Philippines Monthly Economic Developments
July 2019
• Manufacturing output contracted again in May.
• The Philippine Stock Exchange index marginally rose, and the peso appreciated in June.
• Headline inflation declined in June following a slight uptick in May.
• The government registered a fiscal surplus in May as expenditures remained muted.
The manufacturing sector’s output contracted for the sixth including the more dovish stance by the U.S. Federal Reserves,
straight month in May 2019. The Philippines’ manufacturing and the de-escalation of the U.S.-China trade dispute reached
sector remained subdued as the volume of production index at the concluded G-20 summit. This resulted in a substantially
(VoPI) fell for the sixth straight month. The index fell by 4.0 lower net foreign selling at Php7.1 billion in June, half of the
percent year-on-year in May, an improvement from the 14.3 net foreign selling of Php14.2 billion in May.
percent contraction in April. The decline in manufacturing
The Philippine peso appreciated year-on-year in June. The
output was driven by the 14.0 percent year-on-year
Philippine peso appreciated by 4.2 percent year-on-year to
contraction in food manufacturing in May. This poor
close at Php/US$51.36 in June 2019 from Php/US$53.52 in
performance may likely be attributed to supply challenges
June last year. On a month-on-month basis, the peso
caused by the El Nino phenomenon affecting the agricultural
appreciated by 1.5 percent from Php/US$52.11 in May 2019.
sector. Yet, the outlook for the sector may improve moving
The peso performance was encouraged by news of easing
forward as the Nikkei Purchasing Managers’ Index registered a
inflation in the domestic economy, and possible rate cuts by
modest increase to 51.3 in June from 51.2 in May, the second
the U.S. Federal Reserves in the coming months. Along with
consecutive month of expansion after declining for five
the peso appreciation, the international reserves were steady
consecutive months. Meanwhile, the average capacity
at US$85.4 billion in June from roughly the same amount in
utilization rate remained steady at 84.4, with 11 of the 20
May. At its current level, the reserves can cover 7.4 months’
major industries reporting at least 80 percent capacity
worth of imports and payment of services and income, which
utilization rates.
is the same import coverage in May.
Philippine Stock Exchange index (PSEi) marginally rose in June
The trade deficit narrowed in May as imports contracted
driven by improved investor sentiments. The PSEi closed at
while export growth was maintained. Merchandise exports
7,999 in June, rising by 0.4 percent month-on-month from the
grew by 1.0 percent year-on-year in May, sustaining its growth
closing of 7,970 in May. The slight stock market recovery was
rate in the previous month, though lower than the 1.7 percent
supported by improved investor sentiments at the local stock
growth in May 2018. Of the top 10 export categories, 8
market, buoyed by the central bank’s accommodative policy
registered positive growth, led by electronic products which
stance amid slowing inflation. Market sentiment was further
grew by 6.2 percent, year-on-year, while accounting for 56.1
enhanced with positive news from the foreign markets
Figure 1: Manufacturing output declined for the sixth straight Figure 2: The Philippine peso appreciated year-on-year in June.
month in May.
30 84.6
55.0
Capacity Utilization (in percentage)
25 VoPI VaPI Average Capacity Utilization Rate
84.4 54.0
20
53.0
15 84.2
52.0
PHP/US$
10
84 51.0
In percentage
5 50.0
0 83.8 49.0
-5 48.0
83.6
-10 47.0
-15 83.4
May-18
Jan-19
Mar-19
May-19
Jul-18
Sep-18
Nov-18
Source: Philippine Statistics Authority (PSA) Source: Bangko Sentral ng Pilipinas (BSP)
q
PHILIPPINES Monthly Economic Developments | July 2019
percent of total export sales. Meanwhile, imports declined by percent in May from 12.7 percent in April. Loans for
5.4 percent year-on-year, following a downward trajectory production activities increased at a slower pace of 11.5
which started in the previous month. Raw materials and percent in May from 12.4 percent in the previous month.
intermediate goods, which represent 43.1 percent of imports, Meanwhile, loans for household consumption grew by 14.6
dropped by 16.3 percent, while capital goods, which account percent in May from 15.0 percent in April, as growth in credit
for 31.4 percent, registered flat growth for the second card loans and other types of household loans was slightly
consecutive month. As a result, the Philippines’ trade deficit offset by the decline in salary-based general purpose
narrowed from US$3.5 billion in April to US$3.3 billion in May. consumption loans during the month.
Headline inflation resumed its downward trend in June after The Philippines registered a fiscal surplus for the third time in
a slight uptick in May. Headline inflation slowed to 2.7 percent the past five months in May. The Philippine government
year-on-year in June from 3.2 percent in May, notably slower posted a Php2.5 billion surplus in May, a reversal from the
than the 5.2 percent in June 2018. Base effects, and lower Php33.4 billion deficit a year ago as public expenditure growth
prices of staples like rice and corn contributed to the slower failed to keep pace with revenue growth. National government
inflation. Increased local rice inventory was supported by expenditure expanded by 7.8 percent year-on-year in May
higher private sector imports under the rice tarriffication from 11.5 percent a year ago, as disbursements continued to
scheme which replaced the quota-based importation system. be impacted by the delayed passage of the 2019 budget and
Domestic fuel and gas inflation softened on the back of lower the implementation of the public spending ban during the mid-
global oil prices, while electricity rates declined due to term election. Infrastructure projects were impacted the most,
downward adjustments in generation charges. Core inflation as expenditure growth decelerated to 5.9 percent in May from
slowed to 3.3 percent in June from 3.5 percent in June 2018. 42.4 percent expansion a year ago. Growth of personnel
The BSP kept its policy rate steady in June as it monitors the services expenditures picked up in May, due to the
impact of the phased reduction in the reserve requirements implementation of the last tranche of the salary increase of
and the key policy rate cut in May. public employees following the salary standardization law.
Meanwhile, public revenues expanded by 22.5 percent in May,
Domestic liquidity and bank lending moderated in
nearly double the 13.5 percent growth a year ago, driven in
May. Domestic liquidity (M3) grew by 6.4 percent year-on-
large part by the increase in tax revenue collections.
year to about Php11.7 trillion in May, slower than the 7.0
percent expansion in April. Demand for credit eased slightly Developments to Watch
but remained the principal driver of money supply growth. • Manufacturing output: will the contraction continue or will
output start to stabilize?
Domestic claims grew by 6.8 percent in May from 8.9 percent
• Inflation trend: will inflation further decline in the coming
in April due to the sustained growth in credit to the private
months? When will rice price stabilize?
sector. Outstanding loans of universal and commercial banks,
• Budget execution: will public expenditure pick up faster to
net of reverse repurchase (RRP) placements, grew at 11.9 offset the slow start to the year?
Figure 3: Inflation resumed its downward trend in June. Figure 4: In 2019, the government registered a surplus for
the third time in May.
10.0 360
9.0 320
8.0 280
240
Percent, year-on-year
7.0
In Billion Pesos
200
6.0
160
5.0
120
4.0
80
3.0 40
2.0 -
1.0 (40) July Jan July Jan
0.0 (80)
2018 2019
Jun-16
Jun-17
Jun-18
Jun-19
Apr-17
Apr-18
Apr-19
Dec-16
Dec-17
Dec-18
Feb-17
Feb-18
Feb-19
Oct-16
Oct-17
Oct-18
Aug-16
Aug-17
Aug-18
(120)
(160)
Core Inflation Headline Inflation Net Foreign Financing Net Domestic Financing
Food & Non-alcoholic beverage BSP Key policy rate Budget Surplus/Deficit
Source: PSA Source: PSA
PHILIPPINES Monthly Economic Developments | July 2019
Selected Economic and Financial Indicators
2017 2018 Q4 2018 Q1 2019 Q2 2019 Apr-19 May-19 Jun-19
Real GDP growth, at constant market prices 6.7 6.2 6.3 5.6
Private consumption 5.9 5.6 5.3 6.3
Government consumption 7.0 12.8 12.6 7.4
Gross fixed capital investment 9.5 14.0 8.5 5.7
Exports, goods and services 19.5 11.5 14.4 5.8
Imports, goods and services 18.1 14.5 12.4 8.3
Industry Performance -3.7
Value of Production Index -1.4 8.0 -1.4 -10.8 -2.1
Volume of Production Index -0.5 7.2 -2.3 -7.3 -14.0 -4.0
Capacity Utilization 83.8 84.2 84.3 84.3 84.3 84.4
Nikkei Philippines Purchasing Managers' Index 53.2 52.5 53.8 51.9 51.1 50.9 51.2 51.3
Monetary and Banking sector
Headline Consumer Price Index 2.9 5.2 5.9 3.8 3.0 3.0 3.2 2.7
Core Consumer Price Index 2.5 4.1 4.9 3.6 3.4 3.4 3.5 3.3
Domestic liquidity (M3) 13.3 11.6 8.7 7.1 7.0 6.4
Credit growth 17.8 16.4 15.1 11.9 12.2 10.0
Business loans 17.4 17.2 16.2 13.3 11.8 11.0
Consumer loans 20.5 15.1 11.3 10.0 10.9 11.0
Fiscal sector (In billions Php)
Fiscal balance (% of GDP) -2.2 -3.2 -3.6 -2.1 86.9
Total Revenue (% of GDP) 15.7 16.4 14.9 16.3 308.7 317.2
Tax Revenue (% of GDP) 14.2 14.7 13.6 14.6 288.9 265.4
Total Expenditure (% of GDP) 17.9 19.6 18.6 18.5 221.9 314.7
National government debt (% of GDP) 42.1 41.9 41.9 44.0 7,786 7,916
Stock market
PSEi (month-end value) 8,558 7,466 7,466 7,921 7,974 7,953 7,970 7,999
External accounts
Current account balance (% of GDP) -0.7 -2.4 -2.6
Exports of merchandise goods (growth rate) 18.4 -0.3 -0.7 -3.1 1.0 1.0
Imports of merchandise goods (growth rate) 13.6 9.4 3.1 4.7 -1.9 -5.4
Net foreign direct investment (in million US$) 10,057 9,802 1,712 1,941
Balance of payment (% of GDP) -0.3 -0.7 3.0
International reserves (in million US$) 81,273 78,140 76,529 83,613 84,868 83,878 85,348 85,379
Import cover 8.4 7.1 6.7 7.4 7.4 7.4 7.4 7.4
Nominal exchange rate 50.40 52.68 53.27 52.36 52.39 52.11 52.26 52.80
Labor Market
Unemployment rate 5.7 5.3 5.1 5.1 5.1
Underemployment rate 16.2 16.4 13.3 13.5 13.5
Sentiments
Consumer confidence index (end of period) 9.5 -22.5 -22.5 -0.5 -1.3 -1.3
Business confidence index (end of period) 43.3 27.2 27.2 35.2 40.5 40.5
Prepared by a World Bank team consisting of Rong Qian, Kevin Chua, Kevin Thomas Cruz, Ray Gomez, Karen Lazaro, Jiyoung Song and Isaku Endo,
PHILIPPINES Monthly Economic Developments | July 2019
under the guidance of Ndiame Diop.
Contact Rong Qian (rqian@worldbank.org) for questions.