At a recent meeting of the PBBC, The Philippine Ambassador to the UK, His Excellency Enrique A. Manalo, was able to report on recent Philippines Economic performance and indicators which continue to show that the Philippines economy is doing very well in comparison to most counties throughout the world. Many of the economic performance indicators continue to proceed in a positive direction. This is a summary of his report.

Gross Domestic Product / Growth Outlook

•          The Philippine economy registered another quarter of strong growth, as GDP was up 5.9 percent in the second quarter of 2012, well above the average market forecast of 5.3 percent.

•          The strong growth is in large part due to the accelerated public investment, supported by accelerated government spending for infrastructure, including for conditional cash transfer, low inflation, better exports performance, continued credit expansion, buoyant tourism sector, sustained overseas Filipino remittances, increased business and consumer confidence, and an overall positive domestic outlook

•          Given the preliminary first semester estimate of 6.1 percent and with the inflation kept close to the lower bound of the Bangko Sentral ng Pilipinas’ target of 3.0 – 5.0 percent, the government maintains its view that higher end of the full-year 2012 real GDP growth rate projection of 5.0 – 6.0 will be reached.

•          Early July 2012 saw the announcement that Standard & Poor’s upgraded the credit rating of the Philippines, citing the country’s prudent fiscal management, strong external position and stable economic growth. This marks the eight credit rating upgrade for the Philippines over the last two years.

•          Credit Suisse, Bank of America-Merril Lynch and Development Bank of Singapore are among some of the global financial institutions that have recently raised their 2012 growth forecasts for the Philippines.

Trade / Exports / Imports

•          Total merchandise exports for the first 7 months reached $31.564 billion, 7.7% higher from $29.306 billion a year ago.

•          For the first half of 2012, aggregate imports slightly recovered by 0.4 percent to $30.761 billion from the $30.653 billion posted for the first six months of 2011

•          PHL-UK Trade

         Jan – April (in millions USD)

                             2012                                                  2011

                   Export        Import        BOT         Export      Import      BOT         

Inflation / Interest rates / Peso

•          Year-on-year headline inflation rose to 3.8 percent in August from 3.2 percent in July. The August reading was at the high end of the BSP’s forecast range of 2.9-3.8 percent for the month.  This brought the year-to-date average inflation to 3.2 percent, which is well within the Government’s inflation target range of 3-5 percent for 2012.  

•          The uptick in inflation was due mainly to higher food, electricity, fuel, and transport prices. Tight domestic supply conditions, triggered by the recent weather-related production disruptions led to higher retail prices of food, particularly vegetables, fish, sugar, fruits, rice, and meat.

•          The policymaking Monetary Board on July 26 decided to reduce BSP’s key rates by 25 basis points, bringing them to a new record low of 3.75 percent.  This was the third time this year that the BSP cut its policy rates.   The board decided to keep the rates unchanged at its meeting 13 September, as expected.  

•          The Peso settled at a four-year high of P41.56 per dollar last 11 September.  For the year, the Peso has appreciated 5.2% against the dollar, the best performance among Asia’s 11 most-active currencies, data compiled by Bloomberg show.

Budget Deficit

•          The Philippine government’s fiscal deficit for the first seven months to July reached to P73.731 billion, 68.7 percent higher than the P43.713 billion recorded during the same period of last year.

•          Government spending as of end-July amounted to P957.961 billion, 15.1 percent up from the P832.316 billion recorded in the previous year.  Collections went up by 12.1 percent during the seven-month period to P884.23 billion from P788.603 billion last year.

•          Finance Secretary, Cesar Purisima, said the deficit is within expectations and the government has fiscal space to pump prime the economy. 

•          With the cap set at P183.343 billion for the first three quarters of the year, the government still has fiscal space of nearly P110 billion for August and September.

•          The government aims to collect P1.561 trillion this year to help finance expenditures of P1.84 trillion. The 2012 deficit has been capped at P279.1 billion, equivalent to 2.6% of gross domestic product.

•          Foreign portfolio investments recorded a net inflow of $963 million in July, reversing the $8-million net outflow registered in June.  It was also three times higher than the $302-million net inflows recorded in July 2011.

•          This brought net inflows of foreign portfolio investments to $1.8 billion in the first seven months of 2012.

•          The main beneficiaries of these foreign investments were companies listed on the Philippine Stock Exchange led by banks ($411 million), property companies ($373 million), holding firms ($322 million), diversified services ($151 million) and telecommunication companies ($145 million).

•          Top sources of foreign funds were the United Kingdom, the United States, Singapore, Hong Kong and Luxembourg.  The United States continued to be the main beneficiary of outflows from investments.

•          The Philippine stock market is up 18% from year-to-date and 19% from year ago, among the best showings in Asia.   It has already broken all-time highs 19 times in the first half of 2012, reaching a record 5,369.98 last 5 July 2012.

Remittances

•          Remittances from UK from January to May 2012 up 2.78% from same period 2011, to US$ 392,981,000

Gross International Reserves

•          The country’s gross international reserves (GIR) reached a record US$80.8 billion as of end-August 2012, higher by US$1.0 billion than the end-July 2012 GIR of US$79.8 billion.

•          The significant rise in the end-August 2012 GIR level was due mainly to the foreign exchange operations and income from investments abroad of the BSP, foreign currency deposits by the Treasurer of the Philippines (TOP), as well as revaluation gains on the BSP’s gold holdings, reflecting the increase in the price of gold in the international market.

•          The end-August 2012 GIR level could adequately cover 11.9 months worth of imports of goods and payments of services and income.  It is also equivalent to 10.9 times the country’s short-term external debt based on original maturity and 6.6 times based on residual maturity

Tourism / Media Coverage

•          Visitor arrivals to the Philippines for the first half of the year totaled 2,143,506, an increase of 11.68%

•          The top twelve (12) travel markets of the country posted positive growth rates with the majority registering double-digit gains, including the United Kingdom with 57,181 arrivals, an increase of 11.30%. This is particularly impressive, given that there are currently no direct flights between Manila and London.

•          In time with the millions of visitors arriving in London this summer for the Olympic and Paralympic games, the Philippine Department of Tourism has displayed “More Fun in the Philippines” images on 50 double-decker buses, 50 black cabs and over 40 underground posters all around London.