Charting Philippines Economy, 1H 2017 Designed to help executives interpret economic numbers and incorporate them into company s planning. Publication Date: January 3 rd, 2017 Next Issue: To be published on July 3 rd, 2017
HELPING EXECUTIVES AROUND THE WORLD INTERPRET ECONOMIC NUMBERS Argentina Australia Brazil Brunei Cambodia Canada Chile China Hong Kong India Indonesia Laos Malaysia Mexico Myanmar New Zealand Peru Philippines Russia Singapore South Africa South Korea Taiwan Thailand Turkey United Kingdom United States Vietnam
EXECUTIVE SUMMARY ECONOMIC PROFILE ECONOMIC OUTLOOK Structure Competitiveness Development Growth Stability The Philippines is the fifth largest economy in ASEAN, about the same size as Singapore s The Philippines population is around 103 million people, the second largest in ASEAN behind Indonesia Favorable demographic structure for the Philippines with relatively young population and increasing portion of working age group Unique feature of Philippines economy is a high level of net transfer as many Filipinos went to work overseas and transfer back to the economy Philippines economy is traditionally domestic based with private consumption as the most important expenditure. It relies less on external trade than most ASEAN economies. The economy is concentrated in the capital region but higher growth seems to occur at secondtier regions Economic Structure Part of the country s economic profile, economic structure section gives readers useful views to understand economic fundamental and determine what matters for the country s economy. 5
The Philippines is the fifth largest economy in ASEAN, about the same size as Singapore s 2015 GDP USD billion, Market Exchange Rate US China Japan Germany UK ASEAN* France India Italy Brazil* Canada Korea Russia Australia Spain 4,124 3,365 2,858 2,433 2,420 2,073 1,816 1,773 1,551 1,378 1,326 1,225 1,200 18,037 11,182 Indonesia 859.0 Thailand 395.3 Malaysia 296.3 Singapore 292.7 Philippines 292.5 Vietnam 191.5 Myanmar 62.9 Cambodia* 17.8 Brunei 12.9 Laos* 12.6 Measuring the size of an economy Size of any economy is usually measured by calculating its Gross Domestic Product (GDP) which is the market value of all officially recognized final goods and services produced within a country in a given period of time. To compare GDP internationally, there is a need to convert value in local currencies to one main currency, normally USD. There are two popular exchange rate to be used. The first one is the official exchange rate for that particular period. The second one is the so called Purchasing Power Parity exchange rate, which takes into account the difference in living expenses between countries. The first method is more popular in comparing the size of each economy. Size of Philippines economy The Philippines is the fifth largest economy in ASEAN, about the same size as Singapore s. Its 2015 GDP is estimated to be around USD 292 billion, using market exchange rate. Mexico 1,144 Note: (*) IMF Estimate Source: IMF World Economic Outlook Database October 2016 6
Wages in the Philippines is comparable to India, lower than Thailand but higher than Indonesia and Vietnam Average monthly wages in Asia and the Pacific 2013 or latest available year (US$) Australia (2013) Singapore (2013) New Zealand (2013) Japan (2013) South Korea (2013) Hong Kong (2013) Malaysia (2013) China (2013) Samoa (2012) Mongolia (2012) Thailand (2013) India (2011/12) Philippines (2013) Vietnam (2013) Indonesia (2013) Cambodia (2012) Pakistan (2013) Nepal (2008) 4,642 3,694 3,419 3,320 2,841 1,780 651 613 565 411 391 215 215 197 183 121 119 73 International Wage Comparison Due to differences in definitions and coverage, comparing average wages across countries is not always straightforward. The chart presents information on wage levels for countries with broadly comparable data, compiled by International Labor Organization from comprehensive National Labor Force Surveys. Wages in the Philippines Average monthly wages in the Philippines in 2013 was around USD 215, same as in India. It is lower than in Thailand but higher than in Indonesia and Vietnam. Source: ILO Global Wage Report 2014/15 Asia and the Pacific Supplement 15
Philippines economic growth accelerated further in 3Q16 with 7.1% year on year growth Real GDP growth Year-on-year, 3Q16 India Philippines China Vietnam Indonesia New Zealand Malaysia Thailand South Korea Taiwan Hong Kong Australia United States Euro area Japan Singapore 1.1% 1.1% Philippines Real GDP growth Year-on-year, last 8 quarters 7.3% 7.1% 7.0% 7.1% 6.7% 6.8% 6.7% 6.4% 6.5% 5.0% 6.2% 5.9% 4.5% 4.3% 3.2% 5.0% 2.6% 2.0% 1.9% 1.8% 1.7% 1.7% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 GDP growth in the latest quarter Real GDP growth in the latest quarter from major economies in the world sorted from highest to lowest. GDP growth for Philippines economy in 3Q16 Philippines economic growth accelerated further in 3Q16 with 7.1% year-on-year growth. It s the second highest among major economies in the region. Source: The Economist, Philippine Statistics Authority; Charting Economy analysis 33
BSP s key policy rates was cut by 1% in 2016 Philippines Overnight Policy Rates Percent 4.50% 4.00% 3.50% 3.00% 2.50% Policy Interest rate The Bangko Sentral ng Pilipinas (BSP), the central bank, is responsible for the country s monetary policy which is currently using inflation targeting framework. The official interest rate is the reverse repo rate (RR/P) which is the overnight borrowing rate. The central bank of the Republic of the Philippines is committed to promote and maintain price stability and provide proactive leadership in bringing about a strong financial system conducive to a balanced and sustainable growth of the economy. Latest development The Policy interest rate was cut by 1% in June, the only cut in 2016. With less inflation pressure, the BSP was afforded the opportunity to boost growth by lowering interest rate. Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 2.00% Source: The Bangko Sentral ng Pilipinas (BSP) 39
Starting a business in the Philippines is relatively difficult with relatively high cost and around a month to complete Starting a business rank Cost - Paid-in min. Procedure - Cost - Men Procedure - Time - Time - Men Women (% capital (% of Economy Rank DTF* Men (% of income Women Women (days) of income income per (number) per capita) (number) (days) per capita) capita) New Zealand 1 100.0 1 0.5 0.3 1 0.5 0.3 0.0 Hong Kong SAR, China 3 98.2 2 1.5 0.6 2 1.5 0.6 0.0 Singapore 6 96.5 3 2.5 0.6 3 2.5 0.6 0.0 Australia 7 96.5 3 2.5 0.7 3 2.5 0.7 0.0 Korea, Rep 11 95.8 2 4.0 14.6 2 4.0 14.6 0.0 Taiwan, China 19 94.4 3 10.0 2.1 3 10.0 2.1 0.0 Thailand 78 87.0 5 25.5 6.6 5 25.5 6.6 0.0 Brunei Darussalam 84 86.7 7 14.0 1.6 8 15.0 1.6 0.0 Japan 89 86.1 8 11.2 7.5 8 11.2 7.5 0.0 Malaysia 112 83.7 8 18.0 6.2 9 19.0 6.2 0.0 Vietnam 121 81.8 9 24.0 4.6 9 24.0 4.6 0.0 China 127 81.0 9 28.9 0.7 9 28.9 0.7 0.0 Timor-Leste 145 77.1 4 9.0 0.5 4 9.0 0.5 260.1 Myanmar 146 77.1 11 13.0 40.4 11 13.0 40.4 0.0 Indonesia 151 76.4 11.2 24.9 19.4 11.2 24.9 19.4 0.0 India 155 74.3 12.9 26.0 13.8 12.9 26.0 13.8 0.0 Lao PDR 160 72.4 8 67.0 4.6 8 67.0 4.6 0.0 Philippines 171 68.9 16 28.0 15.8 16 28.0 15.8 3.1 Cambodia 180 54.9 9 99.0 57.2 9 99.0 57.2 22.5 Central African Republic 190 31.4 10 22.0 209.4 10 22.0 209.4 556.6 Starting a Business This topic measures the paid-in minimum capital requirement, number of procedures, time and cost for a small- to medium-sized limited liability company to start up and formally operate. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. The most recent round of data collection for the project was completed in June 2016. Starting a Business in Philippines Starting a business in the Philippines is relatively difficult with relatively high cost and around a month to complete. Note: (*) An economy s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier Source: Doing Business 2017 51
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