RBAP Economic Update As of 28 March 2017

Real sector

  • Real GDP grew by 6.6% year-on-year  in Q4 2016.  This was lower than the 7.1% growth in Q3 2016 but higher than the 6.5% in Q4 2015. 
    • Supply side:  The industry sector grew the fastest at 7.6% in Q4 2016 compared with 6.5% in Q4 2015.  The services sector grew by 7.4%, while the agriculture sector contracted by 1.1%.
    • Demand side:  Investments grew by 15.0% in Q4 2016, higher than the 13.3% growth in Q4 2015.  The main drivers of growth were intellectual property products (28.7%) and durable equipment (26.2%).  Meanwhile, household consumption, exports, and government spending grew by 6.3%, 10.4%, and 4%, respectively.

Monetary sector

  • Headline inflation rose to 3.3% y-o-y in February 2017 from 2.7% in January 2017.   The increase was attributed to the higher prices of food items (such as meat, fish, milk, cheese, eggs, and vegetables), electricity rates (due to increase in generation and transmission charges), and domestic petroleum products (gasoline, diesel, kerosene and LPG).  The year-to-date average inflation rate at 3.0% is within the government’s 3.0% + 1.0% target range for 2017.
  • Risks to future inflation:
  • Upside risks:
    • pending petitions for adjustments in electricity rates along with the short-term impact of the Malampaya maintenance shutdown
    • impact of the government’s fiscal reform program
  • Downside risk:
    • continued uncertainty in global economic landscape

External sector

  • Cash remittances from OFs reached US$26.9 billion in 2016, 5.0% higher than the US$25.6 billion recorded in 2015.  Meanwhile, the January 2017 cash remittances amounted to US$2.169 billion, which is 8.6% higher than the year ago level of US$1.997 billion.
  • International reserves stood at US$81.4 billion as of end-February 2017, US$0.06 billion higher than the end-January GIR.  The end-February GIR level can cover 9.0 months’ worth of imports of goods and payments of services and income.  
  • Philippine external  debt stood at US$74.8 billion as of end-2016, a decline of US$1.9 billion from the end-September 2016 level.  Consequently, external debt-to-GDP ratio improved to 24.6% in 2016 from  26.5% a year ago.
  • On a year-to-date (YTD) basis, the peso depreciated against the US dollar by 1.2% on 24 March 2017 as it closed at P50.33/US$1.
  • Commodity prices: (in US$/MT)
Commodity*

Feb. 2017

Jan. 2017

% change (m-o-m)
Copra

$1,146/MT

$1,225/MT

(6.45)
Raw Sugar

$450/MT

$450/MT


*Source: World Bank Commodities Price Data released on 2 March 2017;

Banking sector

  • Total resources of the banking system reached P13.8 trillion as of January 2017, lower than a month-ago level, but higher by 12.3% from a year ago.
  • The banking system remains adequately capitalized. The CAR of U/KBs at end-June 2016 stood at 15.37% and 16.12% on solo and consolidated bases, respectively, albeit higher than the previous quarter’s figures (15.03% solo and 15.80% consolidated).  However, the said CAR of U/KBs is higher than the BSP (10%) and BIS (8%) standards. 
  • The gross NPL ratio of the rural banking system decreased to 10.63% as of September 2016 from 10.95% a quarter ago.  Rural banks’ loan loss reserves stood at 7.90% of their gross NPLs as of September 2016, higher than the 7.81% in the previous quarter.  The CAR of rural banks at end-June 2016 stood at 18.27%, higher than the 17.83% in the previous quarter.

References:

http://www.nscb.gov.ph/sna/ 
http://www.worldbank.org/en/research/commodity-markets
http://www.bsp.gov.ph/banking/bspsup_universal.asp 
http://www.bsp.gov.ph/banking/bspsup_rural.asp 
http://www.bsp.gov.ph/statistics/efs_ext3.asp 
http://www.bsp.gov.ph/statistics/efs_ext2.asp#GIR 
http://www.bsp.gov.ph/statistics/efs_fsa1.asp 
http://www.bsp.gov.ph/publications/regular_inflation.asp 
http://www.bsp.gov.ph/publications/media.asp 
 http://www.nscb.gov.ph/sna/

BSP Economic Update (as of March 28 2017)

BSP Economic Update (as of June 28, 2016)

Real sector 
Real GDP for Q1 2016 grew by 6.9%, higher than the 6.5% growth in Q4 2015 and the 5.0% growth in Q1 2015.  

  • Supply side:  Both the services and industry sectors continued to support domestic growth which expanded by 7.9% from 5.5% and to 8.7% from 5.3% a year ago, respectively. Meanwhile, the agriculture sector declined by 4.4% from a growth of 1.0% in Q1 2015.

  • Demand side: Capital formation grew by 23.8% from 12.5%, with particular increments from durable equipment (36.6% from 12.4%). Sustained government spending (9.9% from 0.2%) and increase in household consumption (7.0 % from 6.1%) also supported the 2016 Q1 GDP growth.

Monetary sector 

  • Inflation rose to 1.6% y-o-y in May 2016 from the 1.1% increase a month ago. The increase was attributed to higher prices of selected food and non-food items. Food items such as meat, fish, fruit, milk, cheese, and eggs as well as vegetables recorded price increases. Meanwhile, the rise in prices of some non-food items such as alcoholic beverages, cigarettes, and selected construction materials counterbalanced the negative inflation rate of electricity, gas and other fuels. Year-to-date average inflation rate at 1.3% was below the government’s 3.0% ± 1.0 percentage point target range for 2016.

  • Risks to future inflation:
    o        Upside risks:  pending petitions for power rate adjustments
    o        Downside risk:  slower-than-expected global economic activity

External sector 

  • Cash remittances from OFs for the first three months of 2016 reached US$8.7 billion, higher by 3.1% yoy. 

  • International reserves remain adequate at US$82.9 billion as of end-May 2016, albeit US$0.8 billion lower than the end-April GIR due to revaluation adjustments on the BSP’s gold holdings. The current GIR can cover 10.2 months’ worth of imports of goods and payments of services and income. 

  • External debt-to-GDP ratio went up slightly to 26.5% in Q1 2016 from 26.1% a year ago. 

  • On a year-to-date basis, the peso appreciated against the US dollar by 0.4% on 28 June 2016 as it closed at P46.90/US$1, moving in tandem with most Asian currencies except the Chinese yuan and Indian rupee, which depreciated vis-à-vis the US dollar.

  • Commodity prices: (in US$/MT)

Commodity*

May 2016

April 2016

% change (month-on-month)

Copra

$963/MT

$1,045/MT

(7.85)

Raw Sugar

$380/MT

$340/MT

11.8

                    *Source: World Bank Commodities Price Data released on 2 June 2016

Banking sector

  • Total resources of the banking system reached P12.4 trillion in December 2015, an increase of 2.0% from a month-ago, and by 7.6% from a year ago.

  • [No update] The banking system remains adequately capitalized. The CAR of U/KBs at end-September 2015 stood at 15.6% and 16.4% on solo and consolidated bases, respectively, higher than the BSP (10%) and BIS (8%) standards.

  • [No update] The gross NPL ratio of the rural banking system decreased to 11.25% as of December 2015 from 11.31% a quarter earlier.  Meanwhile, rural banks’ loan loss reserves stood at 68.1% of their gross NPLs as of December 2015, higher than the 65.4% in the previous quarter.

BSP Economic Update (as of November 3)

Real sector

  • Real GDP for Q2 2015 grew by 5.6% from 5.0% in Q1 2015 (albeit lower than the 6.7% growth a year ago) due to accelerated consumer and government spending as well as increased investments, particularly in construction.

  • Supply side: Services sector continue to drive growth (6.2% yoy), supported by the following sub-sectors: real estate, renting and business activities (6.8%); trade and maintenance of motor vehicles, motorcycles, personal and household goods (6.1%); transport, storage & communication (5.9%); and financial intermediation (5.8%).

  • Demand side: The main drivers of grown were the robust performance of household consumption (6.2%), expansion of capital formation (17.4%), particularly construction (13.1%), and faster government spending (3.9%).

Monetary sector

  • In September 2015 inflation decelerated further to 0.4% from 0.6% in August. This was attributed mainly to lower prices of selected food items (rice, corn, oils and fats as well as other key food items such as fish, fruits, milk, cheese, and eggs) due to adequate supply. Likewise, non-food items (electricity, gas, and other fuels) decreased due to lower generation charges for household electricity rates and price rollbacks of domestic petroleum products.

  • Year-to-date average inflation rate of 1.6% was at the lower end of the government’s 3.0% ± 1.0 percentage point target range for 2015-2016. The government also approved an inflation target range of 3.0% ± 1.0 percentage point for 2017-2018.

  • Risks to future inflation continue to be broadly balanced. While latest baseline inflation forecasts have shifted further downward to average lower than target for 2015, it is expected to continue to be within the target range over the remainder of the policy horizon.

    • Upside risks: impact of stronger and protracted El Niño on food prices and utility rates as well as pending petitions for power rate adjustments.

    • Downside risk: weak global economy and continued uncertainty in global financial markets.

External sector

  • Personal remittances from OFs for January-August 2015 reached US$17.9 billion, higher by 3.9% yoy.

  • International reserves remains adequate at US$80.6 billion as of end-September 2015, which could cover 10.3 months’ worth of imports of goods and payments of services and income.

  • External debt-to-GDP ratio declined to 25.7% as of end-July 2015 from 28.7% in the same period last year.

  • On a year-to-date basis, the peso depreciated against the US dollar by 4.5% on 30 October 2015 as it closed at P46.82/US$1, moving in tandem with other Asian currencies.

  • Commodity prices: (US$/MT)

Commodity*

Sept. 2015

Aug. 2015

% change (month-on-month)

Copra

699

689

1.5

Raw Sugar

260

250

4.0

*Source: World Bank Commodities Price Data released on 2 October 2015

Banking sector

  • Total resources of the banking system declined slightly by 1.5% to P11.4 trillion as of end-March 2015 from a quarter-ago, but increased by 8.7% from the year-ago level.

  • The banking system is also adequately capitalized. The CAR of U/KBs at end-March 2015 stood at 15.07% and 16.10% on solo and consolidated bases, respectively, higher than the BSP (10%) and BIS (8%) standards.

  • The gross NPL ratio of the rural banking system decreased to 11.68% as of June 2015 from 11.92% a quarter earlier. Meanwhile, rural banks’ loan loss reserves stood at 62.0% of their gross NPLs as of June 2015, higher than the 57.4% in the previous quarter.

BSP Economic Update (as of August 3)

RBAP Economic Update

3 August 2015; 3:00 PM; EBC—Visayas/ Mindanao

Real sector

  • Real Gross Domestic Product growth for the first quarter of 2015 was lower than expected at 5.2 percent due to lower government spending and weak exports; but it was still the third fastest in Asia, after China and Vietnam.
    • Supply side drivers: Strong performance of the services sector (5.6% year-on-year growth), particularly the transportation, communication and storage (8.6%); real estate, renting and business activities (6.4%); and other services (5.8%); and robust growth of industry sector (5.5%).
  • Demand side drivers: increased consumer spending (5.4% year-on-year growth), reinforced by fixed capital (10.1%), particularly durable equipment (14.3%).

Monetary sector

  • In June 2015, inflation decelerated further to 1.2 percent from 1.6 percent in May 2015. This was mainly due to the slower increases in prices of food items (i.e., rice, meat, milk, fish, oils, and fruits) as a result of adequate domestic supply.
  • Year-to-date average inflation rate at 2.0 percent was at the lower end of the government’s 3.0 percent ± 1.0 percentage point target range in 2015 to 2016. The government also approved an inflation target of 3.0 percent ± 1.0 percentage point for 2017 to 2018.
  • Risks to future inflation continue to be broadly balanced. Inflation is projected to fall within target range in 2015 to 2016.
  • Upside risks: Pending petitions for power rate adjustments and the potential impact of stronger-than-expected El Niño weather condition on food prices and utility rates.
  • Downside risk: Slower-than-expected global economic activity.

External sector

  • Personal remittances from OFs for January to May 2015 reached US$11.0 billion, higher by 5.2 percent year-on-year.
  • International reserves was at US$80.6 billion as of end-June 2015, which was sufficient to cover 10.6 month’s worth of imports of goods and payments of services.
  • External debt-to-GDP ratio declined from 52.7 percent in 2005 to around 26.1 percent as of end-March 2015.
  • On a year-to-date basis, the peso depreciated against the US dollar by 2.0 percent on 30 July 2015 as it closed at P45.25/ US$1, moving in tandem with other Asian currencies except for the New Taiwan dollar, which appreciated vis-à-vis the US Dollar.1
  • Commodity prices: (US$/MT)
Commodity*

June 2015

May 2015

% Change (month-on-month)

Copra

740

748

(1.1%)

Refined Sugar

270

290

(6.9%)

*Source: World Bank Commodities Price Data released on 2 July 2015

Banking sector

  • Resources of the banking system declined slightly by 1.2 percent to P11.0 trillion as of end-March 2015 from a quarter-ago but increased by 9.2 percent from the year-ago level.
  • The banking system is also adequately capitalized. The CAR of U/KBs at end-May 2015 stood at 16.3 percent and 17.0 percent on solo and consolidated bases, respectively, higher than the BSP (10%) and international (8%) standards.
  • The gross non-performing loans (NPL) ratio of the rural banking system increased slightly to 11.92 percent as of March 2015 from 11.77 percent a quarter earlier. Meanwhile, rural banks’ loan loss reserves stood at 57.4 percent of their gross NPLs as of March 2015, slightly lower than the 58.0 percent in the previous quarter.

1 Based on the last done deal transaction in the afternoon.

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Loans Outstanding for Production and Household Consumption (per 1994 PSIC ending May 2014)

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