1. Acedo * Fabia * Reyes * Sorbito * Vidamo

2. Gross Domestic Product (based on PPP valuation of country GDP)
18.00%
World Advanced economies Eurozone USA Developing Asia Philippines
13.00%
8.00%
3.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-2.00%
-7.00%
Source: IMF, World Economic Outlook Database, October 2012 * 2012 to 2017 are estimates.

3. • World economy in 2013 should mark the beginning of sustainably faster
growth with declining trade imbalances.
• Expansionary monetary policies will continue to drive the cyclical upturn in
the United States and in the euro area.
• Economic activity in Latin America will strengthen.
• East Asia will remain the fastest growing segment of the world.
• Philippines is expected to outperform most other nations in Asia and enjoy
another year of strong economic growth.

4. • The Philippine economy was one of the global star performers in 2012. In
2013, the Philippine economy is expected to grow by around 6% on the back
of sound policy developments and strong underlying fundamentals.
Actual/Forecast
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Graph
Economic Activity
Real GDP (YoY%) 5.20 6.60 4.20 1.10 7.60 3.90 6.60 5.90 5.60 5.55
Inflation (YoY%) 5.48 2.95 8.15 4.24 3.79 4.73 3.12 3.80 4.00 3.90
Unemployment (%) 7.93 7.33 7.40 7.48 7.35 7.03 6.98 6.80 6.50 6.50
External Balance
Curr. Account % of GDP 4.34 4.72 2.48 5.08 4.21 3.14 3.00 3.40 3.05 3.15
Fiscal Balance
Budget (% of GDP) -1.03 -0.18 0.88 -3.72 -3.49 -2.03 -2.30 -2.20 -2.10 -2.35
Interest Rates
Central Bank Rate (%) 7.50 5.25 5.50 4.00 4.00 4.50 3.50 3.75 0.00 0.00
3-Month Rate (%) 6.94 6.31 5.25 5.00 1.06 2.25 0.56 1.76 0.00 0.00
2-Year Note (%) 5.42 11.09 9.79 11.69 4.72 0.00 2.58 0.00 0.00 0.00
10-Year Note (%) 6.38 6.58 7.44 8.11 6.10 5.41 4.40 5.04 0.00 0.00
Exchange Rates
USD/PHP 49.03 41.25 47.52 46.16 43.80 43.84 41.01 39.85 39.00 38.00
Source: Bloomberg

5. Gross Domestic Product
PHP Mlns GDP GDP Growth % • GDP grew by 6.8 percent in
8,000,000 9% 4Q2012, paving for the full-year
7,000,000 8%
6.6%
7%
GDP estimate to post a broad-based
6,000,000 5.9% 5.6%
5.6% growth of 6.6 percent.
6%
5,000,000
5%
4,000,000
4%
3,000,000
3%
• GDP is expected to grow above 5%
2,000,000 2% in the coming years, mainly coming
1,000,000 1% from buoyant public and private
0 0%
spending.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg
Other Economic Activities
9% • Year-on-year headline inflation is
8% within the Government's target
7% range of 3-5 percent for the year
6% 7.0% 6.8% 6.5% 6.5% and will continue for the next few
5%
4%
years.
3% 3.8% 4.0% 3.9%
2% 3.1%
• Unemployment rate improved in
1% Inflation (YoY%) Unemployment (%) 2011. it is expected to hover around
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
4% in the coming years.
Source: Bloomberg

6. External Balance
PHP Mlns Curr. Acount Curr. Account % of GDP
300,000 6% • Current account continued to register a
surplus at US$1.8 billion, equivalent to
250,000 5%
2.9 percent of GDP but 15% lower than
200,000 4% the surplus of US$2.1 billion in 2010.
150,000 3%
3.4%
100,000
3.1% 3.0% 3.1% 3.2%
2%
• Current account is expected to remain in
surplus on the back of strong inflows
50,000 1%
from OFWs and receipts from the
0 0% growing BPO industry
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg
Fiscal Balance
PHP Mlns 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
100,000 2%
• Government has continued to
50,000 1%
0
demonstrate prudence in its
0%
-50,000
fiscal management, as
-1%
-100,000 characterized by low budget
-2%
-150,000 deficits (less than 3% of GDP)
-200,000 -2.3% -2.2% -2.1% -2.4% -3%
-250,000 -4%
Budget Budget (% of GDP)
Source: Bloomberg

7. Interest Rates
14% • Policy rates, repo and reverse repo
12% Central Bank Rate were kept on hold at 5.5% and 3.5%
3-Month Rate
10% 2-Year Note
8% 10-Year Note • Interest rates are low due to investor
strong demand on the back of the
6%
country’s solid fundamentals
4%
2% • Interest rates are expected to remain
0% at or slightly above current levels.
2006 2007 2008 2009 2010 2011 2012 2013
Source: Bloomberg
PHP Foreign Exchange Rate
60 • Peso emerged as Asia Pacific’s 2nd best
49.03 47.52 46.16
performing currency against the dollar
50
41.25
43.80 43.84
41.01 39.85 39.00 in 2012
38.00
40
30
• Capital inflows temper through ban on
foreign funds in SDA and cap on NDF
20
10 • The peso is expected to appreciate
- further on strong inflows.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg

8. Philippine Gross Domestic Product
8,000,000
at Constant Prices 2001-2012 10.0%
7,000,000
8.0%
6,000,000
5,000,000
6.0%
4,000,000
3,000,000 4.0%
2,000,000
2.0%
1,000,000
-
0.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(1,000,000)
Consumer spending Capital expenditure Government spending Current Accounts GDP Growth %
(2,000,000) -2.0%
Source: Bloomberg, NSCB

9. • Conditions are ripe for spending (both from the public and
private sectors)
• Inflation in check, interest rates to remain low, liquidity
abound
• Sustained consumer spending and increased investment
spending from the private sector
• Government spending on infrastructure and socio-
economic programs

10. 10 yr PDST-F Rate Banking Statistics: U/Kbs
14.00
12.11 Yr NPL Ratio Provision/NPL
12.00 2005 8.2% 77.5%
10.00
2006 5.7% 82.6%
2007 4.4% 93.3%
8.00 2008 3.5% 100.0%
6.00 2009 3.0% 112.3%
2010 2.9% 118.3%
4.00
2011 2.2% 126.4%
3.52 3Q12 2.1% 136.0%
2.00
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: BSP
Source: Bloomberg, NSO
Interest rates are low Banking sector is sound
Domestic Liquidity & Money Supply
M2 M3 M2 Growth M3 Growth
60000000 20.0%
50000000
15.0%
40000000
30000000 10.0%
20000000
5.0%
10000000
0 0.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: BSP
Ample Liquidity (M2 &M3 growth)

11. GDP and Consumer Spending Growth Rate
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
GDP growth % Consumer Spending growth %
Source: Bloomberg, NSO
• In 2013, expenditure is likely to be propped up by election-related spending for the
May mid-term poll

12. • Robust consumer spending on the back of strong USD Mlns
BPO Revenues
inflows from OFWs and receipts from the growing
BPO industry 12000 11000
• OFW remittances up 7.2% to new record $ 20.12 B in 10000 9000
2011 amid political turmoil in some parts of MENA and
slowdown in global economic growth 8000 7200
6061
• BPAP 5-yr. plan to grow at an average of 20% a year – 6000 4875
above the projected global annual growth rate of 10-
15% 4000 3257
2420
• IT-BPO services serve as catalysts for growth, the 1475
2000
industry played a major role in fueling recent economic
development in the Philippines 0
2004 2005 2006 2007 2008 2009 2010 2011
Source: BPAP
OFW Remittances
USD Mlns
2000 30.0%
BPO Multiplier Effect at Yr 2016
1800 25.0% OFW Remittances Growth
1600 25.0%
Housing
4%
1400 13%
20.0%
1200 12.8% 20%
Food
1000 15.0%
800
600 6.3% 10.0% Transport and
14% Communicatio
400 5.0% 41% ns
200 5.6% Savings
0 0.0% 8%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Bloomberg, BSP

13. Upgrades in indicators of competitiveness and sovereign ratings reflect an
improved investment environment
S&P raised its outlook on the Phils.’ credit rating to “positive” from
“stable”.
Current administration possesses a level of legitimacy, support and
stability that reduces political uncertainty and allows for improved
legislative efficiency. This environment allowed the government to focus its
efforts on improving its revenues, building infrastructure and reducing
poverty.
Credit rating may be raised from “BB+” to investment-grade by end-2014.
The case for investment grade is supported by a number of
factors, including a resilient economy, a current account surplus, stable
fiscal policy, and the narrowing of the budget deficit.

14. % Debt to GDP
100
90
77
80
70
74.2 72.3
63.8
• Prudent fiscal
56.9 57.3
60 55.8 52.4 50.9 50.6 management:
50
40 government has enough
30
20
leeway for spending
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 • Government revenue
Source: Bloomberg
growth is expected to
Revenues and Tax Efforts
improve further
(As % of GDP)
10.00
8.10
• Infrastructure spending
8.00
6.00
4.70
7.18 • Socio-economic spending:
4.00 RH bill, conditional cash
4.20
2.00
Revenues Tax revenues
transfer program
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Bloomberg

15. • Foreign exchange appreciation poses challenges
– Affects exporters, OFWs, and BPO industry
– However, a stronger peso is helping deliver lower inflation, e.g., through
cheaper oil imports and dollar loans
– BSP says it will not seek to run against the fundamentals, although it has
hinted at strengthened capital controls to curb inflows of hot money

16. • Longer term, the challenge is for further economic reform to
make sure that growth is sustainable
– Important that the heady growth does not sate appetite for economic
reform
– Economy over-reliant on remittances and real estate
– BPO sector is world-class but delivers limited new jobs
– Economic power is too concentrated , holding back development
– More needs to be done to diversify the economy and increase competition

17. • Fiscal deficit is expected to narrow gradually over the next few years.
• Fiscal consolidation would continue especially with the implementation of
the "sin tax" in January.
• Policy rates will remain unchanged at 3.50% given robust growth outlook
and a manageable inflation. Possible policy rate hike by 25 bps in Q4.
• Further SDA rate cuts can’t be ruled out, which would give central bank
more freedom to manage FX volatility.
• Inflation may accelerate, particularly in 4Q2013, due to higher food and
energy inflation, consumer spending, and base effects but will remain
manageable and unlikely to breach the inflation target.

18. 100
150
200
250
300
350
400
-
50
50
100
150
200
250
300
350
400
450
-
Jan-09
Dec-99
Apr-09
Apr-00
Jul-09
Aug-00
Oct-09
Dec-00
PSEI
Jan-10 Apr-01
Apr-10 Aug-01
Jul-10 Dec-01
Oct-10 Apr-02
S&P500
Jan-11 Aug-02
Dec-02
Apr-11
Apr-03
Jul-11
Medium Term
Aug-03
Oct-11
Dec-03
Jan-12 Apr-04
EuroStoxx50
Apr-12 Aug-04
Jul-12 Dec-04
Oct-12 Apr-05
Jan-13 Aug-05
Dec-05
Apr-06
Aug-06
100
110
120
130
140
80
90
Long Term
Dec-06
Apr-07
MSCI Emerging Markets
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Nikkei 225
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Short Term
Dec-10
Apr-11
Philippine stocks still expected to outperform its peers
Aug-11
Dec-11
Shanghai SE Composite
Apr-12
Aug-12
Dec-12
Source: Bloomberg

19. • Based on macroeconomic analysis, sectors we prefer are :
Consumer Staples Utilities Financial
Real estate Tourism

20. •
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