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P HIL IP P IN E E MBA S S Y U P DA T E S Issue 01-2010 1 5 J an u a ry 2 0 1 0 ISSUE FOCUS: THE PHILIPPINE ECONOMY Key Statistics SOUND POLICIES AND STRINGENT REFORMS: KEY TO THE PHILIPPINE ECONOMY’S RESILIENCE AMID CRISIS GNP: 3.5% (3rd Qtr 2009) GDP: 0.8% (3rd Qtr 2009) Projected GDP Growth Rate: 2009: 1.4% (World Bank) 2010: 3.1% (World Bank) 3.7% (The Economist) Exports: US$3.693 Bn (Nov. 2009) Imports: US$3.671 Bn (Aug. 2009) Trade Balance: million (May 2009) US$529 Philippine reforms have generated 34 consecutive quarters of growth, the fastest growth in 30 years, creating 8 million jobs, and allowing the country to maintain the lowest inflation in a generation. Balance of Payments (BOP): US$506 million (July 2009) Interest 2009) Rate: 4.1% (Oct. Peso per US$: Php46.42 (Dec. 2009) Unemployment (July 2009) Population: (Aug. 2007) Rate: 88.57 7.6% million Projected Population: 92.2 million (2009) Simple Literacy Rate: 93.4% (2003) “A midst the global economic downturn which stemmed from the spiral of the US economy in early 2008, the Philippines’ quick recovery reflects fully the resilience of the Philippine domestic economy resulting from the stringent reform program of President Gloria Macapagal Arroyo,” a recent World Bank report said on the Philippine economy. President Arroyo announced that the peso has remained stable and strong even amidst the global financial downturn. “The growth of remittances from our overseas workers still defy expectations, a good indicator and reflection of the stability of our economy,” the President stressed. Staving off adverse effects to the Philippine economy during the tumultuous economic crisis of 2009, was primarily due to the domestic nature of the Philippine economy -- the limited exposure to foreign demand, the conservative nature of banks, and prompt and forceful fiscal and monetary stimuli. The strong and timely fiscal stimulus undertaken by the Government helped ease the adverse effects of these challenges. Real GDP growth is projected to rise from 1.4% in 2009 to 3.1% in 2010, even though, the World Bank predicts, the pace of expansion will be lower than before the crisis. Exports of Philippines products have also started to increase in November 2009, growing by 5.1 percent year-on-year at US$3.7 billion, according to preliminary reports of the National Statistics Office. The US remained as the Philippines’ biggest export market in November 2009 with a 17.7 percent share in total merchandise exports for the month. Last year posed a number of difficult challenges to the Philippine economy, i.e., an impending rice shortage and catastrophic natural calamities (Typhoons Ondoy and Pepeng). Philippine reforms have generated 34 consecutive quarters of growth, the fastest growth in 30 years, created 8 million jobs, and allowed the country to maintain the lowest inflation in a generation. Even the Bertelsmann Foundation based in Germany recognized, in its Bertelsmann Transformation Index (BTI) 2010 Report, the Philippines’ continuous economic growth and observed that President Arroyo has adeptly managed the rise and fall in prices for rice and oil and has diligently prepared for the onslaught of the global economic crisis. “The country, even though considered as an emerging country, is ever prepared to withstand the challenges of global downturn,” President Arroyo declared during a Congress of the Philippine Government (Kongreso ng Pamahalaan) last 16 November 2009. Page 2 UP D A TE S ‘DEVELOPED COUNTRIES NEED TO LEAD IN REDUCING EMISSIONS’ – PRESIDENT ARROYO Speaking at the United Nations Climate Change Conference in Copenhagen last December 17, 2009, President Arroyo emphasized the need to find a way to meet the harsh impacts of climate change. The Philippines has been at the forefront in urging industrialized nations to commit to substantial reductions in greenhouse gas emissions. The President discussed the vulnerability of the Philippines to the effects of climate change as manifested by the destruction brought about by two typhoons in late 2009. In addition, the President also said that global warming has affected the country’s agriculture, fishing stocks and forests. President Arroyo also highlighted the need to establish a robust financial mechanism to address the cost of adaptation for developing countries and for development and transfer of technologies. While in Denmark, the President was able to secure $310 million worth of programs and projects. A Clean Technology Ambassador Willy C. Gaa FROM THE CORNER OF BATAAN AND MASSACHUSETTS The Philippines, one of very few economies that escaped recession, continued to post positive GDP growth in the third quarter of 2009. Official economic performance of the Philippines in 2009 will be released in February. The global economic crisis continued to define the past year. The crisis that started in financial markets hit the developing world where it is most painful, taking away jobs and pushing families to further poverty. The Philippine economy demonstrated great resiliency and did not fall into recession. Posting Fund of $250 million from the Asian Development Bank (ADB) and the World Bank will help the Philippines mitigate the impact of climate change. The grant will leverage about $2.75 billion of investments needed to reduce greenhouse gas emissions and fast track the implementation of other projects. This is in recognition of the Philippines’ leadership in tackling the issue of climate change. A leading country in terms of renewable energy, the country uses renewable energy applications in 43% of total primary energy supply. The Global Environment Facility (GEF) also awarded $50 million to the Philippine Government, while $10 million to support local water utilities came from the international investment fund of Denmark. While the world average per capita carbon dioxide equivalent emission is six tons, the Philippines’ carbon footprint is only 1.6 tons, well below the ideal average of three tons. In October 2009, the President signed the Climate Change Act of 2009, which aims to mainstream climate change into policy formulation, development planning, and poverty reduction programs. uninterrupted growth for more than thirty quarters since 2001, the Philippines enjoyed the confidence of the international business community and upgrades from credit rating agencies. The sound economic policies implemented by the Philippine government, while difficult and largely unpopular, prepared the economy to withstand serious external shocks. Philippine unemployment rate remained in the single-digit figure. The Philippine Central Bank also reported that Philippine banks’ lending went up 6.6% in November 2009 from November 2008. Bangko Sentral ng Pilipinas (Central Bank) Governor Amando Tetangco Jr. said that, “With lending activity gaining momentum, prospects for a self-sustainable economic recovery are improving.” The United States remained the Philippines’ top export destination in November 2009 generating $654.17 million in revenue, from $608.74 million in November 2008. The performance of the economy is remarkable given that in September and October 2009, two typhoons hit the Philippines and the impact to the economy was valued at $4 billion or 2.7% of GDP. Why has the Philippines weathered the global crisis? We took our economic medicine years ago through fundamental economic reforms. Our fiscal stimulus program – the “Philippine Economic Resiliency Plan” – allocated almost $7.0 billion for high-impact projects. For instance, our investments in infrastructure expanded by 11.7 percent, from 1.0 percent in 2008. The fiscal stimulus program will continue our unprecedented investments in the infrastructures we need to enhance our competitiveness, expand social protection programs, and ensure sustainable growth. Another big boost to the Philippine economy is the flow of remittances from Overseas Filipinos (OF). As of November 2009, remittances amounted to $US15.8 billion, posting the highest year-onyear expansion since October 2008 at 11.3 percent. The Philippines remains as one of the best bargains in Asia and continues to pursue opportunities for productive partnerships based on common interests and common goals. President Gloria Macapagal Arroyo delivers her statement during the high level segment of COP and CMP National statement intergovernmental and nongovernmental organization on behalf of their constituents at the B e l l a C e nt e r C o p e nh ag e n Denmark during the UN Climate Change Conference. op.gov.ph “The best buffer we have to external vulnerability is our own domestic internal strength.” President Gloria Macapagal Arroyo “The Philippine government has pursued a series of structural reforms to improve the entrepreneurial environment and develop a stronger private sector that generates more dynamic job growth…some fiscal reforms have been established.” 2010 Index of Economic Freedom The Heritage Foundation “The Philippines has the lowest macro-economic risk.” Credit Suisse Office of the Ambassador Embassy of the Philippines 1600 Massachusetts Ave NW Washington DC 20036 Tel 202-467-9363 Fax 202-467-9417 [email protected] www.philippineembassyusa.org