Philippines
Briefing Notes for the Launch in Manila, March 2008
Economic growth
- The Philippines’ economy increased significantly its growth rate from 5.4% in 2006 to 7.0% in 2007 -- the fastest in 31 years
- Both private consumption and gross fixed investment grew faster in 2007 than in 2006
- Private consumption increased its growth rate from 5.4% in 2006 to 6.0% in 2007
- Investment increased its growth seven-fold, from 1.4% in 2006 to 10.4% in 2007
- Government consumption also increased its growth rate from 5.2% in 2006 to 9.9% in 2007
- Overall, the growth rate of domestic demand increased from 4.7% in 2006 to 7.0% in 2007
- The strong performance of domestic demand more than compensated for the significant drop in the rate of growth of exports, from 11.1% in 2006 to 6.1% in 2007
- GDP growth is forecast to remain robust at 6.7% in 2008
Inflation and monetary policy developments
- Inflation decreased significantly, from 6.2% in 2006 to 2.8% in 2007
- The two CPI items that increased the most in 2007 were food, beverages and tobacco (3.3%) and fuel, light and water (3.2%)
- Price increases in those two items, along with services, accelerated towards the end of 2007
- In January of 2008, the year-on-year inflation rate increased to 4.9% overall, 5.9% for food beverages and tobacco, 5.5% for fuel, light and water, and 5.4% for services
- As inflation lowered during 2007, Bangko Sentral ng Pilipinas cut its benchmark interest rate in four occasions
- Between the beginning and the end of the year it cut the overnight borrowing or reverse repurchase rate (RRP) from 7.5% to 5.25%, and the overnight lending or repurchase rate (RP) from 9.75% to 7.25%
- In January 2008 the bank further cut its benchmark rates to 5% and 7%
- The inflation target for 2008 is
- The peso appreciated 15% against the dollar during 2007, putting significant downward pressure on domestic price inflation
- The inflation rate is forecast to increase to 3.5% in 2008
Exchange rates and foreign exchange reserves
- The exchange rate appreciated from an average of 48.9 peso/US dollar in January of 2007 to an average of 41.5 peso /US dollar in December of 2007
- The peso continued appreciating during the first two months of 2008, to an average of 40.6 peso /US dollar in February 2008
- Foreign exchange reserves increased by more than 40% between January and December of 2007, from US$ 23.7 billion to US$ 33.8 billion
External sector
- The current account surplus increased by US$ 1.1 billion, from US$ 6.0 billion in 2006 to US$ 7.1 billion in 2007
- The goods trade deficit increased by US$ 0.8 billion, but the income account deficit decreased by US$ 0.7 billion
- Net unilateral transfers, whose main items is remittances from overseas workers, increased from US$ 13.2 billion in 2006 to US$ 14.4 billion in 2007
- While inward direct investment increased by US$ 0.2 billion, from US$ 2.1 billion in 2006 to US$ 2.3 billion in 2007, outward direct investment increased from US$ 0.1 billion in 2006 to US$ 3.1 billion in 2007
- In June 2007, Philippines and the Lao’s People Democratic Republic signed a bilateral agreement for the mutual protection and promotion of investments; in October Philippines and India signed bilateral agreements on several areas, including defense, health and medicine, energy security, agriculture, tourism, and culture.
