ECONOMIC PERFORMANCE AND INDICATORS
The Philippine economy grew by 5.7 percent in the first quarter of 2014. The relatively slow growth was expected, given the magnitude of the destruction caused by natural calamities late last year. Prudential lending measures imposed beginning in the previous quarter to prevent the formation of real estate “bubbles” also contributed to the slowdown.
- Information Technology-Business Process Management (IT-BPM) and the export-oriented manufacturing remained resilient. Post-disaster recovery and reconstruction efforts have also induced growth in logistics, transport, and social work.
- On the supply side, the services and industry sectors primarily drove the growth with a contribution of 3.8 and 1.8 percentage points (ppts), respectively, to real GDP growth. Manufacturing remained the main driver of growth for the industry sector, followed by mining and quarrying. However, agriculture has yet to recover from the effects of last year’s typhoons. Meanwhile, the services sector’s growth was primarily driven by the gross value added in communication, land transportation, and storage and services incidental to transport.
- On the demand side, private consumption, fixed capital formation and net exports respectively contributed 4.0 ppts, 2.6 ppts, and 1.8 ppts, to the growth. Household spending remained strong in the first quarter of 2014 despite the higher inflation recorded during the period at 4.1 percent. The impact of a higher inflation was partly moderated by the weakening of the peso as the value of overseas Filipino remittances during the period.
- The Philippines remains confident it will meet the growth target of 6.5 to 7.5 percent for the full year of 2014.
Trade / Exports / Imports
- Total exports from January to May increased by 5.8 percent, from $23.0 billion in the same period last year to $24.4 billion this year.
- Cumulative imports for the first four months of 2014 amounted to $21.530 billion and showed a 9.9 percent increase compared to the $19.590 billion in the same period of last year.
- Per BSP figures, Philippine exports to the UK for 2013 were valued at $560 million, from $657 million for 2012, while Philippine imports from the UK increased to $301 million, from $271 million the year before. The UK was the Philippines’ 22nd largest trading partner in 2013, and ranked as the 13th largest purchaser of Philippines goods, and the 27th largest seller of imported goods to the Philippines.
- Headline inflation decelerated slightly to 4.4 percent year-on-year in June from 4.5 percent in May. The June inflation reading was within the BSP’s forecast range of 4.1-5.0 percent for the month. This brought the year-to-date average inflation rate to 4.2 percent, within the Government’s inflation target range of 4.0 percent ± 1.0 percentage point for 2014.
- At its meeting last June, the Monetary Board decided to keep the BSP’s key policy rates at 3.5 percent for the overnight borrowing or reverse repurchase (RRP) facility and 5.5 percent for the overnight lending or repurchase (RP) facility. The Monetary Board’s decision to maintain the policy rates at their current levels is based on its assessment that the future inflation path is likely to stay within target over the policy horizon.
- Jobs growth in all major sectors of the economy pushed total employment to 38.7 million in April 2014, a 4.5-percent increase from 37.0 million a year ago. This growth translated into 1.7 million additional employed persons in April 2014 from the same period last year. Thus, the unemployment rate dropped to 7.0 percent in April 2014, from 7.6 percent a year ago. The underemployment rate also went down to 18.2 percent in this period from 19.2 percent in April 2013.
- The services sector contributed more than half of the workers employed (52.8%) and the level of employment increased by 4.8 percent or by 929,000 workers in April 2014 from a year ago. In the agriculture, fishery and forestry sector, employment rose by 3.1 percent in April 2014 accounting for 30.7 percent of the total employed.
- The National Government posted its second straight month of fiscal surplus – P11.8 billion for the month of May – as a result of the rapid growth of total revenues and tax revenues. This signifies the third straight month of double-digit year-on-year growth for total revenues.
- This brought the January-May fiscal balance at a surplus of P8.5 billion, a reversal of the P42.8 billion deficit over the same period last year.
- Year-to-date, BIR collections were P549.1 billion, an 8.7% improvement from last year; total Bureau of Treasury income reached P55.9 billion, 142.8% above target and 37.7% higher than comparable figures last year; and Customs collections amounted to P146.1 billion, a 20% rise from comparable figures in 2013.
- The government wants to limit the budget deficit to 2.0 percent of GDP through 2016. The Philippine government has already stated that it will maintain such budget deficit target for 2014, equivalent to 266.2 billion pesos (6.54 billion USD).
Foreign Direct Investment
- The Philippines registered $3.860 billion in foreign direct investments (FDI) in 2013, up 20 percent $3.215 billion from a year earlier, and beyond the $2.1 billion Bangko Sentral target.
- On a cumulative basis, FDI net inflows reached US$2.4 billion for the first four months of 2014. This was 9.1 percent higher than the US$2.2 billion net inflows during the same period last year as net inflows were recorded across FDI components. The sustained increase in net inflows continued to reflect strong investor confidence in the country’s solid macroeconomic fundamentals.
- For Jan-March 2014, net FDI from the UK was US$3.35 M (8th), an increase of 33.06%.
Stock Market / Currency / Reserves
- Foreign portfolio investments (FPIs) in the Philippines registered a net inflow of $545 million in May, a reversal from a net outflow a year earlier and a 67.69 percent improvement from April. For the first five months of the year, foreign portfolio investments registered a net outflow of $1.42 billion, a reversal of the net inflow of $1.58 billion in the same period last year. The BSP expects foreign portfolio investments to post a $2.1-billion net inflow this year. The United Kingdom, Singapore, the United States, Hong Kong and Luxembourg were the top sources of gross hot money inflows.
- The Philippine Peso has averaged 44.4993 to the US Dollar for 2014, starting at 44.9266 in January and strengthening to 43.8175 in June. The 2013 average was 42.4462 pesos to the dollar.
- The country’s gross international reserves (GIR) rose to US$80.7 billion as of end-June 2014. This level was higher by US$0.5 billion than the end-May 2014 GIR of US$80.2 billion. The GIR remains ample as it can cover 11 months’ worth of imports of goods and payments of services and income. It is also equivalent to 7.7 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity
- Cash remittances to the Philippines for the first quarter of 2014 stood at $5.477 billion, 6.1% higher than the same period from the year before.
- Cash remittances from the UK totaled $335 million for the first quarter of 2014, up 20% from the same period the year before.
- International tourists reached 1,696,537 from January to April this year, an increase of 2.85% from the same period the year before.
- Arrivals from the UK from January to April 2014 totaled 50,205, or 16.6% higher than the 43,055 arrivals for the same period the year before. The UK is now the Philippines’ 8th largest market for tourist arrivals.
All of the above information was provided by the Philippines Embassy in London.