The Market Call

June

 

The Philippine economy is expected to record a stronger growth in H1 and hit a 7% (or higher) full-year growth as robust investment spending continues and foreign direct investments perks up. Higher peso equivalent of the remittances and the slower inflation upticks should encourage more consumption. NG’s promise to accelerate infrastructure spending should shore up domestic demand. Moreover, the improved external demand should be a positive catalyst to GDP growth.

May

 

The economy is expected to achieve 7% or higher GDP growth in Q1 as solid recovery of agriculture (+4% to 5%) and double-digit expansion of exports add the needed boost for GDP to hit 7% or higher. Capital goods imports and construction spending should continue to lead robust investment spending. Continued vitality of manufacturing sector and consumer spending should shore up domestic demand. Inflation will likely remain around 3.4% to 3.5% until Q3, well within the BSP’s target range, due to falling food and crude oil prices.

April

 

The current account’s positive balance should hold with OFW remittances enough to cover balance of trade deficits. The economy should expand by 6.5% to 7% in Q1-2017 with exports providing the new boost to robust domestic demand. Strong consumer spending and sustained manufacturing sector activity will continue to propel domestic demand, bolstered by OFW remittances. Inflation should stabilize at 3.5% up to Q3, thanks to easing food prices and crude oil prices, reeling from abundant supply and more oil from shale.

March

 

Despite a high base in Q1-2016, we think GDP growth in Q1-2017 will exceed 6.5% as all indicators, except faster inflation, signal sturdy output expansion in the current quarter. With particularly robust manufacturing output gains in the last two months of 2016, capital goods imports should continue to post above-20% gain in Q1-2017. With bloated domestic demand and exports gaining ground, Q1 performance should again signal much vigor in the economy. While inflation breached 3% in February, we think it should stabilize just above it, as crude oil prices have shown limited upside, and food price inflation can slow down with the inflow of more rice imports. The exchange rate should remain above P50/$ for the rest of H1-2017. The U.S. economy and dollar’s bulging muscle shall continue to provide pressure on the peso.

February

 

With BSP’s Consumer Confidence index still in positive territory and better global economic outlook, the Philippine economy is on track along a 7% GDP growth path. The agricultural sector should rebound starting Q1-2017 and post modest growth for the year. Investment spending will continue to drive the economic expansion as capital goods are expected to register double-digit gains for most of 2017. Manufacturing sector, which together with another banner year for Constructions industry, should propel industrial output to a pace of 8% or better. We expect headline inflation to hit 3% and hover around it in H1 as crude oil prices have stabilized at current levels while food supply should improve with better agricultural performance and early rice imports. The outlook for H2 may be less sanguine if the proposed excise taxes on petroleum products become effective then. Given the solid gains of the US economy and slight improvement in the Eurozone, we expect exports growth to become positive, albeit at a low single-digit pace in H1. Despite a slight improvement in the external sector, we foresee continued depreciation pressure on the US/PHP rate in Q1 but at a milder pace than in H2-2016.

January

 

Latest economic data released by the government indicate that the Philippine economy is firmly on track along a 7% or higher growth path. The 2.1 M new jobs in 2016 will likely support the trend of 1.1 M Filipinos annually moving out of poverty between 2012 to 2015 into 2016 and beyond. This, together with higher peso value for OFW remittances, will ensure a solid base of 7% & above growth in consumer spending, which accounts for more than 70% of GDP. But investment spending should remain as the main growth driver, as we expect continued double-digit growth in capital goods imports, similar to the construction sector. The latter will be buoyed up by aggressive infrastructure spending by the government and private residential and commercial construction that have shown a recent pick-up. FDIs will resume to take a faster pace in 2017 as PH economic numbers continue to impress foreign investors, especially the Japanese, Chinese, Koreans, and Taiwanese. These Asian investors will offset any slowdown of U.S. and Eurozone investments (excluding UK) should they continue to focus on non-economic issues. Exports should register more positive gains in 2017 and thus contribute a little to economic growth. OFW remittances (in USD) growth should remain subdued at the 2% to 4% range, but peso-wise, the peso’s expected depreciation should help these remittances to provide additional stimulus to the economy. Finally, while there may be periods of peso appreciation, the overall trend of a depreciation will likely continue in 2017, albeit at a slower pace than 2016. The U.S. economy will continue to improve slowly but surely as we’ve seen positive data consistently in the past quarter.

 

 

 

 

 

 

December

 

With global economy improving slightly to a 3.4% growth in 2017 from 3.1% expected for 2016 according to the International Monetary Fund's (IMF) projections as of October 2016, the external environment appears less daunting and encourages us to be more optimistic for 2017. Domestic demand may slow down only slightly in Q4 as investments continue its energetic run, while consumer spending should maintain its above-7% growth path considering that the employment situation has improved in Q3 while OFW remittances in both US$ and peso terms should provide robust purchasing power to households. Capital goods spending, as a result of the sustained gains in manufacturing output, shall continue to lead growth with an expansion of close to 15% in Q4.

 

 

 

 

 

 

July

 

The Philippine economy appears headed to a more sanguine second quarter performance as inflation fell to a 67-month low of 1.6% in May, while the National Government's (NG) infrastructure zoomed up by 40% in April. Below-target headline inflation, pulled down by stable to lower food prices, should encourage more consumer spending in Q2 onwards. NG infrastructure spending signaled a rebound from overall underspending in Q1 as NG boosted its April expenditures by 9%, and still brought year-to-date budget surplus to P19.1 B from P3.3 B a year ago. The more optimistic outlook is bolstered by a seasonally adjusted annualized net job creation of 1.3 M in April compared to January 2015. Read More

June

 

Instead of roaring and galloping, the Philippine economy grimaced and limped to a 5.2% Gross Domestic Product (GDP) growth in Q1 hugely disappointing investors (especially foreigners) and market players who were expecting a robust 6.6% expansion. Erstwhile growth leader, the Industrial sector weakened to a 5.5% (year-on-year) gain from 9% a quarter ago; while the Services sector similarly slowed to 5.6% from 6% a quarter ago. In both instances, most analysts point to weak government spending—public construction for industry and public administration & defense spending for Services—as the main culprit for the surprisingly tepid performance. Read More

May

 

Some people surmise that the onset of summer may have brought not only a dry spell (weather) but also a shortage of good news (for the economy). However, the most recent economic data do provide a burst of good tidings, albeit not a downpour. Meralco's electricity sales (a proxy for economic activity) showed a modest acceleration from previous months, while headline inflation remained soft at 2.4% or closer to the lower end of the government's 2-4% target. Besides, money growth kept its single-digit pace, and these all together combine to inhibit the Bangko Sentral ng Pilipinas from tightening monetary policy this year. Read More

April

 

Economic data released in March provide notable support for having a positive outlook for Q1 with job generation hitting over 1 M (from a year ago) in the last four quarters, and inflation in February remaining muted at 2.5%. A slight recovery in Meralco sales and expectations of higher government spending also boost expectations for another strong quarter performance. While exports continued to remain barely in negative territory and OFW remittances rose by only 0.2% in January, these are likely to be temporary. Besides, the National Government (NG) has fiscal space for heavy spending as its deficit for 2014 only hit 0.6% of GDP, pulling down its NG debt to GDP ratio further to 45.7%. This is now even lower than Malaysia (since 2012) and Thailand. Read More

March

 

While headline inflation fell further to 2.4% and net new jobs created exceeded 1M in January, the decline in exports by 3.2% in December suggests that the PH economy needs to post better numbers to maintain the momentum in GDP growth recovery seen in Q4 2014. The Bangko Sentral ng Pilipinas (BSP) kept a conservative view about the "currency wars" (i.e., 21 countries allowing their currencies to depreciate in view of the strong US dollar and the QE in the Eurozone and Japan. Despite slow 7.7% M3 growth in January, the BSP holds the view that its policy stance remains appropriate. In the external front, Overseas Filipino Workers' (OFW) remittances in December still grew by 6.6%, which together with strong portfolio capital inflow into the country's stock market has enabled the USD-PHP exchange rate to appreciate by 0.86% in February. However, the peso cannot indefinitely track the US dollar, despite the robust macroeconomic fundamentals. Read More

February

 

Just when skeptics' pessimism hardened after the Philippine economy's relatively poor performance in the first three quarters of the year, punctuated by a 3-year low of 5.3% in Q3, PH Gross Domestic Product (GDP) growth in Q4 surged to 6.9%, beating consensus estimates of 6% by a mile. As we had earlier put forward, our view that the problems encountered by the economy were man-made and had been resolved by Q3, government spending and construction resumed their high growth trajectory in Q4 which brought the full-year GDP growth to 6.1%, second only to China in the region. Positive developments in the inflation front which fell to 2.7% in December contributed to stronger spending as plunging crude oil prices in the world markets showed little respite. Read More

January

 

The Philippine economy is poised for a recovery starting Q4 if the economic data released in December were to be replicated for the rest of the quarter. Except for weak export growth in October, the major indicators flashed positive signs. Employment generation exceeded 1 M jobs for the 3rd consecutive quarter, inflation slowed to 3.7% in November, and Overseas Filipino Workers' (OFW) remittances hit the highest monthly level since a decade ago. Read More

December

 

The Philippine economy's slowdown to a 5.3% Gross Domestic Product (GDP) in Q3 from 6.4% in Q2 took both government drumbeaters and analysts by surprise. It certainly presented a grim reminder to all and sundry that rapid economic growth is not a walk in the park, nor is it inevitable given favorable economic conditions. Underspending by the National Government, poor agricultural performance and containers stuck in the Manila port due to a truck ban all combined to pull down the PH economy. On the positive side, inflation appears to have peaked in July-August at 4.9% as it continued to fall to 4.3% in October. Exports also soared by 15.7% while Overseas Filipino Workers' (OFW) remittances grew by 7.9% to the highest level since December 2013. A positive side effect of the government's underspending has been keeping a healthy fiscal balance (at P33B or 78% below the full-year target).

 

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November

 

Headline inflation cooled to 4.4% in September year-on-year as food prices stabilized and crude oil prices crashed in the international markets. The sharp slowdown which is likely to continue to 2015 should give the Bangko Sentral ng Pilipinas (BSP) the space to pause in its monetary tightening cycle. This positive development, third consecutive month of double-digit export growth in August, and solid economic numbers for the US economy have rekindled optimism for the rest of the year and 2015. The fly in the ointment was the low budget deficit of P5.2 B in September, suggesting underspending even though the disbursements growth for the month was 9%, an acceleration from 4% in August. These figures, however, could not offset the 15% fall in July, but the National Government seems to be more confident in accelerating its spending, while keeping corruption at a minimum

 

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October

 

The Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) surprised the markets with a two-pronged 25 basis points (bps) increase in both the policy rates (Reverse Repurchase Agreements) and Special Deposit Accounts (SDAs) rates. The aggressive move intends to cool inflation expectations, which likely peaked in July-August at 4.9%. Output indicators, like Meralco sales for August and exports for July, fortunately, displayed double-digit gains. However, the tightening could worsen the outlook for H2 as government spending in August decelerated to a 5% gain, while the media reported an unofficial data showing a 50%+ decline in infrastructure spending in July.

 

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September

 

The Philippine economy showed its resilience as it rebounded in Q2 with a Gross Domestic Product (GDP) growth of 6.4% (year-on-year) versus 5.6% (as revised) a quarter ago. The industrial sector, powered by the manufacturing sector, led the upswing. Financial markets, however, reacted tepidly to the data release which handily exceeded consensus of 6% as players focused on the rising inflation and likely further monetary policy tightening. Inflation clocked at 4.9% in July, a significant acceleration from 4.4% in June. Exports surged by 21% in June, as electronics exports recovered.

 

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August

 

The economy appears to have recovered somewhat in Q2 as more economic indicators emitted positive signals. Factory output (as tracked by the National Statistics Office in its Monthly Integrated Survey of Selected Industries or MISSI) expanded again at double-digit pace of 13.8% in May. This is a slight acceleration from the previous month’s 13.0% uptick. Exports also rose at a faster pace in May, albeit still at a single-digit momentum and National Government (NG) spending jumped by 44% in June after a 4% drop in May.

 

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July 

 

Despite an acceleration in inflation to 4.5% in May and a slowdown in exports in April, Q2 GDP growth may surprise on the upside, considering the 1.6 M jobs created in the year ending April 2014, and double-digit growth of 12.8% in industrial output for the same month. The jobs data are so far the best news that has come out, since that rate of job growth (4.5% y-o-y) is conducive to a virtuous cycle of employment-income-spending.

 

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June 

 

The surprise below-market expectations growth of Gross Domestic Product (GDP) in Q1 has had a mixed effect on early economic indicators for Q2. While the headline inflation rate for April accelerated to 4.1% from 3.8% in the previous month, Meralco electricity sales to industrial firms showed a good rebound in April which, in turn, provided good support for another double-digit expansion in exports in March. No surprises came from robust Overseas Filipino Workers’ (OFW) remittances in March, while the Q1 fiscal deficit stood at some 5% of GDP as the National Government (NG) stepped on the accelerator in terms of spending.

 

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May 

 

Super typhoon Yolanda’s fury finally took its toll on the economy as Gross Domestic Product (GDP) growth slowed to 5.7% in Q1 from (revised) 6.3% expansion in Q4 2013. This ended the PH economy’s run of eight consecutive quarters of above-6% growth. Feeble agricultural output gain of only 0.9% and private construction falling into negative territory did much of the damage. Gross National Income (GNI) picked up pace, however, rising by 7.6% from 7.2% (revised) in the previous quarter. This in turn boosted consumer spending which held at 5.8%, just about 5.9% in Q4 2013 but clearly higher than 5.5% a year ago.

 

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April 

 

Economic indicators released in March showed the Philippine economy leading off to a good, albeit not exceptional, start for the year. Exports in January expanded at almost double digit pace. Overseas Filipino Workers’ (OFW) remittances in January surprised the market with a 7% uptick, and an even more remarkable 18.1% gain in peso terms. Inflation eased slightly to 4.1% in February but Bangko Sentral ng Pilipinas (BSP) officials asserted that monetary policy window has narrowed especially as money supply growth remained above 30% for the 8th consecutive month.

 

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March 

 

The Philippines’ economic growth momentum continues to track a high growth path despite the adverse supply chain impact of November’s super typhoon Yolanda. Domestic demand remains intact, as Meralco electricity sales growth for January improved from the previous month. External demand, which was weak for most of 2013, showed surprising strength as exports continued its recovery in December, marking the 4th month out of five in which it posted double-digit gains. Inflation has kept fairly steady at 4.2% in January, while record Overseas Filipino Workers’ (OFW) remittances hit another all-time high in December 2013.

 

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February 

 

Beating market expectations, the Philippine economy (measured in terms of Gross Domestic Product or GDP) expanded by 6.5% in Q4 2013, and brought the full-year growth to 7.2%, second only to China for the second year in a row. That the PH economy is entering into a rapid growth path is supported by eight uninterrupted quarters of above-6% gains. Exports had surged by double digits in November 2013 while Overseas Filipino Workers’ (OFW) remittances (in US$) hit a new record high in the same month. The fly in the ointment was the acceleration of headline inflation rate to 4.1% in December. But even this brought Q4 inflation average only to 3.4%, and the full-year rate to 3.0%, which is at the lower end of the government’s inflation target of 3-5%.

 

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January 

 

Despite the devastation caused by super typhoon Yolanda (international name: Haiyan), economic data for October and November would suggest that growth in Q4 will remain robust. Industrial production has shown high double-digit surge and exports are gaining traction in the positive territory. The main drawback has been the acceleration of inflation, but being driven by supply chain disruptions caused by the super typhoon, it is likely to be a concern for some three months. Besides, the recent readings are still in the middle range of the Bangko Sentral ng Pilipinas’ (BSP) target of 3-5%.

 

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December 

 

The Philippine economy continued its above-7% Gross Domestic Product (GDP) growth streak in Q3, albeit at a slower pace. This marks the 5th consecutive quarter of expansion at this pace. By another count, GDP has risen higher than 6% in the last seven quarters. Industry continued to lead the pack with robust gains in Manufacturing and Construction. Surprisingly, exports accelerated modestly in September, providing support to the growth momentum. And while faster in October at 3%, inflation remained at the lower end of the Bangko Sentral ng Pilipinas’ (BSP) 3-5% target.

 

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November 

 

Just as another set of economic data was pointing towards an above-7% Gross Domestic Product (GDP) in Q3, killer super typhoon “Yolanda” (international name: Haiyan), that devastated large swathes of the Visayas and Palawan, may have killed the further acceleration suggested by the country’s Leading Economic Indicators (LEI) for Q4. After all, industrial output and exports expanded at a faster pace in August and peso equivalent of Overseas Filipino Workers’ (OFW) remittances rose at a double digit rate. The world’s biggest ever typhoon, that packed over-300 kph winds and huge waves flattened and killed thousands of Filipinos in the eastern coast of some Visayas islands, may now mean below-6.0% GDP growth in Q4 and the first half of 2014. To be sure, reconstruction efforts could offset the loss on output and income due to the negative effects of the super typhoon, but the affected areas reportedly represent some 12% of the country’s population, and the latter would probably tilt the balance.

 

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October 

 

The economy continues to show signs of strength as electricity sales accelerated in August, while exports growth remained in positive territory. Besides, the peso equivalent of Overseas Filipino Workers (OFW) remittances hit a 49-month high in July which should boost consumption spending and residential homes purchases. Decelerating headline inflation rates to 2.1% in August from 2.5% in July further increases the likelihood of another above-7% Gross Domestic Product (GDP) growth in Q3.

 

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September 

 

The economy’s 7.5% growth in Gross Domestic Product (GDP) in the Q2 matched China’s performance for top honors among Asian countries. With inflation in July decelerating to 2.5% from 2.7% (revised) in the previous month, the output expansion meant that the PH economy remains in “goldilocks” world. Exports gains also finally landed in positive territory in June. The Q3 was also off to a fast start, as the National Government (NG) resumed the dizzying pace of infrastructure spending, which rose by 45.1% in July. The economy’s health may also be reflected by the 18.5% increase in tax revenues for the same month. Thus, we remain on track with our outlook of another above-7% GDP growth for Q3.

 

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August 

 

The Federal Reserve Board’s (Fed) clarification that the tapering of its bond purchases as part of its quantitative easing (QE) is “not cast in stone” and will be dependent on how the economy actually performs in the coming months not only calmed the financial markets, but also highlighted the strong fundamentals of the Philippine economy. Meralco electricity sales in Q2 posted a 6.4% gain from year ago levels, a significant climb from 1.2% in Q1, despite a slowdown in June. Government spending on infrastructure still sizzled at 35.9 % growth in Q2, although again this was a bit weaker than the 50.1 % surge in Q1. Industrial production went up by 21.7% in May and is pointing towards an acceleration in the manufacturing sector in Q2. And inflation in June was only slightly up to 2.7% (revised), still markedly below the Bangko Sentral ng Pilipinas’ (BSP) target of 3-5%.

 

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July 

 

May budget deficit remained well under control and inflation still below target, but the economy’s rapid growth still could not create jobs. And despite another fall in exports, the economy remains domestic demand driven, and our positive outlook for Q2 and for the rest of the year remains intact, with construction and manufacturing sectors leading the way. A further booster for the domestic economy is the peso’s sharp depreciation in June, a collateral damage inflicted by the strong outflow of investible funds from EMs and to the US dollar. The basis for this added impulse is in our previous studies which indicate that for every peso of OFW spending, P2.50 of income is generated in the economy. Finally, we have seen the Bangko Sentral ng Pilipinas’ confidence in keeping growth robust with inflation in check as it maintained policy and SDA rates unchanged.

 

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June

 

Just when the financial markets were roiled by the prospect of a QE3 cutback in the US, the Philippine economy’s 7.8% Q1 expansion in Gross Domestic Product (GDP) stunned the world as it bested China’s 7.7% growth for the same period. The Q1 surge may not be an “outlier” as the economy has posted six consecutive quarters of over-6% growth, indicative of a “growth momentum”. The stellar performance comes with a slowing of the headline inflation rate to 2.6% in April-May from 3.2% in March with signs that the below-the-target inflation rate may extend up to Q3. But despite this and the Bangko Sentral ng Pilipinas’ (BSP) 50 basis point cut in the Special Deposit Account (SDA) to 2%, the financial markets paid more heed to the US scenario and started to consolidate.

 

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May 

 

The economy emitted mixed signals which may dampen hopes for faster growth in the first quarter of 2013. Growth in Meralco electricity sales in Q1 averaged 1.1% only, while exports contracted by 15.7% due mainly to weak electronics products demand. On the other hand, infrastructure spending continued to rise at a sizzling rate of 50.7% in Q1 only a bit lower than Q4 2012. Besides, inflation fell to 2.6% in April and averaged 3.2% in Q1 and election spending were likely to have encouraged stronger consumer and construction demand. Since the spending has been more spread out across the country, it may not be readily reflected in Meralco electricity sales. Thus, we do not see sufficient reasons to downgrade our GDP forecast for Q1 and for the rest of the year.

 

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April 

 

Fitch Ratings lifted the Philippine foreign debt papers (ROPs) to investment grade (‘BBB-’ from ‘BB+’), first in Philippine history, as it has been able to continue flexing its economic muscles amidst external headwinds. Although the latest economic data have bequeathed new insights for the reassessment of the outlook for the country’s economy, the downside risk to GDP outlook remains benign, and thus the outlook fairly remains stable and sanguine.

 

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March

 

The International Monetary Fund (IMF) upgraded its forecast for the Philippine economy to 6.0% in 2013, a significant upgrade from its earlier 4.8% projection. This confirmed the widespread view that the economy is fundamentally strong, and so the country’s financial markets were booming even as early data for the year were not overly impressive.

 

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February 

 

The country continued to flex its economic muscles by expanding output (Gross Domestic Product or GDP) by 6.8% in Q4, handily exceeding market expectations, and ending the year with a 6.6% growth which is second only to China in the region. Inflation remained below 3% in December and this gave the Bangko Sentral ng Pilipinas (BSP) the space to slash Special Deposit Account (SDA) rates to 3%, while maintaining the policy rates at 3.5%. While exports growth in November eased back to single-digit pace, electronics exports pace surged by 13.3%. Overseas Filipino Workers (OFW) remittances and foreign portfolio inflows continued to flood the market putting much pressure on the peso to appreciate to a 5-year low.

 

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January 

 

2012 ended with some mixed economic data, although positive on balance. Inflation returned to below-3% level, and the National Government’s (NG) 11-month fiscal deficit reached less than 50% of its full-year target, despite piling up expenditures, especially on infrastructures and capital outlays. Exports expanded by a decent 6.1% in October and Overseas Filipino Workers’ (OFW) remittances hit a monthly record of $1.93 B for an 8.5% uptick also for the same month. The slowdown in electricity sales for November may indicate an unexciting Q4. The latest slew of data would suggest that Gross Domestic Product (GDP) growth in Q4 may not be able to match the 7.1% gain in Q3 (year-on-year). Rather, it may fall more between 6.0% and 6.5%, but still have a full-year expansion in excess of 6%, despite the Eurozone and Middle East turmoils, and slowdowns in the US and China.

 

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December

 

A spate of good news lifted the financial markets and sent analysts scurrying to upgrade economic forecasts for the current year and 2013. The flurry of confidence-boosting news were, among others, as follows: (1) Gross Domestic Product (GDP) rose by an unexpected 7.1% in Q3 (year-on-year), which was next only to China's expansion, and brought year-to-date (YTD) growth to 6.5%, already above the government's 5-6% projections; (2) inflation decelerated further to 3.1% in October, also lower-than-expected; (3) the fiscal deficit for October was only P9.7 B, which brought YTD deficit to P115.7 B, or only 41.5% of the full-year target of P279 B on the back of strong tax collections; and (4) exports accelerated to a 22.8% jump in September, the fastest pace since December 2010.

 

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November 

 

A spate of positive external and internal assessments in late October upheld the growing and widespread belief that the economy is grounded on solid footings and is likely to be in the throes of becoming a Tiger economy in the current decade. The International Monetary Fund (IMF), World Bank (WB), and Asian Development Bank (ADB) have raised their forecast for the country's economic growth for 2012 with the best prognosis provided by the usually conservative ADB at 5.5%. Moody's, on the other hand, raised its credit rating for the country's foreign-denominated debt papers to a just a notch lower than investment grade, putting its evaluation at the same grade as those of Standard & Poor (S&P) and Fitch Ratings.

 

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October 

 

While gains in net new jobs were widely off-target, Meralco electricity sales were flat, and headline inflation shot up to an unexpected 3.8% in August, the positive news on the Philippine (PH) economy in September appeared to have taken the upper hand. The cue for this sanguine view is summarized by the positive performance of the bond and stock markets in September. This was underpinned, however, by the fiscal surplus in August (despite a 65% expansion in infrastructure and other capital outlays, year-on-year), July exports up by 7.8% (even though electronics exports plunged by 25.6%), Overseas Filipino Workers (OFW) remittances robust growth of 5.4% in July, and the Bangko Sentral ng Pilipinas (BSP) putting policy rates on hold, with an option for further easing. 

 

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September

 

Despite the effects of continued recession in the Eurozone and slowdown in the US, Philippine Gross Domestic Product (GDP) expanded by 5.9% in Q2. With agriculture performing poorly and the country's copper smelter being closed, GDP growth fell to the lower end of our expectations of 6-7%. The strong peso was similarly a drag. Economic headwinds remain heavy due to higher inflation arising from crude oil prices and lack of resolution of the Eurozone woes. 

 

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August 

 

Solid expansion of Meralco electricity sales, pulled up by the industrial sector, strong jobs creation, double-digit exports, underpinned by lower inflation rate of 2.8% in Q2 confirm the GDP growth in Q2 to even improve on Q1's 6.4% gain, which is second only to China. 

 

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July 

 

Recent economic indicators—higher electricity sales growth, more than a million jobs created, inflation easing, improving exports, and better agricultural output due to favorable weather, among others—are pointing towards an even faster output growth in Q2 from the 6.4% Gross Domestic Product (GDP) posted in Q1.

 

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May to June

 

The world economic slowdown notwithstanding, the economic performance of the country was off to a fast start. After all, first quarter Gross Domestic Product (GDP) growth was at 6.4%, second highest in Asia, tax revenues soared double digit in Q1 and April when it posted the largest budget surplus since 2007, inflation up by a modest 3.0% (year-on year), and a credit rating improvement by Moody's from stable to positive. 

 

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April 

 

The economy is emitting signals that it is back on track from 2011's three consecutive quarters of tepid growth. 2012 Q1 data (to be released end-May) is likely to show above 5% growth if the early indicators are to be taken seriously. Meralco electricity sales—used as a good proxy for non-agricultural GDP—showed an above-par growth rate of 10% (year-on-year) for Q1.

 

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March

 

Economic data made available in Q1 would indicate a much improved economy, which lead us to forecast Gross Domestic Product (GDP) growth of 5% or more for the quarter. Among the figures that made us more optimistic are: (1) Meralco electricity sales (a proxy for economic activity) rose by an average of 8.3% for Jan- Feb of the year, (2) The economy produced 1.1 million jobs for the year ending Jan 2012, (3) Inflation slid to a 29-month low of 2.7%, (4) The National Government has started the year running with a fiscal deficit of P15.9 B, despite a strong 12.5% increase in tax revenues, and (5) Exports in January expanded by 4.0%, the first positive growth figure after 8 months of negatives.

 

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February

 

Accelerating electricity sales and slower inflation in January coupled with record low interest rates are telltale signs of an economic rebound for 2012. Already, the Asian Development Bank has raised its forecast GDP growth for the country to 5% and other multilateral agencies are expected to follow suit as the year unfolds.

 

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January 

 

The Philippine economy expanded by a tepid 3.7% in both Q4 and the full year of 2011. Export demand was weak, and government was under-spending its budget. The Services sector supported by real estate, financial intermediaries, and business process outsourcing (BPO) gains continued to provide the impetus for growth in the economy.

 

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December

 

The Middle East and North Africa (MENA) crisis, the festering debt problems in the Euro-zone, and the global economic slowdown shattered high expectations for 2011, as Gross Domestic Product (GDP) growth sputtered to a mediocre 3-4% range, while Gross National Income (GNI) was likely to be only slightly above 2%. However, surprisingly good numbers emerged in Q4, and the outlook for 2012 has brightened, even though the global economic weakness poses a threat to this.

 

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November 

 

The Q3 Gross Domestic Product (GDP) growth of 3.2%, or flat from a revised 3.1% (from 3.4%), in Q2 caught analysts flatfooted with consensus estimate at 4.2%. It is easy to blame the Euro-zone crisis and the weak US recovery since exports fell by 27% during the quarter. But if we look at the production side, we would see that agriculture did not do well and industry slumped by 0.2%, led by a 12.2% decline in construction and hardly any growth in mining. But the main concern should be on the bigger income measure, Gross National Income (GNI) which inched up by only 1.6% despite an 8.6% gain in Overseas Filipino Workers’ (OFW) USD remittances. The culprit here was the 5.7% peso appreciation for the period.

 

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October 

 

The year-on-year decline in August exports from -1.7% to -15.1% poses a threat to growth in the second half of 2011. However, positive news both from abroad and the domestic front lead us to believe that Gross Domestic Product (GDP) in H2 2011 will recover from a tepid GDP expansion of 4% in H1. 

 

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September

 

Prior to the meltdown of financial markets in mid-September, the economy looked poised to recover in H2 following an unexciting 4.0% GDP expansion in H1. The domestic forces that provided the optimism were robust industrial growth, continuing job creation, improved fiscal situation, and easing of inflationary pressures. 

 

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August 

 

With the recovery in the US sputtering, the euro-zone mired in a debt crisis, and Japan slowly emerging from the devastating tsunami in March, the Philippines felt the compounded blow just as our other Asian neighbors also suffered a similar plight. Gross Domestic Product (GDP) growth in Q2 eased further to 3.4% from a revised (downward) 4.6% uptick in Q1. However, there was also a large base effect since the GDP gain for Q2 2010 was a 34-year record high of 8.9%, a result of massive election-related government spending. 

 

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July 

 

After a tepid 4.9% expansion in Gross Domestic Product (GDP) in Q1 2011, another unexciting Q2 performance is emerging as economic indicators are showing a mixed picture. On the negative side, Industrial production slowed further in May and may only manage a 2.0% uptick in Q2. This was caused by a slump in exports which became negative at -3.2% in May as EU plunged by 42%. Remittances from Overseas Filipino Workers (OFWs) picked up the pace from Q1 as April and May growth were above 6%. The National Government’s (NG) deficit was down by 94% for the first five months of 2011 to a minimal P9.4 B, compared to year ago levels. NG operational and capital spending showed a 33% increase in Q2 compared to the monthly average in Q1. Inflation remained subdued as it inched up to 4.6% in June, only 0.1% points higher than May. 

 

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June 

 

Despite the disappointing 4.9% growth in Gross Domestic Product (GDP) in the first quarter of the year and policy rates rise to 4.5% or 0.5% since the beginning of the year, fresh economic data validated by the credit rating upgrade by Fitch are showing signs that the economy is likely to have bottomed in Q1. 

 

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May 

 

Higher crude oil prices, brought about by the Middle East and North African (MENA) political turmoil, and a festering debt crisis in the euro-zone, have finally dented Philippine economic growth. The resulting higher inflation rate and lower export growth in first quarter of 2011 have translated into a 4.9% Gross Domestic Product (GDP) growth for the period compared to a 6.1% expansion in the previous quarter. In addition, the Bangko Sentral ng Pilipinas (BSP) raised further its policy rates in May to 4.5% or 0.25% from the previous quarter, which may further dampen growth. 

 

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April 

 

With the Middle East and North African (MENA) crisis continuing to unfold, crude oil prices and other commodity prices have hit the roof and worldwide sentiment turned negative towards emerging markets. However, in the home front, better-than-expected headline inflation rate in March, manufacturing output growth remaining double digit, and the fiscal deficit for Q1 80% lower than the same period last year, the domestic economy is showing signs of resiliency and unperturbed vitality. Optimism has been renewed and this has spilled over into the financial markets.

 

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