newsletter 133111 DEC 01, 2018
Qian,Rong; Chua,Kevin C.; Cruz,Kevin Thomas Garcia; Lazaro, Kevin; Endo,Isaku; Diop,NdiameDisclosed
This newsletter includes the following headlines: Philippine economic growth moderated to 6.1 percent year-to-year in the third quarter; The services sector drove economic growth while the agriculture sector underperformed; While manufacturing growth slowed in September, it is projected to accelerate in the next few month; A surge in imports and a contraction in exports resulted in the widest merchandise trade gap so far in 2018; Headline inflation held steady in October while food inflation moderated for the first time since May; The Philippine peso appreciated 1-2 percent month-on-month in October from Php/USD 54.25 to Php/USD 53.61; The fiscal deficit widened in the first three quarters of 2018. as rapid expenditure growth outpaced revenue growth.
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This newsletter includes the following headlines: Philippine Stock Exchange index (PSEi) declined significantly in the first week of September 2018 due to a mix of external and domestic factors; the Philippine peso depreciated in August after strengthening in July; headline inflation surged in August with increased food and energy prices; Balance of payment deficit widened in the first half of 2018 reaching 2.1 percent of GDP from 0.5 percent of GDP same period in 2017; the government posted a fiscal deficit in July as public spending growth outpaced revenue growth; unemployment declined further in July 2018, but underemployment continued to worsen; consumer confidence turned negative for the first time in two years and business confidence fell to its lowest since 2009
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Newsletter 129959 SEP 01, 2018
Chua,Kevin C.; Cruz,Kevin Thomas Garcia; Endo,Isaku; Qian,Rong; Hansl,BirgitDisclosed
To achieve the AmBisyon Natin 2040, the Philippines needs to triple its income per capita in the next two decades. The AmBisyon Natin 2040 is the government’s plan to transform the country into a prosperous middle-class society free of poverty by 2040.
... See More + This implies that the Philippine economy needs to grow at an annual average of 6.5 percent in the next 22 years, faster than the average growth of 5.3 percent since 2000—a challenge that only the Asian Tigers and China have managed to accomplish in the past. This report shows that sustaining high growth can only be achieved if the Philippines succeeds in sustaining high Total Factor Productivity (TFP) growth while accelerating capital accumulation. To achieve the GDP per capita target by 2040, numerous scenarios regarding the potential mix of growth drivers were evaluated. The first key finding is that sustaining high TFP growth will be crucial to achieve the target. Specifically, the Philippines needs to sustain an average annual TFP growth rate of 1.5 percent or higher in the next 22 years, more than double the world average since 2000. Such a high rate of TFP growth will require deep structural reforms to remove constraints and distortions faced by the private sector. The second key finding is that accelerating capital accumulation in the medium term will be essential to reduce current infrastructure and capital constraints to growth. The Philippines can meet the capital accumulation requirement by doubling the growth rate in the physical investment-to-GDP ratio over the next five years through higher private and public investment, which would require the implementation of important reforms that are highlighted in this report. The top three policy reform areas for sustaining high growth and productivity, prerequisites for achieving Ambisyon Natin 2040 are: (i) improving market competition through regulatory reforms; (ii) improving trade and investment climate policies and regulations; (iii) reducing labor market rigidities and costs. By creating competitive and flexible markets, poverty alleviation is likely to accelerate through more jobs, higher labor productivity, and lower consumer prices. An equal playing field and a regulatory environment that makes it easy to do business encourage firms to enter the market, invest, grow, create jobs, and innovate, leading to higher productivity. Market competition coupled with flexible a labor market and abundant labor supply allows higher productivity to reduce product prices, which increases workers’ real income. As a result of more and higher paid jobs, more people will move out of poverty, helping achieve the AmBisyon Natin 2040 vision of a society free of poverty.
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The World Bank maintains its growth projection for the Philippines at 6.7 percent for 2018 and 2019. The Philippine Stock Exchange index (PSEi) contracted in June for the fifth consecutive month.
... See More + The Philippine peso continued to depreciate reaching Php/US$53.5 in June, weakest since 2006. Exports declined for the fifth consecutive month while import growth remained robust. Bangko Sentral ng Pilipinas (BSP) raised the key policy rate again in June amidst rising inflation. Fiscal deficit narrowed slightly in May as revenue growth outpaced expenditure growth.
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Newsletter 128374 JUL 01, 2018
Chua,Kevin C.; Cruz,Kevin Thomas Garcia; Endo,Isaku; Qian,Rong; Hansl,Birgit; Diop,NdiameDisclosed
In 2017, the Philippines was among the top three growth performers in the East Asia region. Only Vietnam and China performed better. The Philippines growth performance slightly weakened in 2017 to 6.7 percent year-on-year from 6.9 percent in 2016.
... See More + Growth was anchored in strong exports, while investment growth significantly slowed and consumption growth moderated. The Philippines' annual exports rose sharply in 2017 and became the main engine of economic growth, while imports continued to grow by double-digits. Investment growth slowed in 2017, following two consecutive years of rapid expansion, and climbing inflation slowed real wage growth and contributed to a moderation in private consumption growth.
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The Philippines Economic Update (PEU) summarizes key economic and social developments, important policy changes, and the evolution of external conditions over the past six months.
... See More + It also presents findings from recent World Bank analysis, situating them in the context of the country’s long-term development trends and assessing their implications for the country’s medium-term economic outlook. The PEU covers issues ranging from macroeconomic management, financial-market dynamics to the complex challenges of poverty reduction and social development. It is intended to serve the needs of a wide audience, including policymakers, business leaders, private firms and investors, and analysts and professionals engaged in the social and economic development of the Philippines. Policymakers need to confront downside risks while fostering long-term growth. The short-term risks to the country’s outlook include increased trade protectionism, the possibility of financial market disruptions, and elevated economic policy uncertainty. In the longer term, weaker growth potential remains the main risk. Consistency in the government’s policies to achieve stable inflation, fiscal stability, and security will help preserve consumer and business confidence. For the Filipino consumer, it will be important that inflation remains at moderate levels. This will warrant careful inflation management by the central bank authorities to anchor expectations. As long as it is consistent with medium-term fiscal sustainability, an expansionary fiscal policy could support short-term growth. The successful and timely implementation of the government’s fiscal program, including its ambitious infrastructure plan and efforts to generate more revenue, would signal a strong commitment to the government’s policy priorities. Key issues, such as mining regulations and regional development in Mindanao, will require policy certainty to preserve both external and domestic confidence in the Philippine economy. Implementing structural policies that support investment and trade will be critical to boost productivity and potential growth in the long-term. These policies would require the government’s commitment to reforms that promote competition in key sectors, secure property rights, lessen regulatory complexities, and improve doing business in the country. Longer-term policy priorities also include training and job search programs and other measures to support workers most affected by sectoral shifts in employment and share the dividends of growth and gains from globalization more widely. Sustained investment in human capital development and in sectors that create quality employment are needed to safeguard the country’s progress on delivering inclusiveness.
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Working Paper 120239 OCT 01, 2017
Hansl,Birgit; Diop,Ndiame; Chua,Kevin C.; Cruz,Kevin Thomas GarciaDisclosed
This report adds value because its inclusive approach of engaging with a broad-based group of stakeholders at the time of both analysis and engagement has served a means of building support for needed reforms.
... See More + The goal was to generate ownership among Mindanawons through consultations which were guided by mostly local technical experts. For the analysis, the World Bank partnered with leading universities, think tanks, experts, and nongovernmental organizations (NGOs). Some 90 percent of the extended team came from within Mindanao, and they contributed more than 40 background papers. The study’s inclusive approach was to listen intently to government, business, labor, civil society, and vulnerable groups who are often left out in the engagement process, such as indigenous people, Moro women, out-of-school youth, combatants, and internally displaced people. From January 2015 to June 2016, some 1,500 stakeholders were consulted. Finally, 10 eminent individuals with government, business, labor, and civil society experience provided strategic advice to the report team. Finally, building on the dialogue with the Philippine government and stakeholders in Mindanao, this report proposes a strategy for regional development in Mindanao. The three main components are to (1) raise agricultural productivity and improve farm-to-market connectivity; (2) boost human development; and (3) address drivers of conflict and fragility and strengthen institutions in ARMM and conflict-affected areas. The World Bank engagement for Mindanao will be based on this strategy. Policy recommendations are made in four separate categories: (1) increasing agricultural productivity by improving extension and irrigation services, along with price reforms to realize Mindanao’s agriculture potential; (2) building up logistics and transport connectivity by improving road networks and the efficiency of shipping services to reduce trade costs; (3) improving the supply of reliable power and the speed, affordability ,and quality of information and communications technology (ICT) services by fostering competition; and (4) supporting private investment by addressing the growing skills gap, the high regulatory burden for businesses, and by improving financial inclusion and the governance of land. A separate section considers economic policy measures to support the resolution of Mindanao’s longstanding violent conflicts.
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Growth in developing East Asia and Pacific (EAP) continues to be resilient and in line with previous expectations. Already robust domestic demand has been supported by some pickup in external demand and the gradual recovery in commodity prices.
... See More + Fiscal deficits in the major regional economies widened in 2016, prompting some adjustment toward the end of the year in Indonesia and Malaysia. Monetary policies remained accommodative, and credit continued to grow rapidly in most major economies. Inflation is edging up and producer prices are rising quickly as commodity prices increase. Capital outflows intensified toward end-2016 leading to depreciation pressures, but financial markets have since recovered. The growth outlook for 2017–19 remains broadly positive across the region. China is expected to continue its gradual transition to lower, more sustainable growth. In the rest of the region, growth is projected to pick up moderately. Continued buoyancy in domestic demand, including public and increasingly private investment, will be supported by gradually strengthening external demand. Global growth and commodity prices are projected to continue recovering slowly, while global financial conditions tighten gradually. Inflationary pressures should remain contained. In the Pacific Island Countries, maintaining fiscal sustainability needs to remain a focus along with policy reforms in selected sectors, which could prove transformational over the medium term. For fiscal sustainability, efforts to shore up revenues, contain unproductive spending while boosting critical expenditures on health and education, and build up buffers against shocks need to be sustained. There are also opportunities to accelerate growth and boost employment over the longer term. On tourism, promising options include tapping into the Chinese and retiree market, increasing the number of luxury resorts, and encouraging cruise ships to base in the Pacific. Increases in labor mobility, through the expansion of existing agreements and the negotiation of new agreements, complemented by investments in workers’ human capital, could also generate substantial benefits. Higher mobile and internet penetration, complemented by a conducive business environment and the development of a skilled workforce could boost productivity. And income from fisheries could be significantly increased, without threatening the sustainability of the fisheries stock, by broadening participation in cooperative agreements to include East Asian countries with major fishing grounds, such as the Philippines and Indonesia, and ensuring compliance with robust catch limits.
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This newsletter includes the following headings: the World Bank upgraded the Philippines growth projection for 2016 from 6.4 percent to 6.8 percent, and for 2017 from 6.2 percent to 6.9 percent, given higher-than-expected third quarter growth and improved outlook assumptions; in October, manufacturing activities continued to expand, pushing utilization levels near full capacity; remittances remain a key growth driver as both personal and cash remittances reached their highest levels so far; prospect of an interest rate hike by the US Federal Reserve resulted in losses in the local stock index and contributed to a weakening peso; inflation inched up further in November driven by increasing food and utility prices; the banking system continues its expansion through strong credit growth, and Philippine banks received a stable outlook rating from fitch ratings on December 8; the fiscal balance weakened in January-October as expenditure growth continued to outstrip revenue growth.
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Newsletter 111049 DEC 01, 2016
Hansl,Birgit; Chua,Kevin C.; Cruz,Kevin Thomas Garcia; Mylenko,NataliyaDisclosed
This newsletter includes the following headings: the World Bank Philippines’ growth outlook is positive with upside risks; in September, manufacturing activities continued to expand with several sectors working close to full capacity; the banking system shows ample liquidity and strong credit growth; October headline inflation was steady while food inflation inched up further impacted by adverse weather conditions; the national government deficit widened in January-September as expenditure growth outpaced revenue growth; and poverty fell significantly in 2015, as improved employment outcomes, incomes, and social welfare programs lifted 1.8 million Filipinos out of poverty since 2012.
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Newsletter 110260 NOV 01, 2016
Hansl,Birgit; Chua,Kevin C.; Cruz,Kevin Thomas Garcia; Mylenko,NataliyaDisclosed
The Philippine Economic Update (PEU) provides an update on key economic and social developments, as well as policies over the past six months. It also presents findings from recent World Bank studies on the Philippines.
... See More + It places them in a longer term and global context, and assesses the implications of these developments and policies on the outlook for the Philippines. Its coverage ranges from the macro-economy and financial markets to indicators of human welfare and development. It is intended for a wide audience, including policymakers, business leaders, financial market participants, and the community of analysts and professionals engaged in the Philippines. Poverty reduction is expected to continue if the country is able to maintain the relatively high economic growth and the more positive job trends in recent years, despite recent shocks to agriculture. Recent trends show an improvement in the country’s growth-poverty elasticity, which means growth is becoming more inclusive. However, the recent increase in the underemployment rate and weak agricultural output in 2016 will need to be countered by sustained increase in per capita income growth and a continued focus on supporting the structurally poor through effective social protection programs. Under these assumptions, extreme poverty is projected to further decrease from nine percent in 2014 to 6.8 percent in 2018.
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Working Paper 104611 APR 01, 2016
Cruz,Kevin Thomas Garcia; Limkin,Joseph Louie C.; Del Castillo,Noel Borja; Chua,Karl Kendrick Tiu; Van Den Brink,Rogier J. E.; Galang,Roberto Martin NolanDisclosed
In the six months since the previous East Asia and Pacific (EAP) economic update, developing EAP has faced a challenging external environment. Financial market conditions in the region, however, have been volatile over much of the past 6 months, as in the rest of the world.
... See More + Over the next two to three years, growth in developing EAP is expected to ease modestly. Poverty in developing EAP has declined rapidly in recent years, and is projected to fall further with continued growth; however, in several countries the pace of poverty reduction has been restricted by limited labor market opportunities, particularly for disadvantaged groups. The positive outlook for growth and poverty reduction in the region in this base case is subject to elevated risks. The outlook for the Pacific Island Countries (PICs) is heavily dependent on their ability to overcome geographic constraints and take advantage of the relatively narrow set of opportunities available to them. Sustaining the pace of poverty reduction will require measures to enhance the business environment, improve education and health outcomes, and strengthen social safety nets.
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The purpose of this policy note is to present reform options on cabotage liberalization. The goal of cabotage liberalization is to help i) foster more competition in the domestic shipping industry, ii) reduce shipping cost, and iii) improve efficiency, maritime services, and safety standards.
... See More + These, together with complementary reforms in domestic shipping and ports, can help enhance consumer and producer welfare through lower consumer prices, higher household real income, timely delivery of goods, and ultimately, job creation and poverty reduction through greater market access. This policy note on cabotage is organized as follows. Part one provides an overview of the domestic shipping industry and discusses the key issues that it faces. Part two discusses the underlying reasons for the industry’s inefficiency. Part three discusses the concept of cabotage, the cost and benefit of cabotage liberalization, and the cabotage regimes of the Philippines and of selected countries. Part four closes with a discussion of reform options.
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Working Paper 105364 JUL 01, 2014
Chua,Karl Kendrick Tiu; Juco,Marianne N.; Cruz,Kevin Thomas Garcia; Sabarillo,Anthony; Mansour,Wael; Ablaza,Christine Marie; Dato, Nonong; Galang, Robby; Catangui,Gerlin May U.; San Luis,Melanie Marron; Lacerna, TessDisclosed
Despite typhoon Yolanda and a string of natural disasters throughout 2013, Philippine economic growth accelerated to 7.2 percent in 2013. Higher growth was underpinned by the robust performance of consumption and services, and supported by the expansion of investments and manufacturing.
... See More + Like other emerging markets, Philippine financial markets experienced large volatilities as investors responded to the tapering of the United States (U.S.) stimulus program. Monetary and fiscal policy remained supportive of growth. Amid the challenging global environment and the impact of typhoon Yolanda, the Philippines are likely to sustain high growth in the medium-term. Risks to growth include a slower global recovery, financial market volatilities following the tapering of the U.S. stimulus program, potential bubbles in the real estate sector, slower post-typhoon reconstruction, and domestic reform lags. The government responded quickly to the typhoon by rolling out immediate humanitarian aid and preparing the reconstruction assistance on Yolanda (RAY), a strategic plan to guide recovery and reconstruction in the affected areas. The Philippines will also need to prepare more broadly for the increased risk of disasters brought about by climate change. The Philippine economic update provides an update on key economic and social developments, and policies over the past six months. It also presents findings from recent World Bank studies on the Philippines.
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