Asian Development Bank

1. Philippines Country Office Asian Development Bank “The Status of the Philippine Economy” by Günter Hecker January, 2001

3. What you hear about the Philippines in the news lately… • Corruption and cronyism are at a high point • Governance low • Administration not functioning • Budget in disarray, therefore… • IMF has walked out on the Philippines, therefore….. • Investors’ confidence going towards the “zero-point” • Peso at all time low • Stock market at rock-bottom • Economy in shambles • Project implementation takes twice as long as it should

4. GDP Growth (%)…least affected by the crisis, but moderate recovery

5. Inflation Rate (%)….stayed in manageable levels

6. Current Account Balance as % of GDP……has been increasing since the crisis to second place

7. Exports of Goods and Services Growth (%)….exports are growing, while….

8. Imports of Goods and Services Growth (%)imports are contracting

9. Exchange Rate Index(weekly average, last week of June 1997 = 100, $/local currency)…..rates moved together with the other comparator currencies “J2K” Effect

10. Pesos vis-à-vis Euro “J2K” Effect EDSA2 Effect

11. Composite Stock Price Index(weekly average, last week of June 1997=100) “J2k” Effect EDSA2 Effect

12. NPL of Commercial Banks…..low but slightly increasing

13. Gross Int'l Reserves (GIR) Less Gold vs. Short-term Debts(US$ million)Philippines

14. GDP per Capita Development….Philippines is second to reach thee pre-crisis GDP/cap level

15. Central Government Fiscal Balance as % of GDP…..in manageable deficit (however not meeting target figures), but…

16. External Debt as % of GDP…debt level is second highest of Region

17. Government Debt Situation

18. Tax Revenue in % of GNP(1991-2000 Average)…….amongst lowest in Region

19. Tax Revenue in % of GNP GoP Plan

20. Revenues Waived due to Tax Incentives in billion Pesos…high portion of special exemptions since 1997

21. Budget Support to Gov.owned Corporationsin billion Pesos (1999)

22. Foreign Direct Investmentin $ million….FDIs are dwindling

23. Real Gross Domestic Investment Growth……worrying level of investment

24. Major Constraints for Philippine Economy • Lackluster Growth • High Population Growth • High Unemployment • Asset Ownership Distribution • Savings Ratio • Governance • Low Performance of Agriculture Sector

25. Long-term GNP Growth Marcos Era Post-Marcos Era

26. Population Growth…still has the second largest growth

27. Annual Rate of Poverty Reduction1985-95

28. Unemployment Rate (%)…….highest in Region

29. Savings Ratio in the 1990’s….Philippines is lowest

30. Corporate Ownership Distribution in % of Total

31. Governance Indicators

32. Performance of Philippine Agricultural Sectorin % of “best practice” in terms of yields per hectar

33. GNP vs Agri Sector Growth

34. Sources of ODA Loans As of Dec 2000 Total: $ 12.9 B

35. Status of ODA Loansas of Dec 2000……very unsatisfactory Portfolio performance Total $ 12.9b

36. Scenario for the Philippines • Fiscal deficit will be difficult to close • Politically difficult to increase taxes • Export may suffer to due slowdown of US economy • Agriculture…….next El Niño in sight • Direct foreign investment……competition by other countries increasing

37. 10 Areas of special Attention….. • Improve investors confidence • Accelerate sector reforms • Achieve fiscal consolidation • Broaden liberalization of economy • Conserve remarkable export performance • Exploit competitive advantages • Enhance competitiveness • Increase investment in rural areas • Increase savings rate • Improve implementation of ongoing investment

38. Philippines Country Office ADB-HQ, 1st Floor East Zone Tel: 638-1002 Web: www.adb.org

39. PhCO Thankyou very much