Briefing Notes for the Launch in Manila, March 2009
Growth performance and prospects
- The rate of growth dropped noticeably in the Philippines, from 7.2% in 2007 to 4.6% in
2008, the lowest since 2003.
- Domestic demand was insufficient to support GDP growth in 2008.
- Gross fixed investment grew at an average rate of 3.7% in 2008, significantly
down from 11.8% in 2007.
- Private consumption grew at an average rate of 4.5% in 2008, down from 5.8% in
2007 and slightly below the 2008 rate of GDP growth.
- Government consumption increased at an average of 4.6% in 2008, down from
7.2% in 2007.
- The rate of growth of exports dropped from 6.4% in 2007 to –2.9% in 2008 – exports
dropped 14.8% in October (year-on-year), 11.4% in November, 40.3% in December, and
41% in January 2009.
- As of the end of February, growth was forecast to drop to 3.0% in 2009, the lowest since
Inflation, monetary policy and exchange rate developments
- Reflecting dramatic price increases in international commodity markets in the first half of
2008, the Philippines’ inflation rate increased from an average of 2.8% in 2007 to 4.9%
in January 2008 (year-on-year) and a peak of 12.4% in August.
- However, inflation decelerated towards the end of 2008, as the price of crude oil and
other commodities plunged, reaching 7.3% in February 2009.
- Tracking developments in inflation, the central bank increased its policy rate moderately,
from 7% in June to 8% in August, before cutting it by 50 basis points in December and
January, and an additional 25 basis points in March to 6.75%.
- The combination of drops in exports and cuts in interest rates contributed to a
depreciation of the exchange rate from an average of 42 pesos per dollar in the first half
of the 2008 to 48.4 in the fourth quarter.
- The Philippines held $39 billion in foreign exchange reserves as of the end of February
2009, up from $36 billion a year before.
Fiscal situation and perspectives
- The budget deficit increased slightly from 0.2% of the GDP in 2007 to 0.9% in 2008.
- On January 2009 the Government announced a stimulus package of P 330 billion ($6.5
billion, 4.6% of the GDP) with a focus on upgrading of infrastructure, the provision of
seed funding for small enterprises, higher social protection and job creation (including
the re-training of workers who are laid off) – some features of the package are the
- A job creation programme that is part of the stimulus package is expected to
provide 824,000 temporary jobs at government departments by July 2009.
- P 40 billion will be devoted to fund a 5-percentage-point cut in corporate income
taxes and the removal of minimum-wage earners from personal income taxes.
- A proposed P 100 billion infrastructure will be funded by the private sector (P 50
billion) and four government agencies (P 12.5 billion each).
- P 160 billion in budget spending will be used to fund infrastructure and social