The Philippine Economy

[Miguel]

I might appear pessimistic, but I'm not. I still have confidence that this country will improve. According to reports, investments rose by more 200% in 2004, a projected 10% growth for this year's exports, BOPs are coming in giving employment to thousands of Filipinos with higher rates compared to conventionational jobs, the Supreme Court's decision affirming the constitutionality of foreign ownership of mining projects resulted in renewed interest in oil and gas exploration, according to the Department of Finance the budget deficit was cut-off more than the targeted, and the Lower House cut their pork barrel by 40% and have fast track the passage of bills that could generate more income to the country together with the Senate. Of course it is not a smooth ride with some glitches along the way but there is no shortcut to success. Our country will still experience the hardships. "We're not out of the woods yet," as Finance Secretary Juanita Amatong said but we're on target. Even according to a British business official that our country is not really experiencing a financial crisis, that only occurs if we could not pay our debts, the president only proclaimed so that the laws will be pass. One thing we lack though is the confidence. I did not vote for Arroyo, I voted for Roco but for us to grow we have to give our support and not just continue the mudslinging made by some opposition. If the enthusiasm and dedication shown right now will still continue then who knows by 2010 we might see a new Philippines.

[ThisFire]

Even though there's always some negative stories with something in the society and of course, the economy, I always think and feel that things will improve and grow slowly but surely. The Philippines just needs the right tools and people to get things into place.

[stephencua]

its good to know that there are still alot of people out there who have faith that our country will rise up from where it is right now..

[ThisFire]

Well what more can you do?! You have to have faith in your country, otherwise there won't be any improvements. Instead of putting it down, people should act some part in what they believe would make things improve.

[stephencua]

i couldnt agree with you more on that..

[rico]

Originally Posted by stephencua

its good to know that there are still alot of people out there who have faith that our country will rise up from where it is right now..

count me as one of 'em.

[JudeD]

Oh, for the heady days of 1996 again when it seemed that anything could be accomplished and NIChood was just around the corner. Some of the big projects started then have yet to be completed (Skyway, MRT extension), but in fairness some have progressed beyond even our expectations (LRT2, NLEX rehab).

[amras]

Export growth seen flat in early 2005--analyst
Posted: 4:01 PM | Jan. 11, 2005
Erik de la Cruz


MERCHANDISE exports may see flat growth in the next few months, after rising at their fastest pace in about 30 months in November 2004, as global demand slows down, Song Seng Wun, a regional economist at GK Goh Securities in Singapore said.

Merchandise exports in November grew 19.5 percent year-on-year to 3.688 billion dollars, the fastest rise since July 2002, the National Statistics Office (NSO) said.

It was the second month in a row, but only the fourth time since January last year, that exports grew at double-digit levels, the statistics agency said in a statement.

In July 2002, exports grew by 24.2 percent year-on-year.

In the first 11 months of 2004, merchandise exports rose 9.9 percent to 36.331 billion dollars. The government was expecting exports to grow by 10 percent for the whole of 2004.

Electronics exports, which accounted for 67.6 percent of total export revenues in November, rose 16.1 percent from a year earlier to 2.494 billion dollars.

"The November exports growth was much better than we expected, but basically, the low of base of the previous year contributed to the year-on-year rebound," Song said.

"But in terms of the external sector, we see a slowdown (in global demand) so we would expect Philippine exports growth in value terms to be flat over the next three months or so."

Merchandise exports in the first quarter of 2004 grew 6.3 percent year-on-year to 9.19 billion dollars.

Song describes as "fairly realistic" the forecast of Economic Planning Secretary Romulo Neri that exports growth this year will slow to 8 percent after rising by a projected 10 percent in 2004, due to a sluggish global economy.

Neri also sees lower revenues given a reduction in export quotas for garments shipped to the US this year.

The Confederation of Philippine Exporters remains bullish as it expects the country's exports to grow at least 10 percent this year on the back of a 10 percent growth in revenues from electronics, the country's biggest dollar earner.

[normandb]

eventhough i am dismayed to some of our politicians i still have faith in this country. enough of edsa revolution. i trust the arroyo administration and i think she is doing a good job. i hope naia t3 will open soon, it is good for our economy and our tourism industry.

wowphilippines

[rmb]

Posted: 12:31 PM | Jan. 17, 2005

Agence France-Presse

ECONOMIC growth likely reached 6.2 percent in 2004, above the official target, Economic Planning Secretary Romulo Neri said Monday.

The government initially targeted gross domestic product (GDP) growth of between 4.9 and 5.8 percent but after a robust first nine months, the official projection was raised to 6.1 percent.

"Full-year growth for 2004 may be about 6.2 percent. It is our emerging estimate," Neri told reporters.

This year the economy should be on pace for a 6.3 percent expansion, Neri said, despite the forecasts of most analysts for growth slowdown.

The government will release the 2004 figures on January 31.

A robust economic performance in the three months to September 2004 -- made possible by favorable weather that boosted farm output and consumers spending more on mobile telephones -- brought GDP growth to 6.5 percent for the first nine months.

-------------------
Hmmm. not far from my estimate of 6.3%

[amras]

Philippine credit rating cut by one notch
Still betterthan 2-notch downgrade, say analysts


Updated 02:15am (Mla time) Jan 18, 2005
By Doris Dumlao, Gil C. Cabacungan Jr., Michelle Remo
Inquirer News Service


Editor's Note: Published on page A1 of the Jan. 18, 2005 issue of the Philippine Daily Inquirer


THE CREDIT downgrade finally came. But the downgrade of the country's long-term foreign currency debt was by only one notch instead of the two notches that some investors had feared.

Global credit rating firm Standard & Poor's yesterday lowered to BB- from BB the long-term foreign currency sovereign debt, citing the government's "inadequate" response to its fiscal problems.

The S&P cut, to three notches below investment grade for the country's foreign obligations, came weeks before Moody's Investors Service, another rating firm, is expected to deliver its own downgrade on the Philippines.

A downgrade raises interest rates and further jacks up debt payments. Some legislators had warned last year that a credit downgrade for the Philippines would be disastrous, saying that a one-percentage-point increase in interest could mean P30 billion more in debt payments.

The Philippine government, Asia's biggest issuer of sovereign debt after Japan, has direct foreign and domestic debt obligations of about $65 billion.

Despite Malacañang's claim that the fiscal crisis was over, S&P also lowered the long-term local currency sovereign credit rating to BB+ from BBB- and the short-term local currency debt rating to B from A-3.

The outlook on the long-term ratings, however, was "stable" which means that no further downgrade is likely over the near term.

Governor Rafael Buenaventura of the Bangko Sentral ng Pilipinas said the downgrade would not likely affect forthcoming foreign borrowings by the government as the market had already factored into the pricing of debt papers a two-notch downgrade.

Last October, S&P had already warned of heightened risks to the Philippines' credit rating due to lagging fiscal reforms and rising vulnerability to the inching up of global interest rates.

"S&P has now revised downward its expectations that the government will be able to raise tax receipts materially from their current low level of 12 percent of GDP [gross domestic product] and that the government's debt trajectory will move to a clearer downward trend," S&P's analyst Agost Benard said yesterday.

"With the public sector debt at 110 percent of GDP and government interest expense at nearly 40 percent of revenue, prompt passage of the government's fiscal plan was necessary to support the Philippines' ratings at their previous levels," he added.

Benard said that of the eight revenue measures proposed by Malacañang, only the excise tax on tobacco and alcohol products had been passed. But he said this was even a "watered down" version.

He warned that half of the government's debt was in foreign currency, thus limiting fiscal managers' room to maneuver in case of rising global interest rates and the weakening of the peso.

Sigh of relief

An analyst said the debt markets would greet the news of the downgrade with "a sigh of relief."

"You had a lot of sell-side hype that it could be a two-notch downgrade, and this removes that uncertainty," said Tim Condon, head of Asian Financial Market Research at ING Financial Markets in Singapore.

"It's in line with our expectations, a one-notch cut and a stable outlook, so this is good news in that it removes part of the ratings action overhang on the bonds. People can now concentrate on what is a booming year for the Philippine economy, which is translating into some progress on the public finances," he said.

Asked if the downgrade was likely to effect the performance of Philippine dollar bonds, Condon said: "There could be a knee-jerk reaction to sell, but I suspect that many people share our view that the economic fundamentals are improving and will look to buy on dips.

Joseph Tan, a regional economist at Standard Chartered Bank, also in Singapore, said a two-notch downgrade would have been immensely negative.

"We would expect this cut to have some negative impact on the peso, but the damage will be fairly well contained given the market was expecting a two-notch downgrade," Tan said.

At a press briefing, Buenaventura said he was surprised that S&P's downgrade came out prior to a formal review.

"This will probably have an impact on Moody's rating unless we come closer to our target before they finalize their review," Buenaventura said.

"We need to work twice as hard to show that we will in fact be able to do what we say we'll do," he said, referring to the government's commitment to raise yearly P80 billion in fresh revenues from new tax measures.

He said the downgrade was a reaction to "a perceived no action on our part" to pass the much-needed tax revenues.

The Department of Finance said the S&P downgrade was unfair, saying the country did not deserve the lower rating because of "developments" on the fiscal front.

Finance Secretary Juanita Amatong said the decision of S&P was a surprise, considering that it was scheduled to send a mission to the Philippines in February.

She said that without S&P's mission coming to the country, the ratings agency seemed to have based its decision on "baseless" speculations that the government's fiscal reform agenda was not progressing.

Amatong said the administration's value-added tax (VAT) plan -- consisting of raising the VAT to 12 percent from 10 percent, and the removal of exemptions for several sectors -- would generate substantial revenues for the government. The Department of Finance estimates said the twin VAT proposals could generate as much as P60 billion in additional revenues a year.

Budget Secretary Emilia Boncodin said she had "expected'' the downgrade although she had been hoping that the improved fiscal position at the end of 2004 would have helped avert it.

She reported that the government was able to keep its budget deficit way below the deficit target of P198 billion in 2004.

Apparently, Boncodin said, the rating agency was looking for a "more dramatic and sustained trend.''

Malacañang expects S&P to bring the Philippines credit rating back to plus territory within the next six months.

"We are confident that S&P will revisit our rating and consider reversing the downward action once they have a complete understanding of the government's significant achievements to raise revenues and contain the future impact of NPC (National Power Corp.) losses through successful privatization and rate increases,'' said Press Secretary Ignacio Bunye in a statement.

To convince S&P to upgrade the country's credit rating, Bunye said, Congress should pass new tax measures, revenue collection agencies should improve their performance, and the National Power Corp. should complete the sale of its transmission and other assets.

[stephencua]

here's a piece of news that is very enlightening.. our stock market is very healthy and has been on the upside since the start of the year..

taken from inq7.net

SHARE prices closed 1.59 percent higher Friday on buying of stocks that are expected to announce positive earnings for 2004 and renewed interest in the mining sector, analysts said.

The Philippine Stock Exchange composite index rose 31.02 points to 1,987.84.

[rmb]

Agri sector records 5.06% growth in 2004
By Rocel C. Felix
The Philippine Star 01/21/2005

The agriculture sector, which contributes a fifth of the country’s total economic output and employs more than half of its workforce, bucked four devastating typhoons in the fourth quarter to post a 5.06-percent growth in 2004, 1.34 percentage points higher than the 3.72-percent growth in the previous year.

Agriculture Secretary Arthur C. Yap said that notwithstanding an anemic fourth quarter with growth recorded at only 1.35 percent compared to 5.42 percent during the same period in 2003, strong performances posted in the previous quarters, allowed the sector to post full-year growth of 5.06 percent.

The sector grew 7.94 percent in the first quarter, 4.53 percent in the second quarter and 7.25 percent in the third quarter.

"Despite the retreat or negative performance of the crops and the livestock subsectors in the fourth quarter, output increments were sustained in the crops, poultry and fishery sectors during the year," said Yap.

The major growth drivers were the crops subsector which expanded by 4.89 percent from only 2.83 percent during the same period in 2003.

Yap noted improved performances in palay and corn where production grew by 7.38 percent and 17.28 percent, respectively. Production of palay, the country’s major staple reached 14.5 million metric tons (MT) from 13.4 million MT in 2003, allowing the country to post a 94 percent self-sufficiency ratio in rice. Corn production went up to 5.4 million MT from 4.6 million MT in the previous year.

The other crops that recorded significant output expansions were banana, pineapple, tomato and rubber. Overall, the subsector’s contribution to agricultural production was 47.46 percent, equivalent to P383.2 billion at current prices, or a 16-percent increase in value of production in 2003.

The aquaculture subsector became a major growth driver in 2004, with production up by a hefty 17.9 percent to 17.14 million MT from 8.68 percent or 14.54 million MT in 2003. The subsector accounted for 23.44 percent of total agricultural output. Value of production improved 16.03 percent to P139.1 billion at current prices.

Despite the avian flu scare last year, the poultry subsector also posted a positive growth of 4.23 percent with chicken production up by 3.62 percent, chicken egg production up 7.92 percent and duck egg production up 4.7 percent. Duck production however, dipped 1.32 percent. The subsector accounted for 15.57 percent of 2004 agricultural output.

On the downside, the livestock sector which accounted for 13.53 percent of total agricultural output contracted by 0.41 percent. The drop was due to the decline in hog and cattle production.

Yap noted that average farmgate prices of agricultural commodities last year increased by 12.71 percent with top gainers such as the livestock, poultry, crops and fishery subsectors, enjoying higher prices of 27.53 percent, 15.10 percent, 10.43 percent and 6.01 percent, respectively.

The Department of Agriculture (DA) chief said 2005 growth projections are still being assessed in view of the expected slowdown in the first quarter as the farm sector attempts to recover from the destructive typhoons that hit the country‚s farmlands last November and December.

Yap said however, that early mitigation measures to cushion the El Nino phenomenon, implemented as early as September last year, will enable the country to increase palay and corn production in 2005.

Thus, palay production is projected to go up to 15.1 million MT from 14.5 million MT in 2004, while corn production will increase this year to 5.7 million MT from 5.45 million in 2003.

Earlier, the University of Asia and the Pacific (UAP) projected a growth rate of 2.5 to 3.5 percent for the agriculture sector this year, lower than the DA’s projected full-year growth of 4.6 percent
-------
We'll see.

[drwho]

its nice to see that "my" thread still lives on and you guys are taking care of economic news

[amras]

Peso hits fresh one-year high at 55.15:$1
Investors pour dollars into RP


Posted 00:11am (Mla time) Jan 28, 2005
By Doris Dumlao, Juliet Labog-Javellana, Gil C. Cabacungan Jr.
Inquirer News Service

Editor's Note: Published on page A1 of the January 28, 2005 issue of the Philippine Daily Inquirer


"YAHOO!" President Macapagal-Arroyo yesterday shouted upon learning that the peso appreciated for the fourth straight day against the US dollar, the latest indication that foreign and local investors were giving her administration a new vote of confidence.

"The economy is on a roll ... The sense of turnaround is setting in," Ms Arroyo said in Malacañang during the launching of the country's first private equity fund-the $25-million Planters Bank-Aureou equity fund for small and medium enterprises.

The peso finished at a fresh 12-month high on Thursday, hitting 55.13 before closing at 55.15 against the dollar on the Philippine Dealing System. It was the strongest finish for the local currency since Jan. 6, 2004 when it closed at 55.11.

The volume of transactions also rose to $326.8 million from $270 million on Wednesday-another strong sign that foreign investors were pouring in dollars into the country. Analysts see the peso stabilizing at the 54 level within the first quarter.

The 30-company Philippine Stock Exchange Index-another barometer of business confidence-ended up 21.11 points, or 1.1 percent, higher at 1,991.39. The index is at its five-year peak.

What drove the local currency and stocks up was the news that foreign investors had scrambled to buy Philippine sovereign bonds this week after finding themselves underweight in the paper because a rating downgrade had turned out to be only one notch, not the two that many had feared.

The huge demand, with investors ordering more than five times the $1.5 billion on offer, enabled the Philippine government to price its largest single sovereign deal and spurred strong demand in the secondary market for the country's paper. The government had originally aimed for a $1-billion bond float.

The Philippines, Asia's most active sovereign bond issuer outside of Japan, priced the 25-year bond on Wednesday at a yield of 9.70 percent.

'Doing something right'

The bond sale came a week after international credit ratings agency Standard & Poor's downgraded the country's foreign-currency rating by one notch to BB-minus, citing a lack of urgency by the government in tackling potentially painful fiscal reforms.

Reuters quoted a source familiar with the bond offering as saying that investors viewed the Philippines as having navigated the worst of its difficulties, with the domestic economy performing well and rating agencies a little behind the curve.

"We must be doing something very right to get this kind of response from the international financial community,'' said Press Secretary Ignacio Bunye, who had been kept busy lately containing the negative impact of S&P's downgrade.

More positive news

Stock traders said investors were also cheering the government's swiftness in implementing fiscal reforms to address a yawning budget deficit and Ms Arroyo's appointment of three new members to her team of economic managers.

Shortly before dawn Thursday, the House of Representatives approved a measure raising the value-added tax on goods and services to 12 percent from 10 percent. A similar bill must be approved by the Senate before it is signed into law.

Earlier, Ms Arroyo signed the Lateral Attrition Act of 2005-a reward-and-penalty system to improve tax collection-and another bill that raised taxes on tobacco and liquor products. The three laws are part of her administration's fiscal reform package.

Stock traders said investors were also upbeat over the corporate earnings outlook this year and the peso's rise against the dollar.

"There are strong [dollar] inflows and favorable reaction to positive news coming from the passage of the VAT bill and [Ms Arroyo's] appointment of new economic managers bring new hope," said Roland Avante, treasurer of Chinatrust Commercial Bank Philippines.

Proceeds from SMC's borrowing

Avante said investors were pouring dollars into the fixed-income market, particularly government securities. Aside from the government bond float, proceeds from the $1.85-billion new borrowing announced by food and beverage giant San Miguel Corp. are likewise expected to boost the dollar supply in the Philippine Dealing System, adding fuel to the peso's strong rally.

Were it not for some intermittent dollar-buying, Avante said the peso would have easily breached the 55:$1 barrier and started trading at the 54-level.

Jose Emmanuel Hilado, president of foreign exchange association ACI Philippines and treasurer of BDO Private Bank, said the peso's appreciation to 54:$1 could happen any time-"not immediately but probably within the first quarter."

Round of applause

At the launching of the private equity fund for small and medium enterprises (SMEs), Ms Arroyo drew a round of applause from the crowd of bankers, investors and Cabinet officials, including the new appointees-Finance Secretary Cesar Purisima, Trade Secretary Juan Santos and Customs Commissioner Alberto Lina.

She said the country's economic fundamentals remained sound, citing the country's trade surplus of $333 million last November compared to the $193-million deficit during the same period in 2003.

"We must now bring the benefits of this macro-economic performance to the average Filipino,'' Ms Arroyo said. One way, she said, is to support the growth of SMEs.

"Small and medium entrepreneurs have proven the capacity to turn their capital around in the shortest period of time and create jobs,'' she said. "This private equity fund complements the government's training programs on trade and entrepreneurship, skills development and product design.''

The Philippines' budget deficit is expected to narrow slightly to P180 billion, or 3.5 percent of gross domestic product this year, from P186.1 billion, or 3.9 percent of GDP in 2004, due to higher fees and charges by state agencies.

US and European buyers took 35 percent each of the Philippine government's bond float. Singapore investors accounted for 16 percent, Philippine clients took 10 percent and the remainder went to Hong Kong customers. By investor type, asset managers accounted for 74 percent, banks 13 percent, insurance companies 4 percent and retails 9 percent.

Citigroup, Deutsche Bank and UBS were the joint bookrunners on the deal.

The government plans to borrow another $3 billion this year to finance its budget deficit and support the operations of ailing National Power Corp.

[stephencua]

lets hope and pray that 2005 is the start of our country's return to greatness..

[ryanr]

Semiconductor exports up 13.5% last year, exceeds target
By MARICEL E. ESTAVILLO, Reporter
The country's single biggest exports drawer, the semiconductor sector, grew 13. 5% last year, exceeding the revised industry target of 10%.

Total semiconductor exports, which contributes over two-thirds to the country's total exports, is pegged at P67.1 billion, higher than the P59.1 billion and P57 billion net exports values registered in 2003 and 2002, respectively, the National Statistical Coordination Board said Monday.

The semiconductor sector comprises almost 80% of the country's semiconductor and electronics industry, with 89 export players and with an employment capacity of 30,108.

Socioeconomic Planning Secretary Romulo L. Neri said in a press conference that the increase is the result of the turnaround in the semiconductor and electronics demand worldwide.

Last year, both the global and the local semiconductor and electronics industries were expecting the market to pick up, after years of experiencing a global market slump.

The industry follows a cyclical period of upturn and downturn, which on the average spans from two to three years.

Industry association Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) has revised its 2004 exports target from 15% to 10% in the second half of last year as the industry grappled with concerns of rising price of oil, the uncertainty because of the November election in the United States, and the unstable US dollar.

Earlier, SEIPI president Arthur S. Young Jr. said the economics of the local electronics and semiconductor industry is changing. Instead of deep recession, the industry is now experiencing shorter periods of downturn and upturn, a good indicator for rapid recovery and minimal negative impact to the market.

However, Mr. Neri said the government is expecting a moderate exports growth of between 8% to 10% by year-end, with the semiconductor sector to replicate the slowdown.

The forecast is grounded on negative global indicators such as the steady rise in the price oil and the continuous heating up of China's demand for raw materials, particularly steel and wood, pushing prices to rise.

SEIPI's growth forecast for 2005, on the other hand, is pegged between 5% to 10%.

Mr. Neri said a number of positive factors will cushion the economy from experiencing the worst this year. He said the government is now addressing the key bottlenecks to investment in the country, which are infrastructure and corruption.

Major projects for roll out this year are the P27 billion Subic-Clark toll road; the P10 billion South Luzon Extension; the $503 million Northrail project; and the P5 billion Subic Port.

To address the corruption issue which prevents investors from coming in, Mr. Neri said the government through the Bureau of Customs will install X-ray machines in the ports of Manila, Cebu, Subic, Batangas, and the Manila International Container Terminal.

Other anti-corruption projects are the Bureau of Internal Revenue (BIR) computer-assisted audit programs to reduce tax evasion on value-added-tax (VAT) and corporate income; the circular from the Bangko Sentral ng Pilipinas (BSP, or the central bank) requiring the submission of income tax returns when applying for loans; and the e-procurement initiative of the government, which provides a more open, transparent, and competitive environment through online bidding.

Last year, total investments from semiconductor and electronics industry reached $442 million, an increase from the $230 million and $270 million worth of investments registered in 2003 and 2002, respectively.

[ryanr]

Businesses see "moderate outlook" for 2005 -- MBC study
The business community's outlook on the Philippine economy is somewhat tempered for 2005, notwithstanding the strong economic growth in 2004.

Based on the January 2005 Executive Outlook Survey the Makati Business Club conducted this month with 70 respondents, almost 40 percent of senior business executives believe that the country's GDP growth rate will slow down this year.

The number of respondents represent close to ten percent of MBC's membership, the business group said in a statement issued Monday.

In the same poll, over a third of respondents project the economy's growth will remain the same as last year. Only 23% expect the economy to grow faster than last year.

This even as the government said Monday that the country's domestic economy grew 6.1% in 2004 from 4.7% in 2003.

The cautiousness seems to be partly anchored on the forecast for inflation and interest rates. Inflation rose to 5.5% in 2004 from 3.0% in 2003.

About 73% of executives polled expect a higher inflation rate this year.

Another 76% predict a higher average rate for the interest rate benchmark, the 91-day Treasury bill. The 91-day T-bill rate rose to 7.352% in 2004 from 6.034% in 2003.

And inspite of the appreciation of the peso early in the year, 60% expect the peso-dollar rate to depreciate 5.6% over the next 12 months.

While prospects for investments and trade remain positive in 2005, the mood is not as bullish as in 2004. The number of executives expecting higher investments and growth in exports and imports is running considerably lower than at the beginning of 2004. Nearly 46% expect higher investments in 2005. Another 53% forecast higher exports this year while 60% likewise project higher imports.

CORPORATE OUTLOOK

The corporate earnings reports for the full year will be somewhat tempered for many companies.

In the July 2004 survey, the vast majority from 75% to 87% expected revenue and income growth in 2004. That number has dropped significantly in the January 2005 survey to only 44% to 57% expecting gross revenue and net income growth.

It should be pointed, though, that among the companies expecting a rise in revenues and income, those increases are expected to be dramatic. Notwithstanding that, most companies have downgraded their own net income expectations for net income for 2004.

The MBC Executive Outlook Survey is conducted twice a year among its members.

Looking ahead to 2005, 73% of respondents project corporate revenues to grow at an average of 15.6% while 60% expect corporate net income to grow at an average of 27.2% on a year-on-year basis.

The outlook for labor should remain reasonably stable. Sixty percent of respondent companies plan to hold their current workforce size steady -- compared to 64% in July last year -- while over 27% will expand their workforce. On the other hand, close to 6% plan to layoff or downsize their workforce this year.

The outlook for investments is also fairly moderate. Only 47% of respondent firms plan to make additional investments this year, compared to over 71% last year. However, the average investment will be significantly higher than year-ago levels.

One factor behind the moderate investment activity may be the drop in capacity utilization rates for manufacturing companies, the MBC said. Manufacturers in the survey reported a decline in the average capacity utilization rate to 67.8% in end-December 2004 from 76.9% in end-May 2004.

GOVERNMENT PERFORMANCE

Business executives continue to rank the Bangko Sentral ng Pilipinas (BSP, central bank) and the Department of Trade and Industry as the two top performing government agencies in the past six months.

The Department of Social Welfare and Development and the Department of Foreign Affairs ranked third and fourth. The Department of Agriculture and the Department of Budget and Management were tied for fifth place. Both DFA and DBM improved their ratings while DA dropped two places to fifth.

The House of Representatives, Senate, Department of Public Works and Environment, Department of Public Works and Highways, and the Commission on Elections were all ranked to worst performing agencies of government in the last six months.

The most improved government agency in the past semester was the Department of Budget and Management, which rose from No. 17 to No. 5 in the survey and saw its net satisfaction ratings rise from 11.5% in July 2004 to 38.6% in January 2005.

The government agencies whose net scores deteriorated the most were the following:

the Department of Tourism (down 60.3%),
the Supreme Court (down 36.6%),
Armed Forces of the Philippines (down 36.1%),
Department of Environment and Natural Resources (down 29.4%), and
the Metro Manila Development Authority (down 29.3%).

DEVELOPMENTS AND ISSUES

The semestral survey regularly tracks developments and issues over a 6-to-12 month window. Among the major developments cited in the second half of last year were the government's decision to expropriate and operate NAIA 3, the passage of the sin tax law (RA 9334), the Supreme Court's reversal of its ruling on the Mining Act, peace and order, and political stability. The government has promised to open the airport within six months and has also pursued other tax measures in order to bring the fiscal position into balance over the next several years.

Among the major issues which businessmen were asking the government to immediately address were revenues and the fiscal deficit, graft and corruption, peace and order, infrastructure, and investments.

ABOUT THE SURVEY

Close to 79% of respondents belong to top management positions. More than 67% of respondents are Filipinos.

By industry, over 49% of respondents' companies belong to the services sector, while close to 16% are in the manufacturing sector. By company size, 36% reported annual revenues of P1 billion and over, 21% had between P500 million to P1 billion in annual turnover, and 19% had less than P100 million.

In terms of employee size, more than a quarter have less than 99 employees, while more than 24% employ between 100 to 299 people, close to 19% over 1,000 employees, almost 13% between 500 to 999 employees, and more than 11% between 300 to 499 employees.

[SKYLINEPIGEON]

GDP grows 6.1% in 2004
By Marichu Villanueva
The Philippine Star 02/01/2005

The country’s economy grew 6.1 percent in 2004 — the highest growth rate since 1996 — and President Arroyo gave credit to small and medium enterprises as well as young professionals at call centers for attracting investors into the country.

The gross domestic product (GDP) growth exceeded government forecasts of 4.9 to 5.8 percent, according to figures from the National Statistical Coordination Board (NSCB).

"The NEDA (National Economic and Development Authority) will officially report to our nation that our gross domestic product grew by 6.1 percent in 2004," the President said, adding that she was "delighted" with the growth figures.

GDP represents the country’s total annual production of goods and services, minus overseas remittances.

"This is our highest since 1996 and shows the resiliency and capacity of our people to overcome crisis, work hard and keep on track to a better future," Mrs. Arroyo said in a statement.

Romulo Virola, NSCB secretary general, said the services sector was the best performer, growing 7.3 percent from 5.8 percent in 2003.

In a statement, the NSCB said agriculture, fishery and forestry grew 4.9 percent, up from 3.8 percent in 2003, while industrial growth rose to 5.3 percent from 3.8 percent.

"Services, which accounted for about 47 percent of total gross domestic product, contributed the most to GDP growth with 3.37 percentage points," the NSCB said.

"All of its sub-sectors posted accelerated growths in 2004. Top contributors to growth were trade, transportation, communications and storage, and private services.

"Industry accounted for about 33 percent of GDP and contributed 1.77 percentage points to the total GDP growth rate," Virola said in a statement.

The stock market reacted favorably to the news, with the composite index rising 0.25 percent to 2,019.56, its highest level in nearly five years.

"The growth rate was within expectations but the market is happy with a healthy gain for the economy despite high oil prices and rising inflation," said Lawrence de Leon of Accord Capital Equities.

Guillermo Luz, executive director of the influential Makati Business Club, said the growth rate was quite good, considering that "last year was perceived to be a bit of a difficult year."

"We had so many events," which could have hurt the economy, such as a series of destructive typhoons and uncertainty following Mrs. Arroyo’s victory in elections in May which the opposition had charged was due to cheating, he said.

Luz said the growth in agriculture had been "the big surprise," of the year, adding that this would greatly benefit the 30 percent of the workforce who are dependent on that sector.

However, Luz said growth was not likely to be as high in 2005, remarking that "the expectation is slightly more tempered for 2005 than for 2004."

"There is an expectation that inflation and interest rates will be higher due to the high price of imported fuel and the continuing budget deficit of the government which will force it to borrow more money," Luz explained.

Sentiment "is still bullish but not as bullish as last year," he added.

Speaking at the 14th anniversary celebrations of the Philippine National Police (PNP) at Camp Crame, Quezon City yesterday, Mrs. Arroyo said industry and services are picking up due to higher farm incomes and that overseas remittances are adding fuel to the country’s growth engine.

The Chief Executive lauded the "young professionals manning the various call centers and outsourcing firms" for their part in attracting investors.

"And I would like to thank specially our service sector, transport and communications, especially and our trade services for picking up, complemented by our support to boost micro, small and medium enterprises," she said.

Mrs. Arroyo thanked Congress for "putting our fiscal house in order" and the country’s farmers who managed to maintain high productivity despite the floods and typhoons late last year which destroyed large areas in eastern Luzon.

She also thanked PNP chief Director General Edgar Aglipay and the 115,000-strong police force for their vigorous campaign against criminals, which had also greatly helped in attracting investors.

"The rampart of our national security must be held firm as our economy grows," she said.

"Overall confidence in our nation lies in the full trust to the law. Our dedication as public servants to secure our people’s safety and protect (them from) their own scalawags, white collar or otherwise, must be unassailable."

Mrs. Arroyo said the picture of economic growth should further challenge Filipinos to work harder to sustain the positive developments.

"Our institutions are humming the tune of growth," she said.

"We, in the executive branch of the government, must do our share… the Congress and the Senate are doing their share who are addressing the challenge by keeping the food supply and price stable…," the President said.

Last week, the peso rallied towards 54 to $1 at the close of trading. — With reports from Christina Mendez, AFP

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[amras]

Peso strengthens to P54 per dollar level
Posted: 4:56 PM | Feb. 01, 2005

Joel Francis Guinto
INQ7.net with XFN-Asia


(UPDATE) THE PESO appreciated to the 54-per-dollar level on Tuesday, on the back of positive news on the economy and the passage of priority tax measures, analysts said.

However, the peso closed at 55.000 after trading between 54.870 and 55.040 on volume of transactions worth 454.5 million dollars. It closed at 55.090 on Monday.



"There's a wealth of good news that made the Philippines a buy," AB Capital Securities research director Jose Vistan Jr. said.

"We are seeing more inflows, while oil companies are not buying dollars at the moment. Importers are also not hedging and exporters are not selling dollars," a dealer at a local commercial bank said.

"And there are more positive economic news for the market to digest. CalPERS has kept us in its investment list. ROPs (sovereign bonds) are rallying and spreads are tightening. Local interest rates are falling and our GDP growth is rising," the dealer added.

In a television interview, Bangko Sentral ng Pilipinas (BSP) deputy governor Amado Tetangco said upbeat news helped prop up the peso but also said its strength could be sustained only if the Congress passes more revenue enhancing measures.

President Gloria Macapagal-Arroyo recently signed into law the Lateral Attrition Bill, which will penalize government revenue collection agencies who fail to meet their targets and reward those who meet their revenue goals.

A bill seeking a two-percentage point increase on the ten-percent Value Added Tax (VAT) was passed at the House of Representatives and would be tackled at the Senate before the President signs it into law.

The California Public Employees' Retirement System (CalPERS), the biggest pension fund in the US, has retained the Philippines in its list of permissible investment destinations, Philippine Ambassador to the US Albert del Rosario said.

The decision was made after CalPERS's consultant Wilshire Associates gave the Philippines a passing score in its evaluation of the country's political and economic situation, del Rosario added.

CalPERS, the largest US pension fund with assets worth 172 billion dollars,has an estimated 85 million dollars worth of portfolio investments in the Philippines.

At Monday's auction, Treasury bill rates fell sharply with tenders surging after the government cut the fortnightly offer size to 12 billion pesos from 15 billion.

The average 91-day rate, which banks use in pricing loans, averaged 6.847 percent, down from the previous auction's 7.440 percent.

"I think the next target (for the dollar/peso) is 54.50 (and) 53 is also not a difficult target," a currency dealer said.

Central bank governor Rafael Buenaventura on Friday said there is a strong chance for the peso to gain more ground this year, "even better" than 54 to the dollar, if the government is able to deliver on its promised fiscal reforms.