Report on Economic and Financial Developments First Quarter 2020

BANGKO SENTRAL NG PILIPINAS Report on Economic and Financial Developments – First Quarter 2020 Table of Contents Executive Summary ...... 2 Introduction ...... 4 Real Sector ...... 5 Aggregate Supply and Demand ...... 5 Labor and Employment ...... 8 Fiscal Sector ...... 9 National Government Cash Operations ...... 9 Monetary Sector ...... 10 Prices ...... 10 Domestic Liquidity ...... 11 Monetary Policy Developments ...... 12 Monetary Operations ...... 13 Domestic Interest Rates ...... 14 Financial Sector ...... 15 Banking System ...... 15 Banking Policies ...... 19 Capital Market Reforms ...... 20 Stock Market ...... 20 Bond Market ...... 21 Credit Risk Assessment ...... 23 Payments and Settlements System ...... 24 External Sector ...... 24 Balance of Payments ...... 24 International Reserves ...... 28 Exchange Rate ...... 29 External Debt ...... 30 Foreign Interest Rates ...... 32 Global Economic Developments ...... 33 Financial Condition of the BSP ...... 36 Balance Sheet ...... 36 Income Statement ...... 37 Conclusion, Challenges and Policy Directions ...... 37 Annexes ...... 40 List of Acronyms, Abbreviations, and Symbols ...... 45 Statistical Tables ...... 47

First Quarter 2020 Report on Economic and Financial Developments | i Domestic liquidity ample. Money supply or M3 Executive Summary grew by 13.3 percent y-o-y as of end-March 2020 to about P13.1 trillion The expansion was driven by the 9.1-percent y-o-y growth in net foreign assets The Philippine economy contracts in Q1 2020. The and the 11.9-percent growth in domestic claims in country’s real gross domestic product (GDP) February 2020. Credit extended to the private declined by 0.2 percent year-on-year (y-o-y) in the sector rose by 11.2 percent, supported by the first quarter of 2020, a significant drop from the sustained increase in bank lending. 6.7-percent growth achieved in Q4 2019 due to the Taal volcano eruption and coronavirus disease The Bangko Sentral ng Pilipinas (BSP) reduces the (COVID-19) outbreak. Household consumption policy rate cumulatively by 75 basis points (bps) in slowed down significantly while a sharp decline in Q1 2020. At its monetary policy meeting on capital formation was recorded due to the 6 February, the BSP decided to cut its key policy implementation of enhanced community interest rate (overnight reverse repurchase or RRP quarantine (ECQ) in Luzon and other parts of the facility) by 25 bps to 3.75 percent as a pre-emptive country by the National Government (NG). move to support market confidence amid the potential spillovers associated with increased Labor market conditions weaken. The number of external headwinds and the possible adverse employed persons decreased to 42.7 million in impact of the COVID-19 pandemic on economic January 2020 from 43.1 million in October 2019. activity and market sentiment. In its 19-March Meanwhile, the unemployment rate in January policy meeting, the BSP reduced the key policy rate 2020 was estimated at 5.3 percent, 0.8 percentage anew by 50 bps to 3.25 percent for the overnight point (ppt) higher than the rate in October 2019. RRP facility as a follow-on monetary policy Underemployment rate also rose to 14.8 percent response to address the adverse spillovers from 13.0 percent. Meanwhile, labor force associated with the ongoing pandemic. For both participation rose to 61.7 percent during the same policy interest rate cuts, the corresponding interest period. rates on the overnight lending and deposit facilities were also reduced accordingly. NG operations record a narrower deficit. The cash operations of the NG yielded a deficit of Domestic interest rates rise. Amid concerns and P74.0 billion (1.7 percent of GDP) in Q1 2020, uncertainty over the impact of the Taal volcano 18.0 percent lower than the year-ago deficit level of eruption and the COVID-19 outbreak, Treasury bill P90.2 billion (2.0 percent of GDP). Total revenues (T-bill) rates in the primary market as well as as a share of GDP was recorded at 17.3 percent in government securities (GS) yields in the secondary Q1 2020, higher than the Q1 2019 share of market increased in end-March 2020 when 15.5 percent due to higher tax collections and non- compared to those in the previous quarter. tax revenues. Total NG disbursements was recorded at 19.0 percent of GDP in Q1 2020, an increase from Banking system remains sound and stable. The the previous year’s ratio of 17.6 percent. banking system's total resources reached ₱18.8 trillion as of end-March 2020, equivalent to Inflation is higher in Q1 2020. Headline inflation 96.0 percent of GDP. Asset quality remained stable, averaged at 2.7 percent y-o-y in Q1 2020 from with net non-performing loan (NNPL) ratio at 1.6 percent in the previous quarter as both food 1.2 percent and gross NPL ratio at 2.2 percent, as of and non-food inflation increased. Meanwhile, core end-March 2020. Capital adequacy ratios, both on inflation also went up to 3.2 percent y-o-y in solo and consolidated basis, remained well above Q1 2020 from 2.7 percent in the previous quarter. the BSP’s regulatory threshold of 10.0 percent and The Q1 2020 inflation was within the Government’s the international standard of 8.0 percent. inflation target range of 3.0 percent ± 1.0 ppt for the year. Stock market declines. The Philippine Stock Exchange index (PSEi) dropped sharply in Q1 2020 due largely to the outbreak of the COVID-19

2 | First Quarter 2020 Report on Economic and Financial Developments pandemic and investor concerns over its impact on impact of the COVID-19 on the economy also the Philippine economy. The PSEi averaged supported the peso. 6,876.72 index points during the period-in-review, about 12.4 percent lower than its level in the Global economic activity slows down due to the previous quarter. Year-to-date, the PSEi closed COVID-19 pandemic. The global health crisis (GHC) 31.9 percent lower at 5,321.23 index points in end- brought about by COVID-19 slowed global March. economic activity in Q1 2020. Common responses to contain the pandemic, such as regional External position reverses to a deficit. The lockdowns and social distancing, resulted in the country’s balance of payments (BOP) position dramatic decline in domestic and global financial registered a deficit of US$68 million in Q1 2020, a conditions, disruptions in the supply chain, shifts in turnaround from the US$3.8 billion surplus posted spending patterns, decline in consumer and in the same quarter last year. The reversal of the business confidence, among others. BOP position to a deficit stemmed largely from the turnaround of the financial account to net outflows as both portfolio investment and other investment accounts reversed to net outflows during the quarter attributed to net withdrawal of volatile capital flows and residents' payment of foreign loans.

Reserves increase to record-high. The country’s gross international reserves (GIR) increased to US $88.9 billion as of end-March 2020, higher than the US$87.8 billion in end-December 2019. At this level, the GIR can adequately cover 8.0 months’ worth of imports of goods and payments of services and primary income. It was also equivalent to 6.7 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.

External debt declines. Outstanding external debt stood at US$81.4 billion as of end-March 2020, lower by US$2.2 billion (or 2.6 percent) from the US $83.6 billion level as of end-December 2019. The maturity profile remained predominantly medium- to long-term. The debt service ratio increased to 8.9 percent from the 5.7 percent recorded for the same period a year ago while the total outstanding debt to GDP ratio improved to 21.4 percent in Q1 2020 from 22.2 percent a quarter ago.

Philippine peso appreciates against the US dollar. The peso averaged ₱50.83/US$1 in Q1 2020, appreciating by 0.34 percent from the Q4 2019 average of ₱51.00/US$1, with the appreciation due mainly to the continued decline in oil prices in the world market and positive market sentiment amid the credit rating outlook upgrade by Fitch Ratings for the Philippines in February 2020. Policy measures implemented by authorities to counter First Quarter 2020 Report on Economic and Financial Developments | 3 geopolitical tensions, and the increased intensity Introduction and frequency of natural hazards.

Inflation is projected to be relatively benign with Philippine economic growth declined in the first inflation expectations remaining firmly anchored quarter of 2020 due mainly to the adverse impact within the target range of 3.0 percent ± 1 ppt over of the COVID-19 pandemic. Despite the challenging the policy horizon. Downside risks to inflation leans environment, the country remained resilient, heavily on the potential impact of a more disruptive supported by sound macroeconomic fundamentals. pandemic along with continued volatility in crude oil prices. Adjustments in utility rates, higher global In Q1 2020, real GDP contracted by 0.2 percent due rice prices, and the impact of the African swine to the weak performance of private consumption fever (ASF) on meat prices are the main upside risks and public construction. On the supply side, to inflation. Overall, the balance of risks to the domestic economic growth was strained by the inflation outlook is tilted toward the downside in significant slowdown in the services sector. For the 2020. first time in more than two decades, GDP outturn fell into the negative territory. To sustain the country’s economic growth narrative amid stronger headwinds, the BSP will continue to Meanwhile, inflation rose in the first quarter of the coordinate with the National Government in finding year, due to higher price increases of selected food effective means of safeguarding the stability of the and non-food items. The resulting annual average economy while staying firmly committed in the inflation settled within the government’s target effective discharge of its mandates. The BSP also range of 3.0 percent ± 1.0 ppt for the year. Based remains prepared to use its full range of monetary on the assessments of a benign inflation instruments and to deploy regulatory relief environment and the needed support for domestic measures as needed, ensuring timely and growth, the BSP saw enough policy space for the appropriate policy responses particularly during reduction of policy rates in Q1 2020. these challenging times.

In terms of external payments position, the country’s external buffers remained adequate with ample international reserves despite the decline in remittances from overseas Filipinos (OFs), net trade receipts, and foreign direct and portfolio investments.

Similarly, the banking system remained sound and stable with well-capitalized banks, manageable loan exposure and coverage to absorb the unexpected losses related to the ongoing global outbreak.

Looking ahead, economic activity is expected to follow a U-shaped recovery path with growth contracting in the near term but gradually recovering if concerns over COVID-19 are contained.

The main downside risk to growth stems from a more profound and prolonged impact of the pandemic than currently anticipated. There are also risks and challenges coming from a range of issues, such as the trade barriers between US and China,

4 | First Quarter 2020 Report on Economic and Financial Developments this was fully offset by the decline in the industry Real Sector sector by 3.0 percent driven mainly by the contraction in manufacturing, construction and mining and quarrying subsectors. The agriculture, Aggregate Supply and Demand fishery and forestry (AFF) sector also contracted by 0.4 percent primarily on account of lower The Philippine economy declined by 0.2 percent in production of palay as well as fishing and the first quarter of 2020, a significant drop from the aquaculture. On the demand side, gross capital 5.7-percent and 6.7-percent growth achieved in formation dropped by 18.3 percent following the Q1 2019 and Q4 2019, respectively. This was the decline in durable equipment and construction. first time that the GDP outturn fell into negative Household expenditures also posted a weaker territory since the fourth quarter of 1998 when the growth of 0.2 percent due to limitations in the country experienced the El Niño phenomenon and mobility of non-essential goods and services under Asian financial crisis (AFC).1 the ECQ. Meanwhile, government expenditures managed to expand by 7.1 percent. Domestic economy contracts GDP by industry for the first time in 22 years On the production side, the services sector grew by During the first three months of 2020, the country’s 1.4 percent, a slowdown from the year-ago and objective to sustain its growth momentum was quarter-ago rates of 7.1 percent and 8.1 percent, confronted by events such as: (a) the Taal volcano respectively. This was the weakest expansion of eruption in January; (b) coronavirus disease the sector in more than two decades. Accounting (COVID-19)2 outbreak that led to imposition of for 60.3 percent of GDP, the sector contributed travel bans to and from countries with high 0.8 ppts to the first quarter growth rate. Financial infection cases starting in February; and (c) and insurance activities and human health and implementation of enhanced community social work subsectors posted strong growth during quarantine (ECQ) in Luzon and other parts of the the quarter with 9.6 percent and 9.2 percent, country in March to contain the spread of respectively, as these services were categorized as COVID-19. essential activities and continued their operations amid the ECQ (Table 1). Chart 1. Gross Domestic Product and Gross National Income Chart 2. Gross Domestic Product, by Industry annual growth rate in percent; at constant 2018 prices annual growth rate in percent; at constant 2018 prices

While the services sector managed to post a modest growth of 1.4 percent during the period,

1 Statement by the NEDA Acting Secretary Karl Kendrick Chua 2 Coronavirus disease (COVID-19) is an infectious disease caused during the First Quarter 2020 National Accounts Press by a newly discovered coronavirus. Conference. The GDP figures are based on the revised and rebased Philippine System of National Accounts to 2018 released on 20 April 2020 by the PSA.

First Quarter 2020 Report on Economic and Financial Developments | 5 On the other hand, accommodation and food management of 5.3 percent, faster than the service activities as well as transportation and 3.4 percent growth during the same period a year storage contracted by 15.3 percent and ago but slower than the 7.3 percent growth in the 10.7 percent, respectively. The accommodation previous quarter. Under the “new normal” subsector substantially declined by 22.6 percent scenario, the industry sector may continue to face due largely to the temporary shutdown of hotels in challenges in producing essential goods and Tagaytay City after the eruption of Taal volcano and intermediate inputs due to supply chain disruptions limited operations of hotels and similar as some raw materials are imported from countries establishments during the ECQ. Meanwhile, food heavily affected by COVID-19. and beverage services such as restaurants also contracted by 11.1 percent due to the imposition of The AFF sector declined by 0.4 percent in Q1 2020, physical distancing and “stay-at-home” measures. down from the 0.5 percent growth in Q1 2019 and The ECQ also had a major impact on the 0.8 percent expansion in Q4 2019. The downturn transportation subsector as all land, sea, and air may be attributed to the planting season for rice transport were suspended during the period. and closed fishing season in major fishing grounds during the review period. This has been aggravated As the main growth driver of the Philippine by the eruption of Taal volcano in January and the economy, the services sector is heavily affected by impact of ECQ towards the end of the first quarter.3 the COVID-19 pandemic. Hence, to adapt to the Comprising 81.3 percent of the total AFF sector, the “new normal” way of living, the sector has agriculture subsector contracted by 0.3 percent implemented new protocols and programs such as driven mainly by the negative growth in palay expanding the cashless payment system, use of production (-1.9 percent). This was the eighth online platforms, mandatory wearing of face mask, consecutive quarter of contraction in palay which and limited operating hours, among others. started in Q2 2017. Only livestock and poultry and egg production were on the uptrend in Q1 2020, The industry sector contracted by 3.0 percent, a with growth rates of 1.5 percent and 3.5 percent, reversal of the 4.9 percent expansion in Q1 2019 respectively. Nonetheless, the Department of and 6.0 percent growth in Q4 2019. The decline in Agriculture (DA) has been taking the necessary the industry sector primarily dampened the Q1 steps to boost domestic food production and attain 2020 economic performance as it slashed 0.9 ppts higher levels of food sufficiency by providing free off the overall output growth. Of this sector’s major quality seeds and fertilizers as well as the components, the manufacturing subsector declined appropriate technology for farmers to plant in more by 3.6 percent in Q1 2020 from the 5.2 percent areas. Furthermore, the DA has started the growth recorded in Q1 2019 and 4.3 percent in nationwide implementation of the “Plant, Plant, Q4 2019, dragged mainly by the huge drop in the Plant Program” or “Ahon Lahat, Pagkaing Sapat manufacture of coke and refined petroleum (ALPAS) Laban sa COVID-19” program to benefit products due to the contraction in domestic farmers, fishers, and consumers.4 demand given imposition of the ECQ in Luzon and other parts of the country. Meanwhile, after GDP by expenditure posting double-digit growth for two consecutive quarters, construction hit the negative growth On the expenditure side, the Q1 2020 GDP output territory, declining as it declined by 1.8 percent in was pulled down by the double-digit contraction in Q1 2020 as projects were delayed and/or capital formation triggered mainly by the delay in suspended due to the restriction of mobility of non- the implementation of major infrastructure projects essential goods and services. The weak in compliance with the ECQ guidelines. Along with performance of the manufacturing and the “stay-at-home” policy by the government to construction subsectors was partially offset by the contain the spread of COVID-19, household expansion in electricity, steam, water and waste consumption significantly slowed down which also

3 Rappler. “Virus sinks Philippine agriculture by 1.2% in Q1 2020”, 4 DA. “Agri-fishery can rebound – DA chief”, dated 6 May 2020. dated 6 May 2020.

6 | First Quarter 2020 Report on Economic and Financial Developments contributed to the decline in domestic demand than the 6.4-percent expansion during the same (Table 1a). period a year ago. With the realignment of the national budget under the “Bayanihan to Heal as Household spending, which accounted for about One Act”, the government will continue to fund three fourths of the economy, grew by a mere health and social protection-related activities aimed 0.2 percent, a significant slowdown from the robust at containing the COVID-19 outbreak, as well as growth of 6.2 percent a year ago and 5.7 percent a other programs and projects that will help affected quarter ago. This was the slowest growth in sectors and industries recover from the economic household consumption in more than three slowdown.5 decades as consumers reduced their spending on non-essential commodities and focus only in basic Meanwhile, gross capital formation declined needs to cope with the on-going health crisis. Food sharply by 18.3 percent in Q1 2020, a reversal from and non-alcoholic beverages, which accounted for the growth recorded in Q1 2019 and Q4 2019 of 33.7 percent share of total household expenditure, 9.8 percent and 2.5 percent, respectively. The grew at a slower pace of 4.7 percent compared with major contributors to the significant drop in the 5.9-percent expansion recorded in Q1 2019 and investments were changes in inventories 4.8- percent growth Q4 2019. Meanwhile, health (-3.6 ppts), durable equipment (-0.6 ppts), and spending posted a strong growth of 11.5 percent, construction (-0.5 ppts) due largely to the faster than the 5.0-percent and 6.9- percent restrictions under the ECQ. Amid the setback in the growth recorded in Q1 2019 and Q4 2019, implementation of priority infrastructure projects, respectively, amid the COVID-19 outbreak. there are plans to resume some of the projects However, transportation spending contracted by despite the COVID-19 crisis provided that safety 8.9 percent following the suspension of public guidelines imposed by the NG will be met . transportation and shift to work-from-home arrangement for employees during the quarantine International trade continued to face a challenging period. environment due to limited economic activity to suppress the spread of the coronavirus, in Chart 3. Gross Domestic Product, by Expenditure conjunction with ongoing geopolitical conflicts and annual growth rate in percent; at constant 2018 prices trade tensions. Exports fell by 3.0 percent in Q1 2020, a drop from its 4.2 percent growth in the comparable period in 2019 and 0.3 percent in the previous quarter. A larger contraction of 9.0 percent was recorded for imports from an expansion of 8.9 percent in Q1 2019, resulting in a narrowing of the country’s trade deficit during the review quarter. Net exports contributed 2.9 ppts to the Q1 2020 GDP outturn.

Overall, amid a challenging domestic and global economic backdrop, the Philippine economy is

poised to exhibit a U-shaped recovery. Business Government expenditures rose by 7.1 percent in activities and growth will return once the ECQ is Q1 2020, reflecting the NG’s commitment to lifted and the necessary measures intended to stem implement its programs in response to calamities the spread of COVID-19 are implemented. GDP (i.e., Taal volcano eruption) and the COVID-19 could also recover more strongly once the fiscal and outbreak. While this was a moderation from the monetary stimulus gain traction and as workers and 17.0-percent growth in Q4 2019 when the firms resume operations. Moving forward, the NG government accelerated its spending as part of its has laid out its 4-pillar socioeconomic strategy to catch-up plan, this quarter’s growth was higher

5 The Republic Act No. 11469, or the “Bayanihan to Heal as One Act”, was enacted on 24 March 2020.

First Quarter 2020 Report on Economic and Financial Developments | 7 address the COVID-19 pandemic under the decreased by 4.5 percent (-457,400 workers) and Philippine Program for Recovery with Equity and 1.6 percent (-134,100 workers), respectively. The Solidarity (PH-PROGRESO). Under Pillar 3, fiscal and large employment losses in the construction sub- monetary actions are in place to finance emergency sector (-212,700 workers) pulled down the initiatives and keep the economy afloat, while Pillar employment gains posted in other sub-sectors such 4 maps out an economic recovery plan to create as the mining and quarrying (16,600 workers); jobs and sustain growth. manufacturing (31,500 workers); electricity, gas, steam and air conditioning supply (24,700 workers); Labor and Employment and water supply, sewerage, waste management and remediation activities (5,800 workers). The country’s employment rate went down by 0.8 ppt to 94.7 percent as the number of employed The overall slowdown in employment in January persons decreased to 42.7 million in the January 2020 could be attributed mainly to the Taal volcano 2020 preliminary release of the Labor Force Survey eruption which hampered business activities, the (LFS)6 from 43.1 million in the October 2019 negative effects of ASF, and the seasonal slack in 7 revised LFS (Table 2). demand after the holiday season.

Of the total employed persons, the services sector Labor market conditions accounted for the largest share at 58.6 percent, weaken followed by the agriculture sector at 22.7 percent, and the industry sector at 18.8 percent. Major economic sectors registered employment losses in January 2020 except for the services sector Among the wage and salary workers, employment which registered an increase of 0.4 percent in the increments were registered in those who worked number of employed persons. Employment gains in for private households (190,700 workers) and the services sector were supported by the following unpaid family workers (127,800 workers).8 sub-sectors: wholesale and retail trade, repair of Meanwhile, a large reduction in employment was motor vehicles and motorcycles (64,100 workers); recorded for self-employed workers without any arts, entertainment and recreation (54,000 paid employee (-466,500 workers), employers in workers); accommodation and food service own family-operated farm or business (-261,000 activities (15,200 workers), administrative and workers), workers in government/government support service activities (6,800 workers); activities corporation (-60,700 workers), workers with pay in of extraterritorial organizations and bodies (2,100 own family-operated farm or business (-14,900 workers), as well as other service activities (272,500 workers), and those in private establishments workers). Meanwhile, employment losses were (-6,000 workers). Of the total employed, wage and registered in the following sub-sectors: salary workers made up 65.2 percent, self- transportation and storage (-92,800 workers); employed comprised 26.2 percent, unpaid family education (-63,200 workers); information and workers accounted for 6.2 percent, and workers in communication (-51,600 workers); professional, own family-operated farm or business accounted scientific and technical activities (-30,700 workers); for the remaining 2.4 percent. human health and social work activities (-29,200 workers); and real estate activities (-21,800 In January 2020, the number of full-time workers workers). grew by 9.5 percent while the number of part-time workers fell by 21.5 percent as compared to the On the other hand, the number of employed revised October 2019 LFS data.9 Full-time workers persons in both the agriculture and industry sectors

6 Released on 5 March 2020. 9 Workers are also classified as either full-time or part-time 7 Business Expectation Survey for the First Quarter 2020 workers. Those who worked for 40 hours or more during the 8 Employed persons are categorized into: (1) wage and salary reference week are considered full-time workers, while those workers; (2) self-employed workers without any paid employee; who worked for less than 40 hours are considered part-time (3) employers in own family-operated farm or business; and (4) workers. unpaid family workers.

8 | First Quarter 2020 Report on Economic and Financial Developments represent two-thirds of the total employed, while increased number of youths who joined the labor the remaining one-third are part-time workers. force albeit unemployed. Meanwhile, workers with jobs but not at work decreased by 94.3 percent.10

The unemployment rate in January 2020 was Fiscal Sector estimated at 5.3 percent, 0.8 ppt higher than the 4.5 percent in October 2019 LFS. Most of the unemployed persons were males (63.3 percent), National Government Cash aged between 15 to 24 years old (42.4 percent), Operations and have completed junior high school11 (28.7 percent). The cash operations of the NG yielded a deficit of P74.0 billion in Q1 2020, 18.0 percent lower than Chart 4. Unemployment and Underemployment the year-ago deficit level of P90.2 billion. The NG’s Rates fiscal deficit for Q1 2020 was equivalent to in percent 1.7 percent of GDP, down from the 2.0 percent deficit ratio registered in Q1 2019 (Table 3).

NG cash operations post narrower deficit

Total NG revenues for Q1 2020 reached P775.2 billion, 12.7 percent higher than the Q1 2019 level of P687.7 billion. Total revenues as a share of GDP was recorded at 17.3 percent in Q1 2020, higher than the Q1 2019 share of The underemployment12 rate also rose by 1.8 ppts 15.5 percent. The y-o-y increase in revenues was to 14.8 percent in the January 2020 LFS from due mainly to improved collections by the Bureau 13.0 percent in October 2019 LFS (revised). By of Customs (BOC) and Bureau of Internal Revenue hours worked in a week, the visibly underemployed (BIR) by 2.4 percent and 0.12 percent, respectively. persons (part-time workers) comprised Tax collections, which constituted 80.1 percent of 58.8 percent of the total underemployed, while the total revenues, amounted to P620.8 billion, invisibly underemployed persons (full-time workers) 0.8 percent higher than the comparable figure a comprised 39.7 percent. By sector, underemployed year ago. Non-tax revenues, which consisted workers in the services sector comprised mainly of collections made by the Bureau of the 46.0 percent of the total underemployed, while Treasury (BTr), likewise increased by 115.3 percent those in the agriculture and industry sectors y-o-y to reach P154.4 billion. comprised 35.9 percent and 18.1 percent, respectively. Meanwhile, total NG expenditures in Q1 2020 reached P849.2 billion, 9.2 percent higher than the The labor force participation rate (LFPR)13 rose to P778.0 billion expenditures in Q1 2019. Relative to 61.7 percent in January 2020, 0.2 ppt higher than the size of the economy, total NG disbursements the 61.5 percent in October 2019 LFPR, due to the was recorded at 19.0 percent of GDP in Q1 2020, an

10 “With a job but not at work” are those who have a job or longer working hours. Those who work for less than 40 hours in a business but are not at work because of temporary illness/injury, week are called visibly under-employed persons, while those who on vacation, or other reasons. worked for more than 40 hours in a week are called invisibly 11 Per PSA, graduates of junior high school include those high underemployed persons. school graduates in the old curriculum. 13 LFPR refers to the percentage of the total number of persons in 12 Underemployment refers to those employed persons who the labor force to the total population 15 years old and over. The express the desire to have additional hours of work in their labor force consists of employed and unemployed persons. present job, or to have additional job, or to have a new job with

First Quarter 2020 Report on Economic and Financial Developments | 9 increase from the previous year’s ratio of Headline inflation is higher in 17.6 percent. The y-o-y increase in expenditures can be attributed mainly to the increase in personal Q1 2020 but still within the NG’s services, subsidies to government-owned and target range controlled corporations (GOCCs) and allotment to local government units (LGUs). Core inflation. Meanwhile, core inflation—which excludes selected volatile food and energy items to Chart 5. Cash Operations of the National measure underlying price pressures—also went up Government to 3.2 percent y-o-y in Q1 2020 from 2.7 percent in in billion pesos the previous quarter. Similarly, preliminary estimates showed that two of the BSP-computed alternative core inflation measures (trimmed mean and net of volatile items inflation) increased in Q1 2020 relative to the previous quarter. On the other hand, the weighted median inflation was steady at 2.6 percent in Q1 2020 relative to the previous quarter’s level.

Table A. Alternative Core Inflation Measures (2012=100) in percent Netting out the interest payments from total Official Official Net of Trimmed Weighted Quarter Headline Core Volatile expenditures, the resulting primary surplus Mean1 Median2 Inflation Inflation Items3 amounted to P45.9 billion, representing 1.0 percent 2019 of GDP. In terms of financing the deficit, the NG Q1 3.8 3.9 3.8 3.4 3.7 incurred net borrowings in Q1 2020 of Q2 3.0 3.4 2.9 3.0 3.0 Q3 1.7 2.9 1.9 2.8 3.3 P500.6 billion mostly coming from domestic Q4 1.6 2.7 1.7 2.6 3.3 sources. 2020 Q1 2.7 3.2 2.2 2.6 3.8 1 The trimmed mean represents the average inflation rate of the (weighted) middle Fiscal discipline has generated sufficient fiscal space 70 percent in a lowest‐to‐highest ranking of year‐on‐year inflation rates for all CPI which can be allocated mainly into funding social components. 2 The weighted median represents the middle inflation rate (corresponding to a protection programs as well as economic stimulus cumulative CPI weight of 50 percent) in a lowest‐to‐highest ranking of measures against the widespread and profound year‐on‐year inflation rates. 3 The net of volatile items method excludes the following items: bread and impact of the COVID-19 pandemic. cereals, vegetables, sugar, jam, honey, chocolate, and confectionery, electricity, gas, fuel and lubricants for personal transport equipment, and passenger transport by road, which represents 29.5 percent of all items. Source: PSA and BSP estimates

Monetary Sector Inflation in the Philippines accelerated as both food and non-food inflation increased in Q1 2020. Prices Inflation for agricultural commodities such as, fruits, and vegetables were noticeably higher while Headline inflation. Headline inflation settled at 2.7 fish prices were also affected by the fishing ban percent y-o-y in Q1 2020 from 1.6 percent in the imposed in selected areas. Meanwhile, inflation for previous quarter and was within the Government’s rice, corn, as well as sugar, jam, honey, chocolate, inflation target range of 3.0 percent ± 1.0 ppt for and confectionery continued to decline in Q1 2020 the year (Table 4). albeit to a lesser extent compared to the previous quarter’s level. The implementation of the higher excise tax on tobacco products also contributed to the higher inflation during the quarter.

10 | First Quarter 2020 Report on Economic and Financial Developments Chart 6. Food and Non-Food Inflation in the tobacco also remained elevated, as it continued to Philippines (2012=100) post double-digit inflation rate in Q1 2020. in percent In AONCR, y-o-y headline inflation also accelerated in Q1 2020 driven by the turnaround in food inflation, (from negative inflation recorded in Q4 2019) and higher inflation for alcoholic beverages and tobacco (Table 4b). Under non-food items, inflation for most of the major sub- components either posted an increase or were unchanged in Q1 2020. In particular, y-o-y inflation for housing, water, electricity, gas, and other fuels rose while transport inflation also increased, after posting negative inflation rate in the previous On a y-o-y basis, transport inflation also picked up quarter, both of which contributed to the increase in Q1 2020 after declining for two consecutive in non-food inflation. quarters driven by higher y-o-y inflation for operation of personal transport equipment and the 14 approved minimum fare hikes for public utility Domestic Liquidity jeepneys (PUJs) in certain areas during the quarter. However, on a quarter-on-quarter (q-o-q) basis, Money supply or M3 grew by 13.3 percent y-o-y as transport inflation fell to -0.8 percent in Q1 2020 of end-March 2020 to about P13.1 trillion, faster from 0.4 percent in Q4 2019. At the same time, than the 11.5-percent expansion as of lower power generation charges also led to end-December 2019 (Table 5). reduction in electricity rates, tempering the faster increase for non-food inflation. Domestic liquidity remains In terms of geographical location, headline inflation ample in the National Capital Region (NCR) also increased to 2.1 percent y-o-y in Q1 2020 from 1.8 percent in The expansion in M3 was driven by the 9.1-percent the previous quarter (Table 4). y-o-y growth in net foreign assets and the 11.9-percent growth in domestic claims in March Chart 7. Inflation Rate by Region (2012=100) 2020. Credit extended to the private sector rose by in percent 11.2 percent, supported by the sustained increase in bank lending. Meanwhile, net claims on the central government grew by 21.6 percent from a 23.7-percent expansion as of end-December 2019.

Table B. Domestic Liquidity (M3)

Faster price increase for food and non-alcoholic beverages as well as the slight uptick in non-food inflation contributed to the higher NCR inflation in Q1 2020. Inflation for alcoholic beverages and

14 The indicators used for money supply are: M1 (or narrow (quasi-money); M3, consisting of M2 plus deposit substitutes; and money), comprised of currency in circulation and demand M4, consisting of M3 plus foreign currency deposits. deposits; M2, composed of M1 plus savings and time deposits

First Quarter 2020 Report on Economic and Financial Developments | 11 Net foreign assets (NFA) in peso terms grew by The BSP also observed that prospects for global 9.1 percent y-o-y in March 2020. The BSP’s NFA economic growth have weakened further amid position continued to expand during the quarter, geopolitical tensions. At the same time, the BSP reflecting the sustained growth of gross noted that the spread of COVID-19 could have an international reserves. The NFA of banks also adverse impact on economic activity and market expanded as growth in banks’ foreign assets rose sentiment in the coming months. on account of higher interbank loans and deposits with other banks. Meanwhile, the growth of M4, a The BSP concluded, given these considerations, that broader concept of domestic liquidity comprising the manageable inflation environment allowed broad money liabilities and foreign currency room for a preemptive reduction in the policy rate deposits of residents, rose to 12.1 percent y-o-y in to support market confidence. While demand February 2020 from 9.8 percent in December 2019. indicators during the review period still point to a firm outlook for the domestic economy, the BSP Monetary Policy Developments believes that a policy rate cut would provide additional policy support to ward off the potential At its monetary policy meeting on 6 February, the spillovers associated with increased external BSP reduced the key policy rate by 25 bps to headwinds. 3.75 percent for the overnight reverse repurchase (RRP) facility. The interest rates on the overnight In its 19-March policy meeting, the BSP reduced the lending and deposit facilities were, likewise, key policy rate anew by 50 bps to 3.25 percent for reduced accordingly. the overnight RRP facility. The interest rates on the overnight lending and deposit facilities were also reduced accordingly. The BSP reduces the policy rate by 75 bps in Q1 2020 The BSP also authorized the time-bound, temporary relaxation of its regulations on compliance In deciding on the stance of monetary policy in reporting by banks, calculation of penalties on February, the BSP noted that baseline forecasts required reserves, and single borrower limits. The indicate a broadly steady path of inflation for 2020 BSP also approved a temporary reduction in the and 2021 during the review period, with average term spread on rediscounting loans relative to the inflation remaining within the target range of overnight lending rate to zero. 3.0 percent ± 1 ppt. Inflation expectations also continue to be firmly anchored within the target In addition, the BSP announced on 24 March the over the policy horizon. reduction in the reserve requirement (RR) ratios by 200 bps for BSP-supervised financial institutions. Meanwhile, the risks to the inflation outlook The RR cut will ensure sufficient domestic liquidity continue to tilt slightly toward the upside in 2020 in support of economic activity amidst the global and toward the downside in 2021. Upside risks to pandemic due to the COVID-19. inflation over the near term emanate mainly from potential upward pressures on food prices owing in In deciding to reduce the policy rate anew, the BSP part to the ASF outbreak and tighter international noted that baseline forecasts indicate a lower path supply of rice. Moreover, there continues to be the of inflation for 2020 and 2021, with inflation burden on the economy posed by the ongoing Taal expectations remaining firmly anchored within the volcano eruption and the aftermath of typhoon target range of 3.0 percent ± 1 ppt over the policy Tisoy. However, uncertainty over trade and horizon. Average inflation is seen to settle at economic policies in major economies continue to 2.2 percent in 2020 and 2.4 percent in 2021. The weigh down on global demand, thus mitigating latest forecasts are substantially below the upward pressures on commodity prices. February monetary policy meeting projections of 3.0 percent for 2020 and 2.9 percent for 2021 due to lower-than-projected inflation outturns in recent months, a sharp decline in global crude oil prices,

12 | First Quarter 2020 Report on Economic and Financial Developments and the adverse effects of the COVID-19 outbreak Monetary Operations on global and domestic economic activity. Equally important, the balance of risks to the As of end-Q1 2020, total outstanding amount inflation outlook leans toward the downside for absorbed in the BSP liquidity facilities stood at both 2020 and 2021. The uncertainty over the P697.3 billion. Bulk of the BSP’s liquidity-absorbing potentially protracted pandemic poses significant monetary operations had been through the RRP downside risks to aggregate demand. The BSP facility, comprising about 44.8 percent of total noted that while the enforcement of quarantine outstanding amount of liquidity absorbed through measures could help in slowing the spread of the the BSP liquidity facilities. Meanwhile, placements virus, the resulting disruptions to industries and in the overnight deposit facility (ODF) and the term private spending are likely to reduce economic deposit facility (TDF) made up 43.7 percent and growth in the near term. Moreover, COVID-19 has 11.5 percent, respectively. likewise dampened prospects for the global economy, which could negatively impact tourism Consistent with the BSP’s assessment of prevailing and trade, OF remittances, and foreign liquidity conditions and taking into account the investments. increase in system liquidity that needs to be absorbed following the holiday season, the average Given these considerations, the BSP decided that weekly total offer volumes was higher at about there was a need for a follow-on monetary policy P151.8 billion for the TDF auctions on 2 January – response to address the adverse spillovers 11 March relative to P126.9 billion average weekly associated with the ongoing pandemic. With a volume offered in the previous quarter. The manageable inflation environment and stable average bid-to-cover ratios for the 7-day, 14-day, inflation expectations, the BSP saw enough policy and 28-day tenors were recorded at 1.4, 1.5, and space for an assertive reduction in the policy rate at 1.6 compared to 1.1, 1.1, and 1.1, respectively, in this juncture to cushion the country’s growth the previous quarter. momentum and uplift market confidence amid stronger headwinds. The monetary policy easing Following the NG’s implementation ECQ on was also aimed at mitigating the risk of financial 17 March 2020 to contain the spread of COVID-19, sector volatility in light of unfolding global the BSP cancelled the 18-March TDF auction. There developments by ensuring adequate domestic were no TDF offerings for the scheduled TDF liquidity and credit in the financial system as well as auction on 25 March as well. The suspension of TDF lowering borrowing costs for affected firms and auctions were intended to ensure adequate short- households. term peso liquidity in the financial system and support the smooth flow of funding to businesses Chart 8. BSP Policy Rates and households. Nevertheless, the RRP and in percent standing overnight deposit and lending facilities remained open to help counterparties manage their liquidity requirements.

For Q1 2020, the average bid-to-cover ratio for the daily RRP offerings was higher at around 1.8 compared to 1.4 bid-to-cover ratio in Q4 2019. For ODF, average daily placements for the period 2 January – 13 March (period prior to ECQ) was about P226.0 billion. During the ECQ period

(16-31 March), average daily placements stood at about P227.0 billion. Meanwhile, availments in the BSP overnight lending facility (OLF) rose to an average of ₱28.5 billion (for the period 16-31 March

First Quarter 2020 Report on Economic and Financial Developments | 13 2020) from an average of ₱11.1 billion during the Chart 10. Yield Curve of Government Securities in period 2 January - 13 March 2020. the Secondary Market in percent

Domestic Interest Rates

Higher primary market rates in Q1 2020 reflected investors’ risk aversion amid concerns over the impact of the Taal volcano eruption and the COVID-19 outbreak.

Primary market interest rates rise

The 91-day, 182-day and 364-day Treasury bill The interbank call loan (IBCL) rate was recorded at (T-bill) rates in the primary market rose to 3.66 percent, lower by 39 bps when compared to its 15 3.16 percent, 3.45 percent and 3.79 percent from Q4 2020 level of 4.05 percent. the Q4 2019 rates of 3.12 percent, 3.23 percent and 3.53 percent, respectively (Table 6). Interest rates on the 7-day, 14-day and 28-day TDFs declined in Q1 2020 by 27.99 bps, 31.81 bps and Chart 9. Treasury Bill Rates 30.73 bps to settle at 3.97 percent, 3.98 percent in percent and 4.02 percent, respectively.

Rates in the BSP’s term deposit facility decline

This reflected BSP policy rate cuts within the quarter as well as ample liquidity in the financial system. It should be noted however, that the BSP suspended TDF auctions for the period 18 March to 8 April 2020 to help ensure ample liquidity as well

as the proper functioning of the financial system Likewise, interest rates in the secondary market following the implementation of the enhanced generally increased in end-March 2020 relative to community quarantine on 17 March 2020. end-December 2019 levels reflecting market uncertainty over the potential impact of the The differential (gross and net of tax) between the COVID-19 pandemic along with measures domestic and US interest rates generally widened in implemented to stem the virus. Q1 2020 relative to Q4 2019.

Yields in the secondary market Interest rate differentials show generally rise mixed trends

The uptick in the yields of most GS maturities The RP average 91-day T-bill rate increased slightly ranged from 5.80 bps (6-month) to 73.10 bps by 1.88 bps to 3.14 percent in Q1 2020. Meanwhile, (2-year). Meanwhile, the yields of 20-year and the average US 90-day LIBOR and the US 90-day 25-year GS declined by 9.80 bps and 15.00 bps, T-bill rate fell by 39.62 bps to 1.53 percent and respectively.

15 Q1 2020 data for lending, savings deposit, and time deposit rates are not available.

14 | First Quarter 2020 Report on Economic and Financial Developments 50.36 bps to 1.08 percent, respectively. The higher of 10-year US Treasury note and the 105-bp domestic interest rate reflected the growing increase in the yield of the 10-year ROP note. uncertainty over geopolitical tensions and the COVID-19 outbreak, while the foreign interest rate Chart 13. Risk-Adjusted Differentials followed the reductions in the US Federal funds in basis points target rate, which settled at 0.0-0.25 percent as of 16 March 2020.

Chart 11. Interest Rate Differentials quarterly averages; in basis points

Sources: Bloomberg and BSP staff calculations

Financial Sector

Sources: BTr, Bloomberg, and BSP staff calculations

The positive spread between the BSP's policy Banking System interest rate (overnight borrowing or RRP rate) and The Philippine banking system showed resilience the US Federal Funds target rate increased to and stability even as the country’s economic 300 bps as of end-March 2020, given the 75-bp activities and financial transactions were severely cumulative cut in the BSP policy rate against the limited by the disruption caused by the pandemic larger 150-bp cumulative decline in the upper limit and quarantine measures in March 2020. of the US Federal Funds target rate.

Chart 12. BSP RRP Rate and US Federal Funds Target Rate Philippine banking system in percent exhibits sustained growth in assets and deposits

During the first quarter of 2020, banks’ balance sheets exhibited sustained annual growth in assets and deposits, though mildly subdued with respect to end-December levels. At the same time, asset quality remained steady while capital adequacy ratios stayed above international standards. Banks maintained dominance in the financial sector, with U/KBs accounting for about 92 percent of total Meanwhile, compared to its December 2019 level, banks’ resources. In terms of the number of head the risk-adjusted spread between the two policy offices and branches/agencies, non-bank financial rates significantly narrowed to 18 bps in March intermediaries have the widest physical network, 2020, with a 223-bp increase in risk premium consisting mainly of pawnshops. (measured as the difference between the 10-year ROP and the 10-year US note). The risk premium increased following the 118-bp decline in the yield

First Quarter 2020 Report on Economic and Financial Developments | 15 Performance of the Banking System Chart 15. Total Resources of the Banking System levels in trillion pesos; share in percent Market Size

The number of banking institutions (head offices) as of end-March 2020 decreased to 542 offices from 569 a year ago and 547 a quarter ago (Table 7).

Banks’ operating network continues to expand

The banks’ head offices are comprised of 46 U/KBs, 49 thrift banks (TBs), and 447 rural banks (RBs). This indicated continued consolidation of banks. Savings Mobilization

Chart 14. Number of Banking Institutions As of end-March 2020, banks’ total deposits reached P11.0 trillion, higher than the year-ago level by 11.9 percent and the quarter-ago level by 0.5 percent.17

Bank deposits sustain growth

For the same period, demand and savings deposits increased, q-o-q, by 9.1 percent and 0.4 percent, respectively, while time deposits decreased by 8.7 percent. On the other hand, foreign-currency deposits (FCDs) owned by residents grew, q-o-q, by

5.0 percent to ₱2.1 trillion.18 During the same period, the operating network

(head offices and branches/agencies) of the Chart 16. Deposit Liabilities of Banks banking system expanded to 12,892 offices from in trillion pesos 12,427 offices a year ago and 12,870 offices a quarter ago. The expansion was due mainly to the increase in the branches/agencies of UKBs and RBs (Table 7).

The total resources of the banking system reached ₱18.8 trillion as of end-March 2020. This was 8.0 percent and 0.4 percent higher relative to the year- and quarter-ago levels (Table 8). As a percent of GDP, total resources stood at 96.0 percent.16

16 GDP as of end-March 2020. measure called M4. Meanwhile, M3 consists of savings deposits, 17 This refers to the total peso-denominated deposits of the time deposits, demand deposits, currency in circulation, and banking system. deposit substitutes. 18 FCD-Residents, along with M3, forms part of a money supply

16 | First Quarter 2020 Report on Economic and Financial Developments Bank Lending Operations Credit Card Receivables

Outstanding loans of universal and commercial The credit card receivables (CCRs) of the banks, net of RRP placements with the BSP, grew, banking system as of end-December 2019 increased y-o-y, by 12.9 percent in March 2020.19 by 28.1 percent to ₱369.9 billion, y-o-y, and by 9.9 percent, q-o-q. Bank lending continues to rise

Loans for production activities expanded at a rate Credit card receivables remain of 12.0 percent during the same period. The on the uptrend increase in production loans was driven primarily by lending to the following sectors: real estate The ratio of CCRs to the total loan portfolio (TLP) activities (21.8 percent); financial and insurance increased to 3.5 percent as of end-December 2019 activities (17.2 percent); wholesale and retail trade, relative to the previous quarter’s and year’s ratios repair of motor vehicles and motorcycles of 3.3 percent and 3.0 percent, respectively. In (6.8 percent); electricity, gas, steam and air terms of loan quality, the ratio of non-performing conditioning supply (7.7 percent); and information CCRs to total CCRs improved slightly to 5.3 percent and communication (20.8 percent). from 5.6 percent a quarter ago and 5.4 percent a Bank lending to other sectors also increased during year ago. the month, except for manufacturing (-0.4 percent) and mining and quarrying (-5.3 percent). Motor Vehicle Loans20

Chart 17. Loans Outstanding of Commercial Banks As of end-December 2019, the banking system’s (Gross of RRPs) in trillion pesos motor vehicle loans (MVLs) increased to ₱583.7 billion, registering a y-o-y growth of 11.9 percent and a q-o-q growth of 2.5 percent.

Motor vehicle loans sustain growth

Demand for passenger cars and commercial vehicles continued its growth despite the implementation of the higher excise tax following the passage of the Tax Reform for Acceleration and Meanwhile, growth of loans for household Inclusion (TRAIN) Law in 2018. Further, introduction consumption eased to 22.9 percent in March (from of new and refreshed models, appropriate product 37.7 percent in February) due to the slower mix, as well as flexible financing schemes from expansion in credit card and motor vehicle loans banks and other financing firms helped sustain the during the month. rise in vehicle purchases.

The share of total MVLs to TLP increased slightly to 5.5 percent relative to the year-ago ratio of 5.4 percent but declined marginally compared to

19 It must be noted that community quarantine and enhanced the market; easing of lending to micro, small, and medium community quarantine in many parts of the country were enterprises (MSMEs) by allowing new MSME loans to be counted declared last March 15 and 16, respectively. In this regard, the BSP as part of banks’ compliance with reserve requirements; and crafted measures to ensure increased credit and domestic increase of the single borrower’s limit (SBL) for loans granted by liquidity. These measures included: a policy rate cut totaling 125 banks and quasi-banks, among others. basis points since February 2020; RR ratio reduction of U/KBs and 20 Formerly “Auto Loans”, renamed effective September 2015. NBQBs by 200 basis points; conduct of asset-purchase activities in

First Quarter 2020 Report on Economic and Financial Developments | 17 the quarter-ago ratio of 5.6 percent. In terms of of 7.0 percent. In terms of loan quality, non- loan quality, the ratio of non-performing MVLs to performing RRELs to total RRELs increased slightly total MVLs was unchanged at 4.0 percent against to 3.1 percent from 2.7 percent a year ago but the registered quarter-ago ratio but grew slightly remained unchanged relative to the ratio recorded from the 3.8 percent posted a year ago. a quarter-ago.

Salary-Based General-Purpose Consumption Asset Quality and Capital Adequacy Loans21 The Philippine banking system’s GNPL ratio mildly The banking system’s Salary-Based General-Purpose rose to 2.2 percent as of end-March 2020 from the Consumption Loans (SBGPCL) rose to ₱155.6 billion year- and quarter- ago ratios of 2.1 percent and as of end-December 2019, 5.5 percent higher than 2.0 percent, respectively (Table 9). Amid the the year-ago level but 2.4 percent lower than the ongoing pandemic, GNPL ratio remained below its quarter-ago level.22 pre-Asian crisis level of 3.5 percent on the back of banks’ initiatives to improve their asset quality Salary loans increase along with timely and prudent lending regulations.23,24 moderately

The share of total SBGPCLs to TLP was unchanged Improved asset quality at 1.5 percent relative to the year-ago ratio but decreased slightly from the quarter-ago ratio of indicates that banks remain 1.6 percent. In terms of loan quality, the ratio of healthy non-performing SBGPCLs to total SBGPCLs improved to 5.7 percent from the previous year’s Likewise, the net non-performing loan (NNPL) ratio 6.3 percent and previous quarter’s 5.9 percent. increased to 1.2 percent as of end-March 2020 relative to the year- and quarter- ago ratio of Residential Real Estate Loans 1.1 percent.

As of end-December 2019, the total residential real Chart 18. Ratio of Gross NPLs and Net NPLs to estate loans (RRELs) of the banking system reached Total Loans of the Banking System ₱759.4 billion, growing by 12.2 percent, y-o-y, and by 4.6 percent, q-o-q.

Real estate loans continue to expand

Sustained household investments in residential properties and the increase in the number of projects unveiled by real estate developers supported the growth in real estate purchases In computing for the NNPLs, specific allowances during the review period. Total RRELs to TLP was for credit losses on TLP are deducted from the unchanged at 7.2 percent relative to the quarter- GNPLs. Said allowances increased to ₱110.4 billion ago ratio but increased from the year-ago ratio

21 Formerly “Salary Loans” staggered booking of allowance for credit losses for loans 22 Data collection started with June 2014 data. extended to affected borrowers for a maximum period of five (5) 23 The regulatory relief package include the following, among years, subject to approval of the BSP (per BSP Memorandum No. others: (1) exclude exposure of affected borrowers from the M-2020-008). computation of the past due loan ratios; waiver of BSP 24 The 3.5 percent NPL ratio was based on the pre-2013 definition. documentary requirements for restructured loans, and (2) allow

18 | First Quarter 2020 Report on Economic and Financial Developments as of end-March 2020 from ₱99.1 billion a year ago Chart 19. Capital Adequacy Ratio of Universal and and P108.3 billion quarter-ago.25 Commercial Banks in percent The Philippine banking system’s GNPL ratio of 2.2 percent was higher with respect to those of Malaysia (1.0 percent) and South Korea (0.8 percent) but was lower than those of Indonesia (2.4 percent) and Thailand (3.0 percent).26

The loan exposures of banks remain adequately covered even as the NPL coverage ratio of the banking system declined to 86.3 percent as of end-March 2020 from 95.7 percent a year ago and 92.6 percent a quarter ago.

The capital adequacy ratio (CAR) of U/KBs at Banking Policies end-December 2019, on solo basis, decreased marginally to 15.4 percent from 15.6 percent as of Banking policies implemented during the quarter end-September 2019. Meanwhile, on a were aimed at enhancing/providing consolidated basis, CAR of U/KBs remained guidelines/regulations on the following: unchanged at 16.0 percent relative to the previous (1) reduction in reserve requirements; quarter. These figures remained well above the (2) operational relief measures for FX transactions BSP’s regulatory threshold of 10.0 percent and under the Manual of Regulations on Foreign international standard of 8.0 percent. Exchange Transactions (FX Manual); (3) correspondent banking relationships; (4) risk-based capital adequacy framework for U/KBs’ CAR remains well above stand-alone thrift banks, rural banks and cooperative banks; (5) personal equity and international and regulatory retirement account (PERA); (6) disqualifications and standards watchlisting of directors/officers; (7) extension of the transitory period on single borrower's limit of foreign bank branches (8) financial audit of banks The CAR of Philippine U/KBs, on consolidated basis, and non-bank financial institutions; (9) removing was higher than that of South Korea (14.7 percent) the restriction on the acceptability of agricultural but lower than those of Malaysia (18.0 percent), free patent as underlying collateral for Thailand (18.7 percent) and Indonesia rediscounting loans; and (10) revised 27 (23.3 percent). rediscount/lending rates for peso and dollar/yen (Annex A).

25 This type of provisioning applies to loan accounts classified December 2019); and Thailand (Total Commercial Banks’ Gross under loans especially mentioned (LEM), substandard-secured NPLs ratio, December 2019). loans, substandard-unsecured loans, doubtful accounts and loans 27 Sources: South Korea (Capital Ratios of Banks and Bank Holding considered as loss accounts. Companies, March 2020); Malaysia (Banking System’s Total 26 Sources: Malaysia (Banking System’s Ratio of net impaired loans Capital Ratio, March 2020); Thailand (Commercial Banks’ Capital to net total loans, March 2020); South Korea (Domestic Banks’ Funds Percentage of Risk Assets, March 2020); and Indonesia Substandard or Below Loans [SBLs] ratio, March 2020); Indonesia (Commercial Banks‘ Regulatory Capital to Risk-Weighted Assets (Commercial Banks’ Nonperforming Loans to Gross Loans Ratio, Ratio, December 2019).

First Quarter 2020 Report on Economic and Financial Developments | 19 Capital Market Reforms into the economy through cuts in policy rates and the reduction in banks’ RR ratio . Capital market policy reforms continued to gain Chart 20. Average PSEi ground during the first quarter of 2020 as landmark in index points institutional measures were adopted by the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE). During the period, the reforms focused on developing investment products and broadening investor base (see Annex B).

Stock Market

The Philippine Stock Exchange index (PSEi) dropped sharply in the first three months of the year. The decline in the local stock market index was due Other stock market indicators also marked general largely to the outbreak of the COVID-19 pandemic declines during the review period. Total market and investor concerns over its impact on the capitalization in the Philippine stock market fell Philippine economy. The benchmark index sharply by 27.9 percent from P16.7 trillion in end- averaged 6,876.72 index points during the period- 2019 to P12.0 trillion in end-March 2020 due to the in-review, about 12.4 percent lower than its level in spread of the coronavirus and the imposition of the the previous quarter. Year-to-date, the PSEi closed ECQ. All sectors posted double-digit declines in 31.9 percent lower at 5,321.23 index points in end- their market capitalization levels. March (Table 10). Foreign investors posted net sales of P32.3 billion during the period 1 January-31 March 2020, higher Average PSEi drops sharply than the P23.0-billion net sales registered in the due to COVID-19 pandemic preceding quarter. Foreign investors remained net sellers of local stocks as they become more cautious During the first three months of the year, the of the likely economic impact of the pandemic. benchmark index trended lower. In January 2020, the PSEi declined relative to its end-December Amid escalating concerns about the economic closing due to the escalation of tensions between impact of the COVID-19 pandemic and global the US and Iran,28 concerns over the economic lockdown measures implemented to contain its impact of Taal volcano’s eruption and the spread of spread, Southeast Asian stock market indices the novel coronavirus. declined in the first three months of 2020 relative to their average in the previous quarter. The decline In February and March, the stock market declined was led by the PSEi, which fell by 12.4 percent sharply due to concerns over the socioeconomic during the period in review, followed by Thailand’s impact of the COVID-19 outbreak and the SET (-11.8 percent), Indonesia’s JCI (-9.1 percent), implementation of ECQ in most parts of the Malaysia’s FBMKLCI (-5.8 percent), and Singapore’s country. The resulting disruption in business FSSTI (-5.6 percent). activities prompted investors to sell their shares, given the firms’ increased preference for cash amid the lockdown of the economy. Partly tempering the decline were the BSP’s decision to inject liquidity

28 Since 3 January 2020, the conflict between the US and Iran heightened following the death of Iran’s military commander, Qassem Soleimani, and Iran’s retaliation by firing missiles on two military bases in Iraq that hosted US troops.

20 | First Quarter 2020 Report on Economic and Financial Developments Chart 21. Quarter-on-Quarter Growth of Selected Chart 22. LCY Bond Issuances ASEAN Stock Exchange Indices in billion pesos in percent, end-March 2020 vs end-December 2019

Similarly, the private sector issuance of LCY bonds amounted to P147.9 billion, 12.3 percent higher Bond Market than that in the previous quarter and 154.0 percent higher than the amount in the previous year. Local Local Currency Bond Market firms tapped the bond market as they took advantage of the relatively low interest rate Size and Composition29 environment due to the policy rate cuts and enhanced liquidity measures implemented by the Local currency (LCY) bonds issued by both the BSP. public and private sectors amounted to P817.9 billion in the first quarter of 2020. This was more In terms of market share, issuances from the public than the P346.4 billion registered in the previous sector comprised 81.9 percent share of the total quarter and 24.5 percent higher than the P657.2 bond issuances while the private sector took the billion recorded in the same period last year. remaining 18.1 percent. Bonds issued by BTr accounted for the entire public sector issuance LCY bond issuances of the while issuers from the private sector came from public sector increase banks and holding companies.

The NG-issued Treasury bills (T-bills), fixed-rate Chart 23. LCY Bond Issuances Treasury bonds (T-bonds) and retail Treasury bonds as percent of market share; Q1 2020 (RTBs) reached a total of P670.0 billion, an increase by 212.1 percent from the comparable Q4 2019 level. The increase in government issuances reflected the need for the NG to (1) finance expenditures authorized in its annual appropriation and (2) help counter the impact of the COVID-19 outbreak in the country. In the first two months of the year, the NG took advantage of the domestic liquidity from the reduced RR ratio. For instance, the RTBs offering in February was met with robust demand as issuances were oversubscribed by about 10 times.

29 This refers to the peso-denominated bond issuances by both public and private sectors. Public sector issuances of LCY bonds include issuances in the primary market and rollovers of maturing series which were issued by the BTr and GOCCs. This excludes issuances by the central bank.

First Quarter 2020 Report on Economic and Financial Developments | 21 Primary Market30 and Exchange Corporation (PDEx) remained marginal at 1.1 percent. In the primary auctions conducted for both T-bills and T-bonds, the NG offered a total of Chart 24. Secondary Market Volume P562.2 billion short- and long-term debt securities. in billion pesos Demand was robust as total tenders were oversubscribed by about 1.8 times. The market showed preference for short-term dated debt securities as tenders for T-bills reached P599.8 billion as against the NG’s offering of P278.2 billion. Such tenders were higher than the tenders for T-bonds, which reached P438.3 billion against the P284.0 billion offering. Relatively higher demand for short-term debt indicates investors’ risk-averse attitude amid the uncertain and challenging market environment. The increased activity partly reflected the GS NG partially awards auction purchases of the BSP from banks. The increased supply of relatively high-yielding RTBs may have offerings to reject relatively contributed to the more upbeat trading during the high yields period.

Foreign Currency Bond Market The NG partially awarded the P562.2 billion offering of GS in Q1 2020, indicating NG’s rejection of some During the quarter, the government issued in the bids for T-bills and T-bonds as selected bid rates offshore market €$1.2 billion worth of new were found to be relatively higher than NG’s 3-year and 9-year global bonds to support its preferred rates. A total of P445.7 billion of T-bills budgetary needs. The NG took advantage of the and T-bonds were accepted during the quarter. strong demand and relatively lower rates from European investors. Secondary Market

Trading of both government and private corporate Both NG and the private sector bonds in the secondary market increased by tap the international bond 84.4 percent to P1,757.5 billion in the review market in sourcing funds quarter from P953.0 billion in the previous quarter. Similarly, on a y-o-y basis, trading in the secondary Similarly, for the private sector, a utility firm issued market also increased by 45.8 percent. US$600 million worth of Senior Perpetual Capital Securities in January 2020 to fund development Trading increases at the projects in power generation, distribution and retail 31 secondary market electricity services. Other firms took advantage of the ample domestic liquidity as they relied more on domestic financing sources than on foreign Trading was dominated mostly by fixed income creditors to limit exposure to FX risks. Treasury notes (FXTNs) and RTBs which accounted for 47.2 percent and 34.2 percent, respectively, of the total trading. Meanwhile, the share of corporate bonds traded at the Philippine Dealing

30 The discussion includes primary market for government 31https://www.pds.com.ph/wp- issuances only. content/uploads/2020/01/Disclosure-No.-234-2020-Issuance-of- US600-Million-Senior-Perpetual-Capital-Securities.pdf

22 | First Quarter 2020 Report on Economic and Financial Developments Credit Risk Assessment notch lower than BBB+ and one notch higher than the minimum investment grade. On 11 February 2020, Fitch Ratings adjusted upward the outlook on its “BBB” investment grade Bond spreads credit rating for the Philippines from “stable” to “positive”. This was less than a week after Japan- In January, debt spreads slightly narrowed, based Rating and Investments Information Inc. reflecting the relative stability in the sovereign (R&I) upgraded the country’s rating from “BBB” to credit markets and market participants’ view of “BBB+”. continued improvements in the country’s financing conditions. Fitch upgrades the Philippines' outlook to positive Debt spreads widen

Fitch Ratings’ outlook upgrade was a result of the Locally, the eruption of the Taal volcano affected following: 1) continued adherence to a sound some parts of Luzon but the resulting brief macroeconomic policy framework that will support interruption in business activities generally had high growth rates with moderate inflation, progress insignificant impact on investor sentiment. on fiscal reforms that should keep government debt within manageable levels and continued resilience In February, debt spreads widened as market in its external finances; and 2) sound economic uncertainty increased amid the spread of COVID-19 policy making as evidenced by the government’s in many countries. In March, debt spreads widened healthy fiscal position and implementation of tax further due to a combination of different factors, reforms, which help ensure that public debt will namely, the increasingly rapid spread of COVID-19; remain manageable over the long haul. large oil price declines; and financial shocks arising from the pandemic and its negative impact on Meanwhile, on 7 February 2020, Japan-based economies around the world. Rating and Investment Information Inc. (R&I) upgraded the Philippines’ credit rating by a notch, As of end-March 2020, the extra yield investors from “BBB” to “BBB+,” bolstering the country’s demanded to own Philippine sovereign debt over momentum toward the Republic’s goal of securing U.S. Treasuries or the Emerging Market Bond Index single “A” rating by 2022. As such, R&I joins Global (EMBIG) Philippines spread stood at 222 bps Standard & Poor’s (S&P) Global and Japan Credit from the end-December level of 67 bps. Rating Agency (JCR) in assigning to the Philippines a rating that is just a notch away from the sterling “A” Chart 25. Emerging Market Bond Index Global scale. Spreads of Selected ASEAN Countries in basis points R&I’s new rating was also assigned a “stable” outlook, which indicated the absence of factors that may cause the rating to change within the short term. The upgrade was based on the following: 1) assessment of the Philippines’ positive growth performance and prospects on the back of the government’s infrastructure development drive; 2) the government’s ability to keep its fiscal condition healthy; and 3) the improving socioeconomic climate in the Philippines.

Meanwhile, Korea-based NICE Investors Service assigned to the Philippines a rating of “BBB”, while Similarly, the country’s 5-year sovereign credit Moody’s Investors Service assigned a rating of Baa2 default swap (CDS) spread increased to 110 bps (which is equivalent to “BBB”). Both ratings are one from its end-December level of 34 bps. Against

First Quarter 2020 Report on Economic and Financial Developments | 23 other neighboring economies, the Philippine CDS Table C. PhilPaSS Transactions spread traded closely with Malaysia’s 120 bps, and narrower than Indonesia’s 222 bps but wider than Thailand’s 79 bps and Korea’s 38 bps spreads.

Chart 26. 5-Year CDS Spreads of Selected ASEAN Countries in basis points, end of period During the quarter, interbank transactions, Philippine peso/US dollar trades (peso leg) transactions, monetary operations transactions, and GS trades jointly accounted for 82.4 percent of the total volume of transactions. In terms of value, monetary operations transactions, interbank dealings, and Philippine peso/US dollar trades (peso leg) collectively made up 92.1 percent of the total value of transactions.

On a y-o-y basis, both the volume and value of 32 Payments and Settlements System transactions increased by 2.2 percent and 34.6 percent, respectively. In Q1 2020, the total number of transactions settled and processed in the Philippine Payments and Settlements System (PhilPaSS) reached 311,247 transactions, 1.9 percent higher than the previous quarter’s level of 305,546 transactions. The higher External Sector number of transactions was due mainly to the q-o-q increase in GS trades (42.1 percent), peso leg of peso/US trades (10.3 percent), and automatic Balance of Payments clearing house transactions (5.4 percent), namely, PESONet and InstaPay. The country’s balance of payments (BOP) position registered a deficit of US$68 million in Q1 2020, a turnaround from the US$3.8 billion surplus posted Both the volume and value of in the same quarter last year (Table 11). PhilPaSS transactions increase BOP position reverses to a Similarly, the total value of transactions rose by 14.0 percent to reach ₱96.1 trillion from the deficit quarter-ago level of ₱84.3 trillion. The increase in the value of transactions was brought about by The reversal of the BOP position to a deficit higher GS trades (69.2 percent), monetary stemmed largely from the turnaround of the operations transactions (22.0 percent), and financial account to net outflows as both portfolio automatic clearing house transactions investment and other investment accounts (13.2 percent). In particular, PESONet and Instapay reversed to net outflows during the quarter transactions grew by 7.1 percent and 31.3 percent, attributed to net withdrawal of volatile capital 33 respectively. flows and residents' payment of foreign loans. These outflows were, however mitigated by the direct

32 Starting 1 April 2014, the volume and value of transactions exclude payment transfers to BSP Payments Unit. balances of the current, capital, and financial accounts and their 33 The overall BOP position was computed based on final data on components are preliminary as these were based on partial and the country’s Gross International Reserves (GIR). However, the preliminary data and estimates, considering the operational constraints of our data sources amid the community quarantine.

24 | First Quarter 2020 Report on Economic and Financial Developments investment account which managed to post net The 16.3-percent improvement in the trade in inflows in the first quarter of 2020. goods gap resulted from the decline in goods imports (10.3 percent) outpacing the slowdown in Table D. Balance of Payments goods exports (4.3 percent) during the quarter. in million US$ Exports of Goods. Exports of goods declined to US$11.7 billion in Q1 2020 from US$12.2 billion in Q1 2019, brought about by decreased demand from the country’s major trading partners, i.e., China and the United States, and scaling back of orders due to the COVID-19 outbreak.

Exports of goods decrease

By commodity, the decrease in exports of goods Source: BSP was evident in the 8.6-percent decline in shipments of manufactures, in particular, exports of machinery Current Account. The current account recorded a and transport equipment which contracted by surplus of US$92 million in Q1 2020, a reversal from 23.9 percent and chemicals by 34.7 percent. the US$1.7 billion deficit posted in Q1 2019. Shipments of electronic products and other electronics also declined by 2.4 percent and Current account reverses to a 15.5 percent, respectively. The lower production of electronic products, particularly electronic data surplus processing, communication/radar, as well as control and instrumentation, mirrored the decline This developed primarily from the lower deficit in in the output of the manufacturing sector due to the trade in goods account and higher net receipts supply chain disruptions and limitations in mobility. in the secondary income account, which were Meanwhile, exports of fruits and vegetables mitigated partly by the decline in net receipts of managed to grow by 26.5 percent following higher trade in services and primary income. 34 The weak shipments of canned pineapple, pineapple performance of both exports and imports of goods concentrates, and other fruits and vegetables. reflected the slack in global demand, disruptions in Exports of mineral products likewise expanded by global supply chains, and a slowdown in domestic 12.9 percent owing to increased shipments of iron economic activity, owing to the ECQ implemented ore agglomerates and gold during the quarter. by the government to control the spread of the virus.

Trade-in-Goods. The trade-in-goods account deficit narrowed to US$10.2 billion in Q1 2020 from US$12.2 billion in the same quarter last year.

Trade-in-goods account deficit narrows

34Primary Income account (formerly the Income account) shows transfers, in cash or in kind, for nothing in return, between the flows for the use of labor and financial resources between residents and non-residents, e.g., overseas Filipino workers’ resident and non-resident institutional units. Secondary Income remittances. account (formerly the Current Transfers account) shows current

First Quarter 2020 Report on Economic and Financial Developments | 25 Chart 27. Exports by Major Commodity Group the quarter due to lower import volume and percent share, Q1 2020 decline in the international market price of petroleum crude.35

Chart 28. Imports by Major Commodity Group percent share, Q1 2020

Imports of Goods. Imports of goods dropped to US$21.9 billion in Q1 2020 from US$24.4 billion in the same quarter a year ago. The 10.3-percent decline stemmed largely from lower imports registered across all commodity groups, as the domestic economic activity was adversely affected Trade-in-Services. Net receipts of trade in services by the lockdown imposed by the government. decreased by 12.1 percent to US$2.3 billion in Q1 2020 from US$2.6 billion in Q1 2019. Imports of goods fall Trade-in-services account Significant declines were registered in imports of posts lower net receipts capital goods which fell by 17.7 percent to almost US$6 billion attributed to lower purchases of The shortfall resulted from lower net receipts of telecommunication equipment and electrical technical, trade-related, and other business services machinery (by 29.7 percent), power generating and (10.6 percent), and to higher net payments of specialized machines (21.3 percent) and aircrafts, telecommunication (498.4 percent), travel ships and boats (22.3 percent). Imports of raw (14.5 percent), and freight services (7.9 percent). materials and intermediate goods also contracted These developments were partly mitigated by by 8 percent to US$8.1 billion on account of higher net receipts in manufacturing (4.5 percent), decreased imports of the following: a) and computer services (2.4 percent) along with manufactured goods, particularly metal products, lower net payments in insurance and pension non-ferrous metals, and non-metallic mineral services (17.1 percent) during the quarter. manufactures; b) chemicals, mostly artificial resins and chemical compounds; and Primary Income. The primary income account c) unprocessed raw materials, largely wheat and recorded net receipts of US$1.2 billion in Q1 2020, inedible crude materials. 6.1 percent lower than US$1.3 billion net receipts in Q1 2019. Imports of consumer goods dropped by 9.4 percent to US$4 billion due to lower importation of rice (49.6 percent) as supply remains adequate, and Net receipts of primary other miscellaneous manufactures (17.5 percent). income decline Imports of mineral fuels and lubricant also decreased by 8.4 percent to US$2.6 billion during

35Based on data from the Department of Energy, the average price of Dubai crude oil in Q1 2020 declined to US$50.74/barrel from US$63.51/barrel in Q1 2019.

26 | First Quarter 2020 Report on Economic and Financial Developments This came about following increased net payments mostly the heightened volatility in global financial of investment income (15.7 percent), emanating flows due to uncertainty caused by the pandemic. from higher dividends paid to foreign direct investors (44.6 percent), lower interest receipts on Direct Investments. Direct investments posted a intercompany borrowings (22.2 percent) and on 6.0-percent increase in net inflows (or net reserve assets (12.1 percent) due to falling global borrowings by residents from the rest of the world) interest rates. By contrast, compensation inflows to reach US$1.1 billion. This can be attributed to from resident overseas Filipino (OF) workers posted the larger decline in residents’ investments abroad a 1.9-percent growth to reach US$2.1 billion during compared to that of foreign direct investments in the quarter. the Philippines (FDI).

Secondary Income. Net receipts in the secondary income account grew by 2.7 percent to Net inflows of direct US$6.8 billion in the first quarter of 2020. This was investments rise attributed mainly to net current transfers to the National Government (NG) which expanded by In particular, residents’ investments abroad 165.7 percent to reach US$232 million. Non- contracted by 38 percent to US$553 million during resident OF workers' remittances increased by the quarter. This was due mainly to the decline in 1.3 percent to US$6.3 billion during the quarter. residents’ net investments in debt instruments to US$430 million (from US$573 million) and in equity Net receipts of secondary capital to US$82 million (from US$302 million) during the period. Meanwhile, FDI also decreased income improve by 14.2 percent to US$1.7 billion on account of the decline in non-residents’ investments in debt Capital Account. Net receipts in the capital account instruments from US$1.4 billion to US$828 million. more than doubled the US$21 million recorded in Q1 2019 to reach US$43 million in Q1 2020. Reinvestment of earnings also dropped from US$247 million to US$187 million. By contrast, non- residents’ net investments in equity capital Capital account net receipts increased to US$653 million (from US$296 million) expand as equity capital placements rose to US$714 million (from US$582 million) while withdrawals dropped This was on account primarily of the higher receipts to US$61 million (from US$286 million). of other capital transfers to the NG amounting to US$51 million.36 By country of origin, the bulk of equity capital placements came from the Netherlands, Japan, and Financial Account. The financial account posted net Singapore, which were infused mainly into outflows of US$3.8 billion in the first quarter of manufacturing, administrative and support service, 2020, a reversal of the US$4.6 billion net inflows as well as real estate industries. recorded in the same quarter last year. Portfolio Investments. The portfolio investment account registered net outflows of US$555 million Financial account reverses to in Q1 2020, a reversal from the US$2 billion net net outflows inflows recorded in the same period in 2019.

This developed as portfolio and other investment Portfolio investments register accounts reversed to net outflows, representing net outflows

36 Other capital transfers to the NG refer to transfers for the the intention of which is for investment (i.e., machinery and purpose of capital formation. This includes grants and donations, equipment, buildings and structures).

First Quarter 2020 Report on Economic and Financial Developments | 27 This reversal to net outflows of foreign portfolio International Reserves investments (FPI) stemmed mainly from: a) non- residents’ net withdrawal of investments in equity The country’s GIR amounted to US$88.9 billion as of securities issued by other sectors (US$405 million) end-March 2020, higher than the US$87.8 billion in and local banks (US$187 million); and b) net end-December 2019 (Table 12). redemption of debt securities issued by local banks (US$389 million) and the NG (US$253 million) to non-residents. Meanwhile, residents’ investments Reserves increase to record abroad posted net inflows of US$450 million from high net outflows of US$1.3 billion recorded a year ago. Contributing mainly to the inflows were non- At this level, the GIR can adequately cover residents’ net redemption of US$1.5 billion worth 8.0 months’ worth of imports of goods and of debt securities issued to local banks. payments of services and primary income. It was also equivalent to 6.7 times the country’s short- Other Investments. The other investment account term external debt based on original maturity and posted net outflows of US$4.4 billion in Q1 2020, a 4.4 times based on residual maturity. reversal of the net inflows of US$1.4 billion registered in the same period in 2019. Chart 29. Gross International Reserves in billion US dollars 90.0 Other investments reverse to 88.0 86.0 net outflows 84.0 82.0 80.0 On the liability side, net outflows were driven by: 78.0 a) resident banks’ net repayments of their foreign 76.0 74.0 loans (US$3 billion); b) other sectors’ net 72.0 70.0 settlement of trade credits and advances Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 (US$1.2 billion); and c) non-residents’ net 2017 2018 2019 2020 withdrawals of their currency and deposits in local Source: BSP banks (US$378 million). These outflows, however, The increase in reserves was due mainly to inflows were tempered by the US$1.3 billion net availment arising from the BSP’s income from its investments of foreign loans by the NG. abroad. However, the increase was tempered by lower FX operations by the BSP, payments made by On the asset side, net outflows were boosted by the NG for servicing its FX obligations as well as loans extended by resident banks to non-residents lower BSP reserve position and holdings of Special (US$1.1 billion) and resident banks’ net placements Drawing Rights (SDRs) in the International of currency and deposits in banks abroad Monetary Fund (IMF). (US$758 million). The bulk of the country’s total reserves or Trading in financial derivatives 86.1 percent was held in foreign investments. Meanwhile, 9.0 percent were in gold and the results in higher net gains remaining 4.9 percent were in holdings of SDRs, the BSP’s reserve position in the IMF, as well as FX Financial Derivatives. The financial derivatives holdings. account recorded a higher net gain of US$74 million during the quarter compared to US$40 million in Net international reserves (NIR), which refer to the Q1 2019. difference between the BSP’s GIR and total short-term liabilities, amounted to US$88.8 billion as of end-March 2020, an increase of US$1.0 billion from end-December 2019.

28 | First Quarter 2020 Report on Economic and Financial Developments Exchange Rate 6 February 2020 monetary policy meeting; optimism over China’s actions towards containing The peso averaged ₱50.83/US$1 in Q1 2020, the coronavirus outbreak; and reduced market appreciating by 0.34 percent from the Q4 2019 uncertainty after the US President was acquitted by average of ₱51.00/US$1 (Table 13). the US Senate of impeachment charges. In addition, positive market sentiment over the credit rating outlook upgrade for the Philippines by Fitch Peso appreciates despite Ratings, as well as the release of trade deficit data COVID-19 outbreak for 2019, which narrowed to $37.05 billion from $43.53 billion in 2018, likewise provided support to the peso. Despite the COVID-19 outbreak, the peso appreciated during the review period due partly to In March, the peso’s depreciation reflected the continued decline in oil prices in the world continued concerns about the global impact of the market and positive market sentiment amid the coronavirus disease, which has then spread outside credit rating outlook upgrade by Fitch Ratings for China and over hints of possible rate cut by the US the Philippines in February 2020. Policy measures Federal Reserve (Fed) to cushion the impact of the implemented by authorities to counter the impact outbreak in the US economy. The imposition of a of the COVID-19 on the economy also supported quarantine covering the entire island of Luzon amid the peso. concerns over the spread of COVID-19 in the country have likewise added pressure to the peso. Chart 30. Quarterly Peso-Dollar Rate P/US$; average per quarter On a y-t-d basis, the peso depreciated slightly against the US dollar by 0.09 percent to close at ₱50.68/US$1 on end-March 2020 from the end- December 2019 closing rate of ₱50.64/US$1.38

Chart 31. Year-to-Date Appreciation (+)/ Depreciation (-) of Selected Asian Currencies against US dollar in percent, as of end-March 2020

On a y-o-y basis, the peso likewise appreciated by 3.01 percent relative to the ₱52.36/US$1 average in Q1 2019.37

In January 2020, the peso depreciated due partly to global market risk aversion and safe-haven buying driven by (i) the geopolitical tension between the US and Iran; and (ii) heightened fears of the potential economic impact of the spread of novel coronavirus from Wuhan, China. The country’s firm macroeconomic fundamentals, i.e. manageable inflation environment, a strong and Meanwhile, in February, the peso recovered to resilient banking system, prudent fiscal position, appreciate marginally by 0.18 percent, amid market and a strong international reserve buffer should expectation of a rate cut by the BSP during its continue to provide support to the peso, going forward.

37 Dollar rates (per peso) or the reciprocal of the peso-dollar rates 38 Based on the last done deal transaction in the afternoon. were used to compute for the percentage change.

First Quarter 2020 Report on Economic and Financial Developments | 29 Meanwhile, the volatility of the peso’s daily closing External debt declines rates (as measured by the coefficient of variation) stood at 0.43 percent in Q1 2020. This was lower The decline in the country’s external debt in the than the 0.80 percent registered in the previous first quarter of 2020 was due mainly to net quarter.39 The volatility of the peso in the review repayments of US$4.0 billion following the quarter was lower than the volatility of most settlement of short-term (ST) maturing obligations currencies in the region. by the private sector. This was offset by the

US$1.1 billion increase in non-residents’ On a real trade-weighted basis, the peso lost investments in Philippine debt papers issued external price competitiveness in Q1 2020 against offshore demonstrating investors’ confidence in the the basket of currencies of all trading partners (TPI); country’s creditworthiness; prior periods’ trading partners in advanced (TPI-A) countries; and adjustments of US$580 million; and positive FX trading partners in developing (TPI-D) countries revaluation adjustments of US$101 million as the relative to Q4 2019. This was indicated by the US dollar weakened against the Japanese yen. increase in the real effective exchange rate (REER) index of the peso by 3.60 percent, 5.73 percent, Chart 32. Philippine External Debt and 2.44 percent, against the TPI, TPI-A and TPI-D in billion US dollars baskets, respectively (Table 13b)..40,41 Relative to Q1 2019, the peso likewise lost external price competitiveness across currency baskets during the review period. This developed following the nominal appreciation of the peso and the widening inflation differential, resulting in the increase in the REER index of the peso by 5.20 percent against the three currency baskets.

External Debt

The Philippines’ outstanding external debt42 stood On a y-o-y basis, the country’s debt stock rose by at US$81.4 billion as of end-March 2020, down by US$990 million. While net repayments amounted to US$2.2 billion (or 2.6 percent) from the US$2.2 billion largely by private sector banks’ ST US$83.6 billion level as of end-December 2019 accounts, this was more than offset by the (Table 14). following: (a) transfer of Philippine debt papers from residents to non-residents (US$2.4 billion); (b) prior periods’ adjustments (US$482 million); and (c) positive FX adjustments (US$266 million).

39 The coefficient of variation is computed as the standard with the countries whose currencies comprise the NEER index deviation of the daily closing exchange rate divided by the average basket. A decrease in the REER index indicates some gain in the exchange rates for the period. external price competitiveness of the peso, while a significant 40 The TPI measures the nominal and real effective exchange rates increase indicates the opposite. The NEER index, meanwhile, of the peso across the currencies of 14 major trading partners represents the weighted average exchange rate of the peso vis-à- (MTP:s) of the Philippines, which includes US, Euro Area, Japan, vis a basket of foreign currencies. Australia, China, Singapore, South Korea, Hong Kong, Malaysia, 42External debt refers to all types of borrowings by Philippine Taiwan, Indonesia, Saudi Arabia, United Arab Emirates, and residents from non-residents, following the residency criterion for Thailand. The TPI-A measures the effective exchange rates of the international statistics. Outstanding external debt valued at peso across currencies of trading partners in advanced countries exchange rates as at end-March 2020; while transaction amounts comprising of the US, Japan, Euro Area, and Australia. The TPI-D (e.g., availment, repayment, interest payment) are converted to measures the effective exchange rates of the peso across 10 US Dollar equivalent based on exchange rates prevailing on currencies of partner developing countries which includes China, transaction dates. Principal data sources include regular reports Singapore, South Korea, Hong Kong, Malaysia, Taiwan, Indonesia, from borrowers, banks and other financial institutions, major Saudi Arabia, United Arab Emirates, and Thailand. foreign creditors and news articles in local and international 41 The REER index represents the Nominal Effective Exchange Rate publications, as well as through conduct of external debt surveys.

(NEER) index of the peso, adjusted for inflation rate differentials

30 | First Quarter 2020 Report on Economic and Financial Developments By Maturity largely to net repayments of US$4.9 billion (largely by banks). As of end-March 2020, the maturity profile of the country’s external debt remained predominantly Chart 34. Philippine External Debt by Borrower medium- to long-term (MLT) in nature [i.e., those as of end-March 2020 with original maturities longer than one year], with share to total at 83.6 percent (US$68.1 billion). This means that FX requirements for debt payments are well spread out and more manageable.

The weighted average maturity for all MLT accounts slightly increased to 16.9 years in end-March 2020 from 16.7 years during the previous quarter, with public sector borrowings having a longer average term of 20.9 years compared to 7.4 years for the private sector.

Chart 33. Philippine External Debt by Maturity as of end-March 2020 By Creditor

Major creditor countries during the quarter were Japan (US$14.9 billion), the United States of America (US$3.6 billion), The Netherlands (US$3.3 billion), and United Kingdom (US$3.2 billion).

Loans from official sources [multilateral and bilateral creditors (comprising of Japan at US$8.2 billion; China at US$807 million; and Singapore at US$421 million, among others) had By Borrower the largest share (33.6 percent) of total outstanding debt, followed by foreign holders of bonds and Public sector external debt increased to notes (31.6 percent) obligations to foreign banks US$45.1 billion during the review quarter from and other financial institutions (28.9 percent); while US$42.8 billion in the previous quarter, with share the rest (5.9 percent) were owed to other creditor to total external debt increasing from 51.2 percent types (mainly suppliers/exporters). to 55.4 percent. This was due largely to net availments of US$953 million. About US$38.3 billion The country’s debt stock remained largely (84.9 percent) of public sector obligations were NG denominated in US dollar (US$45.4 billion or borrowings while the remaining US$6.8 billion 55.7 percent of total) and Japanese yen pertained to loans of government-owned and (US$10.9 billion or 13.4 percent of total). US dollar- controlled corporations, government financial denominated multi-currency loans from the World institutions and the BSP. Bank and ADB (US$14.1 billion) represented 17.4 percent of total. The 13.6 percent balance Private sector debt decreased from US$40.8 billion (US$11.0 billion) pertained to 14 other currencies, as of end-December 2019 to US$36.3 billion as of including the Philippine peso (6.6 percent), Euro end-March 2020, with share to total external debt (4.0 percent) and SDR (1.6 percent). decreasing from 48.8 percent to 44.6 percent. The recorded drop in private sector borrowings was due The debt service ratio (DSR), which relates principal and interest payments (debt service burden or DSB)

First Quarter 2020 Report on Economic and Financial Developments | 31 to exports of goods and receipts from services and $200 billion.43 As a result of the US Fed rate cut, primary income, is a measure of adequacy of the both the average US prime rate and discount rate country’s FX earnings to meet maturing obligations. decreased to 4.417 percent and 1.826 percent, For Q1 2020, the ratio increased to 8.9 percent respectively, from the previous quarter’s from 5.7 percent recorded for the same period a 4.830 percent and 2.330 percent, also respectively. year ago due to higher payments. Similarly, the average US Fed funds rate declined to 1.228 percent from the 1.633-percent average The external debt ratio, or total outstanding debt reported in the previous quarter (Table 16). (EDT) expressed as a percentage of GDP, is a solvency indicator. The EDT to GDP ratio decreased In a special meeting on 10 March, the Bank of (an improvement) to 21.4 percent in Q1 2020 from England (BOE) reduced the official bank rate paid 22.2 percent a quarter ago. The ratio continued to on commercial banks’ reserves by 50 bps to be well below the 68.25 percent threshold under 0.25 percent. It also continued the purchase of up the BSP-EWS model for assessing debt to £10 billion of non-financial investment-grade sustainability, reflecting the country's sustained corporate bonds, financed by the issuance of strong position to service foreign obligations over central bank reserves. In addition, it also the medium to long-term (MLT). maintained the stock of UK government bond purchases at £435 billion.44 Foreign Interest Rates The Bank of Japan (BOJ) decided to continue its “Quantitative and Qualitative Monetary Easing In Q1 2020, some advanced economies (AEs) (QQE) with Yield Curve Control,” in view of reduced policy rates and implemented monetary achieving the price stability target of 2 percent. The easing measures through asset purchases to BOJ decided to continue such policy until the target address the risks posed by the COVID-19 to global becomes stable. Moreover, given the growing economy. uncertainties and weak economic activity due to the impact of the COVID-19 outbreak, the BOJ The US Fed reduces policy decided to implement enhanced monetary easing in rates addition to its current measures. During its March meeting, the BOJ decided to apply a negative interest rate of 0.1 percent to current accounts that The US Fed lowered the target range for the Federal financial institutions hold at the Bank. For the long- funds rate by 50 bps to 1.00-1.25 percent in an term interest rate, the BOJ decided to buy Japanese unscheduled meeting on 3 March. Meanwhile, in government bonds (JGBs) at a rate of ¥80 trillion another unscheduled meeting on 15 March, the US per year in order for the 10-year JGB yields to Fed decided to further lower the Federal funds rate remain at around zero percent. by 1 ppt to 0.0-0.25 percent. The cut in the policy rates was aimed at providing liquidity to address In terms of asset purchases, the BOJ has decided to the expected slowdown in economic activity and actively purchase exchange-traded funds (ETFs) and uncertainty in global financial conditions of the Japanese real estate investment trusts (J-REITs) ongoing COVID-19 outbreak. such that their outstanding amount will increase at

annual paces with the upper limit of about In addition to its monetary policy decision, the Fed ¥12 trillion and ¥180 billion, respectively. Likewise, decided to increase its holdings of Treasury the BOJ decided to increase the upper limit of its securities by a least US$500 billion and its holdings purchases of commercial papers and corporate of agency mortgage-backed securities by at least

43Press Release, “Decisions Regarding Monetary Policy 44Press Release, “Monetary Policy Summary and minutes of the Implementation”, 3 March 2020 and 15 March 2020, Monetary Policy Committee (MPC) meeting”, 11 March 2020 and https://www.federalreserve.gov/newsevents/pressreleases/mon 26 March 2020, https://www.bankofengland.co.uk/monetary- etary20200303a.htm & policy-summary-and-minutes/2020/march-2020 & https://www.federalreserve.gov/newsevents/pressreleases/mon https://www.bankofengland.co.uk/news/2020/march/boe- etary20200315a.htm measures-to-respond-to-the-economic-shock-from-covid-19

32 | First Quarter 2020 Report on Economic and Financial Developments bonds by ¥2.0 trillion until the upper limit of their 1.534 percent in Q1 2020 from 1.930 percent in the outstanding amounts reach ¥3.2 trillion and previous quarter. Similarly, the 90-day Singapore ¥4.2 trillion, respectively.45 Interbank Offered Rate (SIBOR) declined to 1.556 percent from 1.801 percent in the previous While the European Central Bank (ECB) decided to quarter. maintain the interest rates on the deposit facility, main refinancing operation, and marginal lending Global Economic Developments facility at -0.50 percent, 0.0 percent, and

0.25 percent, respectively, during its January and The global health crisis (GHC) brought about by March meetings, it implemented a comprehensive COVID-19 slowed global economic activity in package of monetary policy measures to counter Q1 2020. Common responses to contain the the risks posed by the COVID-19 outbreak.46 pandemic, such as regional lockdowns and social On 12 March, the ECB announced that it will distancing, resulted in a tightening in domestic and conduct additional longer-term refinancing global financial conditions, disruptions in the supply operations (LTROs) to provide immediate liquidity chain, shifts in spending patterns, declines in support to the euro area financial system. An consumer and business confidence, among others. additional net asset purchases of €120 billion will The IMF (2020) noted that the economic fallout be implemented until the end of the year to following the GHC prompted policymakers to support favorable financing conditions. implement substantial targeted monetary, fiscal, On 18 March, the ECB launched the Pandemic and financial market measures to support affected Emergency Purchase Program (PEPP) worth household and businesses. In 2020, growth is €750 billion of asset purchases to be conducted expected to contract in AEs, including US, UK, until the end of 2020 and will include all the asset Japan, Germany, France, Italy, and Spain. If categories under the existing asset purchase implementation of tighter restrictions is prolonged, program (APP). the same decline in growth is expected in both

emerging markets (EMs) and developing Chart 35. Selected Foreign Interest Rates economies.47 in percent

In the US, growth in Q1 2020 was recorded at 0.2 percent, lower than the 2.3-percent growth in Q4 2019. On a seasonally adjusted annualized rate (SAAR) basis, US GDP contracted by 5.0 percent, a reversal from the 2.1-percent increase recorded in Q4 2019. The contraction reflected negative contributions from personal consumption expenditures, nonresidential fixed investment, exports, and private inventory spending. Improvements in residential fixed investments and government spending partly offset the decline in

growth.48 As AEs reduced their policy rates, benchmark global interest rates recorded downward trends during Meanwhile, GDP in the Euro area49 contracted by the review period. The 90-day LIBOR decreased to 3.1 percent in Q1 2020, the sharpest decline since

45Press Release “Statement on Monetary Policy” 16 March 2020, 47 IMF World Economic Outlook, 14 April 2020 https://www.boj.or.jp/en/mopo/mpmdeci/state_2020/k200121 48 “Gross Domestic Product, First Quarter 2020 (Second a.htm/ Estimate)”, U.S. Bureau of Economic Analysis (BEA), 28 May 2020 46Press Release, “Monetary policy decisions” 12 March 2020 and 49 The Euro area (EA19) includes Belgium, Germany, Estonia, 18 March 2020, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.mp2 Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, 00312~8d3aec3ff2.en.html& Slovakia and Finland. Source: Eurostat https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr20 0318_1~3949d6f266.en.html

First Quarter 2020 Report on Economic and Financial Developments | 33 Q3 2009.50 The slowdown in the Euro area was In China, the economy shrank by 6.8 percent in attributed to the effects of containment measures Q1 2020, a reversal from the 6.0-percent growth in widely implemented by Member States following the previous quarter. The implementation of large- the COVID-19 outbreak. Slower domestic and scale shutdowns and prolonged community external demand were reported in Spain, France quarantines to prevent the spread of the virus and Italy51 while contraction was also reported in caused a significant drop in industry activity, with Belgium, Germany, Latvia, the Netherlands, Austria, car production recording the sharpest decline. 57 In Portugal, and Slovakia.52 In Japan, the economy India, the economy grew by 3.1 percent in declined further by 1.7 percent in Q1 2020 from the Q1 2020,58 slower than the 4.1 percent revised 0.7-percent contraction in the previous quarter.53 expansion in the previous quarter, driven mainly by The drop in global demand for Japanese goods and weaker exports and investments. services has adversely affected the exports sector, contributing largely to the negative growth. Table E. Real GDP in Selected Economies Furthermore, decline in private residential y-o-y growth in percent investments (as business confidence among large Real GDP (y-o-y growth rate) 1/ manufacturers fell) also weighed down on growth. Country Grouping Q1 2019 Q4 2019 Q1 2020

Advanced Economies Global uncertainty brought by the pandemic has US 2.7 2.3 0.2 also affected the growth of Asian economies. The Japan 1.0 -0.7 -1.7 Euro Area 1.3 1.0 -3.1 South Korean economy grew by 1.4 percent in Hong Kong 0.6 -3.0 -8.9 Q1 2020, lower than the 2.3-percent growth South Korea 1.7 2.3 1.4 registered in the previous quarter. The growth was Singapore 1.1 1.0 -0.7 driven mainly by increased government Emerging and Developing Asia consumption and investments, though partly offset China 6.4 6.0 -6.8 54 by declines in private consumption and services. India 5.8 4.1r 3.1 The Hong Kong economy dropped by 8.9 percent ASEAN-5 Indonesia 5.1 5.0 3.0 during the review quarter, declining further from Malaysia 4.5 3.6 0.7 the 3.0-percent contraction in the previous quarter. Philippines 5.6 6.7 -0.2 Thailand 2.8 1.5 -1.8 The fallout was due to the continued weak Vietnam 6.9 7.0 3.8 performance in both domestic and external Sources: Bloomberg and country websites r/ revised data demand, as seen in the slump in exports to 1/ Country grouping is based on the IMF World Economic Outlook Database, Mainland China and to major economies such as April 2020 the US and EU.55 In Singapore, the economy declined by 0.7 percent in Q1 2020. The reversal In Vietnam, GDP grew by 3.8 percent in Q1 2020, from the 1.0 percent positive growth in the lower than the 7.0-percent expansion in the previous quarter was attributed to the combined previous quarter.59 The strong growth in the contraction in both construction, and wholesale construction, agriculture and services sectors were and retail trade sectors, which, in turn, was traced offset by weaker global demand. In Malaysia, the to lower private sector construction activities due economy grew by 0.7 percent in Q1 2020 following to the COVID-19 pandemic.56 a 3.6 percent expansion in the previous quarter, primarily attributed to softer private consumption

50Eurostat News Release and Euro Indicators, “GDP down by 3.6 Department, Hong Kong, 15 May 2020 percent and employment down by 0.2 percent in the euro area”, 56 Press Release on “MIT Downgrades 2020 GDP Growth Forecast 9 June 2020 to “-7.0 to -4.0 Per Cent”, Ministry of Trade and Industry 51 “Eurozone economic outlooks darkens considerably”, Economic Singapore, 26 May 2020 Snapshot for the Euro Area, FocusEconomics, 6 May 2020. 57 National Bureau of Statistics of China, “Preliminary Accounting 52 Ibid. Results of GDP for the First Quarter of 2020”, 20 April 2020 53 “Quarterly Estimates of GDP for January-March 2020 (Second 58 Government of India, Ministry of Statistics and Programmed Preliminary Estimates)”, Economic and Social Research Institute, Implementation, Press Note on “Provisional Estimates of Annual Cabinet Office, Government of Japan, 8 June 2020 National Income, 2019-20 and Quarterly Estimates of GDP for the 54 Press Release on “Gross National Income: 1st Quarter of 2020 Fourth Quarter (Q4) of 2019-2020”, dated 29 May 2020 (Preliminary)“, Bank of Korea,2 June 2020 59 “Socio-economic situation in the first quarter of 2020”, General 55 “First Quarter Economic Report 2020“, Census and Statistics Statistics Office of Vietnam

34 | First Quarter 2020 Report on Economic and Financial Developments combined with lower exports and investments.60 Meanwhile, disruptions in the supply of goods and Meanwhile, an expansion was recorded in services in China—brought about by the COVID-19 Indonesia at 3.0 percent, driven mostly by the outbreak—caused prices to rise by 5.0 percent from positive performance in the external sector, albeit the previous quarter’s 4.3 percent. On the contrary, offset by the drop in domestic demand.61 inflation in India eased to 6.6 percent from the previous quarter’s 8.6 percent due to the sharp The Philippine economy posted a 0.2 percent decline in food and beverage prices. contraction in Q1 2020 from the revised growth of 6.7 percent in the previous quarter, driven mainly In the ASEAN-5 region, average inflation rates were by weak supply side growth from the generally higher in Q1 2020. Higher prices of manufacturing, transportation and storage, and housing and construction materials contributed to accommodation and food services sectors.62 Vietnam’s inflation rate of 5.6 percent during the Likewise, in Thailand, the economy contracted by review quarter. Similarly, the Philippine inflation 1.8 percent in Q1 2020, a reversal from the rate rose to 2.7 percent in Q1 2020 from 1.5 percent expansion in the previous period. The 1.5 percent in the previous quarter. In Indonesia, subdued growth was attributed mainly to declines inflation climbed slightly to 2.9 percent from in exports of goods and services, private and public 2.7 percent a quarter ago. In Malaysia, the decline investments, and government final consumption in consumer prices and plunge in transport prices and expenditure.63 resulted in a lower inflation rate of 0.9 percent in Q1 2020 from the 1.0 percent posted in Q4 2019. In Average headline inflation in the US and Japan was Thailand, inflation remained stable at 0.4 percent unchanged at 2.1 percent and 0.5 percent in following weaker consumer prices, which was offset Q1 2020, respectively. Meanwhile, inflation in the by upward pressures in prices of food, transport, Euro area rose to 1.1 percent, slightly above the and communication. 1.0 percent recorded in the previous quarter. The uptick was due to hikes in the prices of food, Table F. Inflation in Selected Economies alcohol and tobacco in January and partly offset by quarterly average in percent the decline in prices of energy in February and March.

Prices in most Asian economies fell in Q1 2020. Hong Kong’s average inflation was recorded at 2.0 percent, lower than the previous quarter’s 3.0 percent, driven mainly by slower price movement in food, transportation and miscellaneous services. Singapore's average inflation stood at 0.4 percent during the review period on the back of lower housing and utilities costs, which were offset by softer declines in transport and food prices. In South Korea, higher prices of transport, food, non-alcoholic beverages, housing and utilities, health, among others, resulted in an average inflation rate of 1.2 percent, up from 0.3 percent in Q4 2019.

60 Press Release on “Economic and Financial Developments in 62 “GDP declines by 0.2 percent in the first quarter of 2020; the Malaysia in the First Quarter of 2020“, Department of Statistics, first contraction since fourth quarter of 1998”, Philippine Malaysia, 13 May 2020 Statistics Authority Press Release, 7 May 2020 61 Bank Indonesia, “Indonesia’s Economic Growth Slowdown in Q1 63 “Gross Domestic Product: Q1 2020”, Office of the National 2020”, 5 May 2020 Economic and Social Development Council (NESDC), 18 May 2020

First Quarter 2020 Report on Economic and Financial Developments | 35 Global labor market conditions were generally stable during the review quarter. The Financial Condition unemployment rate in the Euro area eased to 7.2 percent in Q1 2020 from the previous quarter’s 7.4 percent. Meanwhile, a slight uptick in of the BSP unemployment was reported in the US and Japan at 3.8 percent and 2.4 percent, respectively, during Balance Sheet the review period. As of end-March 2020, the BSP’s total assets In Asia, unemployment rates were slightly above amounted to ₱5,439.0 billion, notably higher by the previous quarter’s level particularly in Hong 7.0 percent from the quarter-ago level of Kong (3.8 percent), South Korea (3.7 percent), ₱5,082.9 billion. Likewise, against its year-ago Singapore (2.4 percent), Malaysia (3.5 percent), balance, total assets was higher as it grew by Philippines (5.3 percent), and Thailand 5.7 percent or by ₱293.8 billion (Table 17). (1.1 percent). Meanwhile, marginal improvement in unemployment was recorded in Indonesia at During the same review period, the BSP’s liabilities 5.0 percent and unchanged in Vietnam at grew by 7.4 percent to ₱5,305.5 billion from the 2.2 percent and China at 3.6 percent. previous quarter’s balance of ₱4,938.6 billion. Relative to the end-March 2019 level of Table G. Unemployment Rate in Selected ₱5,018.3 billion, total liabilities for the period was Economies higher by 5.7 percent or ₱287.2 billion. in percent

Unemployment rate2/ Country Grouping1/ BSP’s net worth remains strong Q1 2019 Q4 2019 Q1 2020 at end-Q1 2020 Advanced Economies US 3.9 3.5 3.8 Japan 2.4 2.3 2.4 Euro Area 7.8 7.4 7.2 Consequently, the BSP’s net worth as of end-March Hong Kong 2.8 3.2 3.8 2020 reached ₱133.5 billion or 7.4 percent below South Korea 4.0 3.6 3.7 the quarter-ago level of ₱144.2 billion. The resulting Singapore 2.2 2.3 2.4 net worth, however, was higher by 5.3 percent

Emerging and Developing Asia relative to the ₱126.8 billion figure posted in the

China 3.7 3.6 3.6 same period last year. India n.a. n.a. n.a. ASEAN-5 Indonesia 5.0 5.3 5.0 The BSP’s financial condition remains strong with Malaysia n.a. 3.2 3.5 total assets dominated by international reserves Philippines 5.2 4.5 5.3 amounting to ₱4,484.2 billion as of end-March Thailand 0.9 1.0 1.1 Vietnam 2.2 2.2 2.2 2020. Compared with the quarter-ago balance of Sources: Bloomberg and country websites r ₱4,434.1 billion, the end-March 2020 balance was / revised data 1/ Country grouping is based on the IMF World Economic Outlook Database, higher by 1.1 percent or ₱50.1 billion. The quarterly April 2020 2/ Unemployment rate is the proportion (in percent) of the total number of rise in the reported peso equivalent of international unemployed as a percentage of the labor force reserves was largely due to the inflows arising from the BSP’s FX operations, income from its

investments abroad, and the NG’s net foreign currency deposits.64 These were partially offset by NG payments of foreign currency obligations.

Meanwhile, the BSP’s liabilities of ₱5,305.5 billion during the review period were comprised mostly of

64 Also due to the gradual depreciation of the Philippine peso against the US dollar during the quarter.

36 | First Quarter 2020 Report on Economic and Financial Developments deposits and currency issues. The deposits were Total expenditures, as compared to the previous largely supported by placements in reserve deposits quarter, significantly decreased by ₱6.1 billion or of Other Depository Corporations (ODCs), and 25.1 percent to reach ₱18.2 billion. The q-o-q drop deposits from the Treasurer of the Philippines. in expenditures was due to lower bank note production and coin minting cost, as well as Table H. Balance Sheet of the BSP reduced taxes and licenses fees. in billion pesos 2020 2019 Mar p Dec u Mar Conclusion, Assets 5,439.0 5,082.9 5,145.2 Liabilities 5,305.5 4,938.6 5,018.3 Net Worth 133.5 144.2 126.8 Challenges and Note: Details may not add up to total due to rounding. p Based on the tentative BSP Financial Statements (FS) as of end-March 2020. Policy Directions u Based on the unaudited pre-closing BSP FS as of end- December 2019. p & u Figures may change once the end-2019 FS become final and audited. The Philippine economy declined by 0.2 percent in Source: BSP the first quarter of 2020, a significant drop from the 5.7 percent and 6.7 percent growth achieved in Q1 2019 and Q4 2019, respectively. This was the Income Statement first time that the GDP outturn fell into a negative territory since the fourth quarter of 1998 when the Based on preliminary data, the BSP registered a net country experienced a strong El Niño condition and income of ₱9.9 billion for the quarter ending March AFC. 2020. The increased quarterly net income was primarily the result of lower operational During the first three months of 2020, the country’s expenditures (Table 18). objective to sustain its robust growth was challenged by unforeseen events such as: (1) the Taal volcano eruption in January; (b) COVID-19 BSP’s profit climbs to ₱9.9 billion in outbreak that led to the imposition of travel bans to Q1 2020 and from countries with high cases starting in February; and (c) the implementation of ECQ in Total revenues for the review quarter amounted to Luzon and other parts of the country starting in ₱26.1 billion or 1.1 percent lower than the March to contain the spread of COVID-19. ₱26.4 billion posted in the previous quarter. Total revenues were mostly comprised of interest income While the services sector managed to post a on reserves, and miscellaneous income. modest growth of 1.4 percent during the period, this was fully offset by the decline in the industry Table I. Income Position of the BSP sector. The AFF sector also contracted by in billion pesos 0.4 percent. On the demand side, gross capital formation dropped by 18.3 percent and household 2020 2019 Q1 p Q4 u Q1 expenditures posted a weaker growth of Revenues 26.124 26.404 26.410 0.2 percent due partly to limitations in the mobility Less: Expenses 18.225 24.338 18.950 Net Income/(Loss) Before Gain/(Loss) on FXR of non-essential goods and services under the ECQ. Fluctuations and Income Tax Expense/(Benefit) 7.899 2.066 7.460 Meanwhile, government expenditures managed to Net Gain/(Loss) on FX Rates Fluctuations 2.021 0.360 5.670 Income Tax Expense/(Benefit) 0.005 (6.024) - expand by 7.1 percent. Net Income/(Loss) After Tax 9.915 8.450 13.130 Note: Details may not add up to total due to rounding. p Based on the tentative BSP Financial Statements (FS) as of end-March 2020. A key factor supporting economic activity in u Based on the unaudited pre-closing BSP FS as of end-December 2019. p & u Figures may change once the end-2019 FS become final and audited. Q1 2019 was the favorable inflation environment, Source BSP upheld by well-calibrated monetary policy actions. Headline inflation averaged at 2.7 percent y-o-y in

First Quarter 2020 Report on Economic and Financial Developments | 37 Q1 2020 from 1.6 percent in the previous quarter health crisis started, it is likewise recognized that and was within the NG inflation target range of risks and challenges to both growth and inflation 3.0 percent ± 1.0 ppt. outlook need to be managed. For one, the pandemic has dimmed the global economic growth As the Philippines faces the challenges brought outlook considerably with the IMF estimating a about by the pandemic, the BSP is prepared to use 3.0-percent contraction in global growth for 2020.65 the full range of its monetary instruments and Moreover, on the external front, major risks regulatory relief measures as needed in the include: 1) possibility of heightened financial fulfilment of its price and financial stability volatility due to the tightening of global financial objectives. By end-May 2020, cumulative policy rate conditions and the possible rise in sovereign and cuts have reached 125 bps (25 bps in February, 50 corporate risk premia; 2) lingering trade tensions bps in March, and another 50 bps in April), bringing between US and China; 3) geopolitical tensions as the policy rate to 2.75 percent. well as social unrest in some countries; and 4) the increased intensity and frequency of natural BSP announced on 24 March the reduction in the hazards. RR ratios by 200 bps for BSP-supervised financial institutions. The RR cut will ensure sufficient On the domestic front, the public health situation domestic liquidity in support of economic activity continues to be relatively unpredictable. The main amidst the global pandemic. downside risk to the country’s sound economic growth narrative stems from a more profound and BSP’s baseline forecasts indicate a lower path of prolonged impact of COVID-19 than currently inflation for 2020 and 2021, with inflation anticipated. The COVID-19’s simultaneous adverse expectations remaining firmly anchored within the effects on the country’s GDP (both on the supply target range of 3.0 percent ± 1 ppt over the policy and demand sides of the economy, specifically on horizon. tourism and transport, exports, remittances, and consumption) were estimated by the National Given these developments, the MB believes that Economic and Development Authority (NEDA). In the reduction in the policy interest rates, lower RR total, the NEDA expects a cumulative loss of ratios and increased support for lending to MSMEs P428.7 to P1,355.6 billion in gross value added (in would ensure adequate liquidity in the financial current prices), which is equivalent to 2.1 to system and help reduce borrowing costs. These 6.6 percent of nominal GDP in 2020.66 In addition, measures should thus mitigate the adverse impact natural hazards and infrastructure bottlenecks are of the outbreak on the economy, reinforcing the among the key challenges confronting the health and fiscal measures being rolled out by the economy. Meanwhile, the IMF, in its April 2020 NG. The monetary initiatives will also quicken World Economic Outlook (WEO) report, anticipates economic recovery as the pandemic fades. Philippine growth in 2020 to settle at 0.6 percent and to rebound strongly at 7.6 percent in 2021. Moreover, the balance of risks to the inflation outlook leans toward the downside for both 2020 Overall, amid a challenging domestic and global and 2021. The uncertainty over the potentially economic backdrop, the Philippine economy is protracted pandemic poses significant downside expected to exhibit a U-shaped recovery. Increased risks to aggregate demand. business activities and growth should return once the ECQ is lifted and the necessary measures While it is important to note that the domestic intended to stem the spread of the coronavirus are economy comes from a position of strength (i.e., implemented. GDP could also recover faster once GDP grew by 6.0 percent in 2019) when the global

65 International Monetary Fund (2020). “World Economic Outlook, 66 National Economic and Development Authority (2020). April 2020: The Great Lockdown.” “Addressing the Social and Economic Impact of the COVID-19 Pandemic.”(http://www.neda.gov.ph/wp- content/uploads/2020/03/NEDA_Addressing-the-Social-and- Economic-Impact-of-the-COVID-19-Pandemic.pdf). March 19.

38 | First Quarter 2020 Report on Economic and Financial Developments the fiscal and monetary measures gain traction and Finally, amid the increasing interconnectedness of as workers and firms resume operations. global financial markets, the BSP will remain an active participant in regional and international The BSP is also closely monitoring the consequent cooperation programs and fora, in order to reap the stress in the financial institutions’ balance sheet benefits of collaborative engagement. following the impact of a potential rise in credit risk in the coming months. Lenders need to prepare and address credit risks relating to possible delays in loan payments or breaches in loan covenants in a post COVID-19 scenario. The BSP is carefully studying how the weaknesses in hardly hit sectors of the economy could weigh down the banking industry’s assets as loans may need to be extended/rolled over/partially paid back to help clients with liquidity needs.

Meanwhile, the BSP remains in pursuit of its reform agenda. The amendments to the BSP Charter, or Republic Act (R.A.) No. 11211, embodies a package of reforms that will further align BSP operations with global best practices, improve the BSP’s corporate viability, and enhance its capacity to craft proactive policies. Specifically, the law restored the central bank’s authority to issue its own debt papers as part of its regular monetary operations and establishes a stronger prudential regulatory framework to promote a safe and sound financial system. The amended charter expands the BSP’s supervisory coverage and authority to prescribe metrics attuned to international standards and practices.

The amendment likewise mandates the BSP to oversee the country’s payment and settlement systems (PSS), including critical financial market infrastructures that are vital components of the PSS. Moreover, the amended charter strengthens the central bank’s ability to obtain data from any person or entity from the private and public sectors, for policy making and statistical purposes, in line with the pursuit of its mandates.

Also, the BSP’s policy and reform agenda are geared towards developing deeper money, debt, and foreign exchange markets by reducing reliance on external funding and insulating the domestic economy from external shocks, thereby building the economy’s resilience. More importantly, initiatives to deepen the local debt market is expected to fund infrastructure and other big-ticket investments.

First Quarter 2020 Report on Economic and Financial Developments | 39 resources of the banking system by the public to Annexes finance legitimate transactions.

The approved measures mainly involve: Annex A. Banking Policies (a) electronic submission of documents for: (i) applications for approval and/or registration of foreign/foreign currency Reduction in Reserve Requirements (BSP Circular loans/borrowings/investments; and (ii) sale of FX by No. 1082 dated 31 March 2020) authorized agent banks (AABs)/AAB forex corps; (b) use of e-signatures/digital signatures for The Monetary Board (MB) authorized BSP Governor documents originally required to be submitted in Benjamin E. Diokno to reduce the RR ratios of BSP- hardcopy and/or requiring signature; (c) submission supervised financial institutions by up to a of documents without the e-signatures/digital maximum of 400 bps for 2020. signatures/required notarizations; (d) non- imposition of monetary penalties for delayed To properly calibrate reduction in the RR, the MB submission of reports; (e) relaxation of also authorized the BSP Governor to determine the deadline/prescriptive period for the submission of timing, extent, and coverage of the reduction in the certain documents/information/applications RR, taking into consideration the impact of COVID- covering foreign/foreign currency 19 on domestic liquidity. The authority given to the loans/borrowings/investments; (f) waiver of Governor to adjust the RR allows the BSP flexibility applicable processing fees for applications covering to promptly address any possible liquidity strain in private sector foreign/foreign currency the industry. loans/borrowings with FX obligations due within the period covered by the Circular; and (g) issuance Pursuant to this authority, BSP Governor Diokno of BSP documents [e.g., Bangko Sentral Registration announced a 200-bp reduction in the RR ratio of Document (BSRD), implementing letter] by the reservable liabilities of universal and commercial International Operations Department in electronic banks (U/KBs) effective 3 April 2020. Potential cuts form. on the reserve requirements for other banks and non-bank financial institutions will also be explored. The measures shall be effective for the duration of the declaration of “community quarantine”67 by the The RR cut is intended to calm the markets and to OP, or as may be extended by the BSP. encourage banks to continue lending to both retail and corporate sectors. This will ensure sufficient The Governor emphasized that notwithstanding domestic liquidity in support of economic activity these relief measures on FX rules, banks are amidst this global pandemic due to the coronavirus expected to continue to adopt safe and sound disease 2019 (COVID-19). practices in their operations.

Operational relief measures for foreign exchange Guidelines on Correspondent Banking (FX) transactions under the Manual of Regulations Relationships (BSP Circular No. 1078 dated 9 March on Foreign Exchange Transactions (FX Manual), as 2020) amended (BSP Circular 1080 dated 27 March 2020)

The BSP issued BSP circular No. 1078 amending The BSP MB approved operational relief measures section 923 of the Manual of Regulations for Banks for FX transactions in line with the declaration of (MORB), on additional preventive measures for “community quarantine” by the Office of the specific customers. The circular states that covered President (OP) amidst the spread of COVID-19. persons shall adopt policies and procedures to These measures will facilitate the access to FX prevent correspondent banking activities from

67 Any form of community quarantine declared by the OP (e.g., general/enhanced/extreme enhanced community quarantine)

40 | First Quarter 2020 Report on Economic and Financial Developments being utilized for money laundering/terrorist common shares, additional paid-in capital, retained financing (ML/TF) activities, and designate an earnings, and undivided profits. The remaining officer responsible in ensuring compliance with component, Additional Tier 1 capital is mostly made these regulations and the covered person's policies up of eligible perpetual capital instruments. Since and procedures. the composition of qualifying capital of covered banks under the current framework are already in The inherent nature and structure of transactions the form of common equity, no significant change is and relationships in correspondent banking renders expected resulting from the new capital categories. it vulnerable to ML/TF activities. Correspondent banks execute financial transactions on behalf of Meanwhile, the 2.5 percent capital conservation customers of another bank (the respondent bank). buffer (CCB) requirement is also introduced in the As a result of this indirect relationship, the revised framework. The CCB is in the form of CET1 correspondent bank provides services for capital and is computed in excess of the 6 percent individuals or entities whose identities it has not CET1 ratio (e.g., 10 percent CET1 ratio, 4 percent actually verified. Meanwhile, the cross-border CCB). This requirement ensures that covered banks nature and amount of transactions involved in have capital buffers which can be drawn as losses correspondent banking pose material threat to are incurred. When certain levels of CET1 capital financial institutions. The layers involved in are breached, the bank concerned will be restricted transactions processed through correspondent from distributing earnings like dividends in order to banking relationships pose a challenge in build its CCB. monitoring transactions and in identifying suspicious transactions. These should be considered The BSP provides an observation period until in implementing a robust risk management system 31 December 2021 to allow the smooth transition for correspondent banking relationships. to the amended capital requirements. During the said period, covered banks are required to submit Banks shall perform the applicable customer due parallel CAR reports using the existing and new diligence on accounts and relationships opened frameworks. upon the effectivity of these guidelines. For existing relationships, the requirements shall be applied The enhanced capital standard is aimed at upon updating as part of ongoing monitoring. promoting the safety and soundness of individual banks and the banking system. The modifications to Amendments to the Risk-Based Capital Adequacy the risk-based capital adequacy framework for Framework for Stand-Alone Thrift Banks, Rural stand-alone TBs, RBs and Coop Banks largely Banks and Cooperative Banks (BSP Circular 1079 conform with the Basel reforms. dated 9 March 2020) Amendments to the Regulations Governing the The BSP MB approved the amendments to the Risk- Personal Equity and Retirement Account (PERA) Based Capital Adequacy Framework for stand-alone (BSP Circular No. 1081 dated 4 March 2020) thrift banks (TBs), rural banks (RBs) and cooperative banks (Coop Banks) to further enhance the quality The BSP issued BSP Circular No. 1081 amending the of capital of covered banks. This reinforces the MORB and Manual of Regulations for Non-Bank importance of maintaining sufficient level of Financial Institutions (MORNBFI) relative to the common equity which could absorb losses on an implementation of the PERA Act of 2008 and its ongoing basis. Revised Implementing Rules and Regulations (Revised PERA Rules). The enhanced capital standards provide minimum capital ratios of 6 percent Common Equity Tier 1 To streamline the PERA investment process and (CET1) ratio and 7.5 percent Tier 1 ratio. This is in improve operational efficiency, the Revised PERA addition to the existing minimum capital adequacy Rules introduced the PERA cash self-custody ratio (CAR) of 10 percent. Tier 1 capital is largely arrangement. Under this arrangement, the comprised of CET1 capital elements such as contributor will have the option to be the custodian

First Quarter 2020 Report on Economic and Financial Developments | 41 of his own PERA funds and income. The The issuance complements the fit and proper rules amendment also granted the concerned regulatory for directors/trustees and officers of BSFIs covered authority the flexibility to issue rules and by Circular Nos. 969 and 970 both dated 22 August regulations with respect to the accreditation 2017. Said guidelines contain enhanced corporate requirements for custodians and administrators and governance standards for the board of directors to prescribe the basic security deposit for the and officers, and set forth their key roles and faithful performance of administrator’s duties. In responsibilities consistent with the principle that order to provide guidance on the administration the tone of good governance should come from the and recording of PERA funds under a self-custody top. arrangement and to ensure adherence to the Revised PERA Rules, guidelines on PERA market Extension of the Transitory Period on Single participants and PERA investment products were Borrower's Limit of Foreign Bank Branches (BSP issued in the said circular. Circular No. 1073 date 10 February 2020)

Amendments to the Regulations on the The MB extended the transitory period allowing Disqualifications and Watchlisting of foreign bank branches to use twice the level of net Directors/Officers (BSP Circular No. 1076 dated 18 worth as basis for determining the Single February 2020) Borrower’s Limit (SBL) until 31 December 2020. This will allow foreign bank branches existing prior to The BSP issued the revised rules on disqualification Republic Act (R.A.) No. 10641 to continue of directors and officers of banks and quasi-banks. supporting the public sector’s initiatives under the “Build, Build, Build” Program. The new rules expanded the grounds for disqualification aimed at further strengthen the The extended transitory period will also provide the quality of governance in the financial services foreign bank branches with ample time to re-assess industry. The policy clarifies that persons who their credit exposures and implement measures to caused undue injury, material loss or damage to the ensure compliance with the SBL regulations even bank or those who exposed the bank to higher risk with the reduced base amount starting 1 January or danger shall be disqualified from becoming a 2021. director or officer in other BSP-supervised financial institutions (BSFIs). Amendments to Regulations on Financial Audit of Banks and Non-Bank Financial institutions (NBFIs) The BSP MB likewise approved the inclusion of (BSP Circular No. 1074 and 1075 dated 7 February dismissal from any government institution, 2020) conviction for offenses under the amended charter of the Philippine Deposit Insurance Corporation The MB hereby issued the amendments to the (PDIC), and delinquency or unwillingness to settle relevant provisions of the MORB and Manual of obligations as among the grounds for Regulations for Foreign Exchange Transactions disqualification. (MORFXT) under BSP Circular No. 1074.

In order to promote transparency and ensure that Banks shall initiate an annual financial audit by an persons concerned are accorded with due process, external auditor included in the List of Selected the revised policy sets out the disqualification External Auditors for BSFIs not later than thirty (30) procedures that will be followed. The procedures calendar days after the close of the calendar year or provide a window for the person concerned to the fiscal year adopted by the bank. The audited explain his side and present evidence to support his financial statement (AFS) shall be submitted by the position. Once a person is disqualified, his name bank to the appropriate supervising department of will be included in a watchlist database and he can the BSP not later than 120 calendar days after the no longer be connected in any BSFIs unless his close of the calendar year or the fiscal year adopted name is removed from the said list. by the bank, accompanied by the documentary requirements as enumerated under Appendix 55.

42 | First Quarter 2020 Report on Economic and Financial Developments In addition, the external auditor shall be required Amendment to Section 282 of the MORB by the bank to submit to the board of directors or Removing the Restriction on the Acceptability of country head, a Letter of Comments (LOC) Agricultural Free Patent as Underlying Collateral indicating any material weakness or breach in the for Rediscounting Loans (BSP Circular No. 1072 institution's internal control and risk management dated 31 January 2020) systems not later than 120 calendar days after the close of the calendar year or fiscal year adopted by The Monetary Board, in its Resolution No. 30 dated the bank. If no material weakness or breach is 08 January 2020, approved the amendment to noted to warrant the issuance of an LOC, a Section 282 of the MORB removing the restriction certification under oath stating that no material on the acceptability of agricultural free patent as weakness or breach in the internal control and risk underlying collateral for rediscounting loans. management systems was noted in the course of the audit of the bank shall be submitted, together The paragraph under Section 282 on Eligible papers with the AFS. and collaterals is hereby amended to state as: "An Original Certificate of Title issued by virtue of Free Government-owned or-controlled banks, including Patent may be accepted as underlying collateral for their subsidiaries and affiliates under Bangko loans offered for rediscounting with the BSP.", in Sentral supervision, which are under the concurrent view of the passage of Republic Act No. 11231, jurisdiction of the Commission on Audit (COA) shall otherwise known as the Agricultural Free Patent be exempted from the aforementioned annual Act. financial audit by an external auditor included in the List of Selected External Auditors for BSFIs. Revised Rediscount/Lending Rates for Peso and However, the MB may, upon recommendation of Dollar/Yen (BSP Circular No. 1071 dated 8 January the appropriate supervising department of the BSP, 2020) require the financial audit of the institution concerned to be conducted by an external auditor The BSP MB, in its meeting on 13 December 2019, when warranted by supervisory concern such as approved the adoption of a flexible term premium material weakness/breach in internal control (in lieu of the fixed term premium) in order to and/or risk management systems; and when arrive at the appropriate rediscount rate. Under this circumstances such as, but not limited to loans from policy, the BSP will have the flexibility to recalibrate multilateral financial institutions, privatization, or the rates in response to changes in monetary public listing warrant. management and/or economic conditions. Accordingly, effective 28 January 2020, the BSP will The deadline of submission of AFS of foreign change its rediscount rates for the Peso and currency deposit units (FCDUs) or expanded FCDUs Dollar/Yen Rediscounting Facility pursuant to (EFCDUs) was also changes from 90 calendar days Circular No. 1071 dated 08 January 2020. to 120 calendar days after the close of the calendar year or fiscal year adopted by the bank. Under the said Circular, the Peso rediscount rates remain to be based on the BSP overnight lending In a separate circular (BSP Circular No. 1075), BSP rate plus a spread depending on the term of the also issued guidelines to govern the submission of loan (i.e. 1-90 days and 91-180 days), while the AFS of NBFIs, which include NBFIs performing quasi- rates for the Exporters Dollar and Yen Rediscount banking functions, non-stock savings and loan Facility (EDYRF) will continue to be based on the 90- associations (NSSLAs), pawnshops, and trust day London Inter-Bank Offered Rate (LIBOR) plus corporations (TCs). the spread depending on the term of the loan (i.e. 1-90 days, 91-180 days and 181 to 360 days). The appropriate spread for each term of the loan may change periodically to complement changes in the BSP’s monetary policy goals and to reflect movements in the market interest rates.

First Quarter 2020 Report on Economic and Financial Developments | 43 In this regard, the applicable rediscount rates for exemption from value-added tax of the the Peso and the EDYRF are now as follows: transfer of property to a REIT company in exchange for its shares of stocks, among a. Peso Rediscount Facility Rates1 others. Meanwhile, the PSE issued amendments to the listing rules for REITs, Loan Maturity Rate (%) which ensures that the large investment funds 1-90 days 5.44650 that will be raised using this mechanism will 91-180 days 6.39300 be reinvested exclusively within the country's real estate and infrastructure sector. The peso rediscount rates are based on the latest 68 available BSP Overnight Lending Rate plus term • With the new IRR, it is expected that there will premia. be more activity in the capital market as REITs provide property developers with more b. EDYRF Rates 69 options to address funding needs and more

Loan Maturity Rate (%) opportunities for the investing public. The establishment of REIT is a secure opportunity Dollar Yen for small investors to participate in the 1-90 days 4.85488 2.89917 country’s growing real estate sector, enabling 91-180 days 5.80138 3.84567 greater inclusiveness in the financial market. 181-360 days 7.69438 5.73867 On broadening investor base Such amendment in the rediscount rates is part of the broader reforms of the BSP to bring its policies • The PSE has started to feature on its website in line with its lender of last resort function and to information and data on the three main ensure that the rediscounting policies remain indices of the Shenzhen Stock Exchange relevant to the present and future demands on (SZSE). This index promotion initiative forms monetary management. The changes in the part of the index cooperation project being rediscount rates will be posted in the BSP website undertaken by PSE and SZSE.71 for appropriate guidance by the banks. • The SZSE information available on the PSE Annex B. Capital Market Reforms70 website include the description, methodology, fact sheet, constituent list, index products and chart of the Shenzhen Component Index, On developing investment products Shenzhen 100 Index, and ChiNext Index. For its part, the SZSE has also displayed information • The Securities and Exchange Commission (SEC), on the PSEi, PSEi Total Return Index, and All Department of Finance (DOF), Bureau of Shares Index on the website of the authorized Internal Revenue (BIR), and Philippine Stock index agent of SZSE, the Shenzhen Securities Exchange (PSE) issued amendments to the Information Company Limited. Implementing Rules and Regulations (IRR) governing the Real Estate Investment Trust • The sharing of information program is an (REIT) Act of 2009. The amendments include initial step in broadening the country’s lower minimum public ownership and less investor base, including potential access of stringent tax regulations. Chinese investors to shares listed in the • In particular, the DOF and the BIR updated the Philippines and vice versa. tax incentive for REIT companies and

68 The peso rediscount rates are based on the BSP overnight 70 Source: Media releases from the Bangko Sentral ng Pilipinas, lending rate plus a spread depending on the term of the loan. and Philippine Stock Exchange, Inc for the period January to 69 The EDYRF rates are based on the 90-day LIBOR plus the spread March 2020. depending on the term of the loan 71 In 2009, PSE and SZSE signed a memorandum of understanding to undertake sharing of information on various market-related matters.

44 | First Quarter 2020 Report on Economic and Financial Developments

List of Acronyms, Abbreviations, and Symbols

AE Advanced Economies FDI Foreign Direct Investment Agriculture, Hunting, Forestry and AHFF Fishing FSSTI FTSE Straits Times Index Areas Outside National Capital AONCR FX Foreign Exchange Region FXTN Fixed-Income Treasury Note Association of Southeast Asian ASEAN Nations GDP Gross Domestic Product GIR Gross International Reserves BIR Bureau of Internal Revenue GNI Gross National Income BOC Bureau of Customs GNPL Gross Non-Performing Loan BOE Bank of England GOCC Government-Owned and BOJ Bank of Japan -Controlled Corporations BOP Balance of Payments GS Government Securities

BPO Business Process Outsourcing HLA Higher Loss Absorbency BPS Basis Points IMF International Monetary Fund BSFI Bangko Sentral-Supervised Jakarta Stock Exchange Composite Financial Institutions JC BSP Bangko Sentral ng Pilipinas Index

BTr Bureau of the Treasury JCRA Japan Credit Rating Agency JGB Japanese Government Bond CAR Capital Adequacy Ratio Japanese Real Estate Investment J-REIT CCR Credit Card Receivable Trust

CDS Credit Default Swap LCY Local Currency CET1 Common Equity Tier 1 LEM Loans Especially Mentioned CPI Consumer Price Index LFPR Labor Force Participation Rate DOLE Department of Labor and Employment LFS Labor Force Survey DSIB Domestic Systemically Important Bank LGU Local Government Unit DSR Debt Service Ratio LIBOR London Interbank Offered Rate ECB European Central Bank LTR Labor Turnover Rate

EFT Electronic Fund Transfer LTS Labor Turnover Survey MB Monetary Board EMBIG Emerging Market Bond Index Global MBS Mortgage-Backed Securities ETF Exchange-Traded Funds MLT Medium- to Long-Term EU European Union MOS Monetary Operations System FBMKLCI FTSE Bursa Malaysia Kuala Lumpur MPC Monetary Policy Committee Composite Index FCD Foreign Currency Deposit MVL Motor Vehicle Loan NCR National Capital Region

First Quarter 2020 Report on Economic and Financial Developments | 45

List of Acronyms, Abbreviations, and Symbols

National Economic and NEDA SIBOR Singapore Interbank Offered Rate Development Authority NEER Nominal Effective Exchange Rate SME Small- and Medium-Enterprises

NFA Net Foreign Assets SRC Securities Regulation Code

NG National Government ST Short Term NIR Net International Reserves TB Thrift Bank NNPL Net Non-Performing Loan T-bill Treasury Bill NPSA National Payment Systems Act T-bond Treasury Bond NZSE50F New Zealand Stock Exchange 50 G Gross Index TDF Term Deposit Facility ODC Other Depository Corporation TLP Total Loan Portfolio ODF Overnight Deposit Facility TPI Trading Partners Index OF Overseas Filipinos TPI-A Trading Partners Index-Advanced OPS Operators of Payment System TradingCi Partners Index-Developing Philippine Dealing and Exchange TPI-D PDEx Countries Corporation Tax Reform for Acceleration and Philippine Payments and TRAIN PhilPass Inclusion Settlements System UK United Kingdom ppts percentage points U/KB Universal and Commercial Bank PSA Philippine Statistics Authority PSE Philippine Stock Exchange y-o-y year-on-year PSEi Philippine Stock Exchange Index y-t-d year-to-date

QB Quasi-Bank

q-o-q quarter-on-quarter

QQE Quantitative and Qualitative M Ei RB Rural Bank

REER Real Effective Exchange Rate

ROP Republic of the Philippines

RREL Residential Real Estate Loan RRP Reverse Repurchase

RRR Reserve Requirement Ratio Salary-Based General-Purpose SBGPCL Consumption Loans SDR Special Drawing Rights

SEC Securities and Exchange Commission SET Stock Exchange of Thailand Index

SHCOMP Shanghai Stock Exchange Composite Index

46 | First Quarter 2020 Report on Economic and Financial Developments Report on Economic and Financial Developments First Quarter 2020 Statistical Tables

1 Gross National Income and Gross Domestic Product by Industrial Origin

1a Gross National Income and Gross Domestic Product by Expenditure Shares

2 Selected Labor, Employment and Wage Indicators

3 Cash Operations of the National Government

4 Consumer Price Index in the Philippines

4a Consumer Price Index in the National Capital Region

4b Consumer Price Index in Areas Outside the National Capital Region

5 Monetary Indicators

6 Selected Domestic Interest Rates

7 Number of Financial Institutions

8 Total Resources of the Philippine Financial System

9 Ratios of Non-Performing Loans and Loan Loss Provisions to Total Loans of the Banking System

10 Stock Market Transactions

11 Balance of Payments

12 International Reserves of the Bangko Sentral ng Pilipinas

13 Exchange Rates of the Peso (Peso per Unit of Foreign Currency)

13a Exchange Rates of the Peso (Unit of Foreign Currency per Peso)

13b Effective Exchange Rate Indices of the Peso

14 Total External Debt

15 Selected Foreign Debt Service Indicators

16 Selected Foreign Interest Rates

17 Balance Sheet of the Bangko Sentral ng Pilipinas

18 Income Statement of the Bangko Sentral ng Pilipinas

First Quarter 2020 Report on Economic and Financial Developments | 47 1 GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN for periods indicated

LEVELS (in billion pesos; at constant 2018 prices) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Agriculture, Forestry and Fishing 406.7 382.3 375.3 507.8 427.6 406.6 388.4 520.5 438.5 406.8 388.6 528.7 440.9 409.8 400.1 533.1 439.2 Industry 1,157.9 1,266.7 1,102.3 1,334.5 1,220.7 1,355.8 1,194.9 1,431.2 1,305.8 1,456.8 1,274.2 1,545.7 1,370.3 1,493.3 1,342.4 1,638.0 1,328.9 Mining and Quarrying 46.4 46.5 29.3 34.6 41.6 51.0 30.4 37.0 43.9 49.8 30.0 39.7 45.4 56.8 28.9 38.1 35.2 Manufacturing 774.7 771.8 654.7 869.8 813.3 833.6 726.4 944.4 865.4 891.6 755.2 976.2 910.6 909.8 762.0 1,017.8 877.5 Electricity, Steam, Water and Waste Management 113.5 128.6 140.2 118.2 116.4 133.7 147.0 126.1 125.3 140.8 155.7 135.3 129.5 152.2 167.0 145.2 136.4 Construction 223.3 319.8 278.1 311.9 249.4 337.6 291.1 323.7 271.2 374.7 333.4 394.6 284.7 374.4 384.5 436.9 279.7 Services 2,158.1 2,491.2 2,374.9 2,505.1 2,311.7 2,674.9 2,559.3 2,684.3 2,471.2 2,856.8 2,734.5 2,857.6 2,646.5 3,071.6 2,933.4 3,089.2 2,682.8 Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 591.3 710.3 765.7 793.7 633.6 751.5 819.2 853.3 666.9 798.8 863.0 908.7 713.6 867.1 934.8 985.5 721.6 Transportation and Storage 148.3 170.6 136.3 149.1 163.3 185.0 141.0 158.9 177.7 199.2 156.4 164.6 189.7 211.3 168.7 172.4 169.4 Accommodation and Food Service Activities 82.4 77.0 83.7 89.4 90.0 87.0 93.8 100.3 100.5 94.1 100.6 108.1 106.5 98.8 106.6 116.5 90.2 Information and Communication 107.8 120.5 103.1 131.4 110.6 123.4 109.4 140.2 119.6 133.2 114.5 148.5 131.5 140.6 120.8 156.5 139.0 Financial and Insurance Activities 311.6 334.5 306.7 322.9 335.7 368.3 336.1 342.4 365.0 400.1 364.3 368.7 409.0 442.9 411.1 413.2 448.5 Real estate and Ownership of Dwellings 256.7 264.9 277.9 268.8 266.6 284.6 296.0 281.9 283.2 302.7 312.6 291.2 297.7 317.5 331.9 304.3 304.3 Professional and Business Services 207.8 276.8 258.7 268.7 227.6 305.4 287.5 296.7 239.6 316.6 298.9 304.1 242.4 326.0 306.9 310.8 244.0 Public Administration and Defense; Compulsory Social Activities 133.9 169.1 144.9 162.6 143.4 185.9 158.9 178.2 162.3 213.8 187.2 204.3 181.3 238.2 203.4 247.9 190.7 Education 151.6 181.4 148.3 145.8 165.0 192.1 163.4 151.4 174.0 202.7 181.6 173.3 182.9 227.1 185.3 181.1 184.6 Human Health and Social Work Activities 68.5 82.2 69.6 69.7 73.9 88.3 73.6 73.5 75.4 86.8 72.2 73.8 77.7 86.3 76.3 80.6 84.8 Other Services 98.1 103.8 79.9 102.8 101.9 103.5 80.3 107.5 107.0 108.7 83.2 112.2 114.2 115.9 87.5 120.4 105.5 Gross Domestic Product 3,722.7 4,140.2 3,852.5 4,347.3 3,960.0 4,437.3 4,142.6 4,636.0 4,215.6 4,720.4 4,397.2 4,932.0 4,457.6 4,974.7 4,675.9 5,260.2 4,450.9 Net Primary Income from the Rest of the World 462.0 437.5 433.4 467.0 488.0 468.2 472.4 479.5 499.4 463.9 497.9 485.9 491.3 465.4 475.2 472.2 469.9 Gross National Income 4,184.7 4,577.7 4,285.9 4,814.3 4,448.0 4,905.6 4,615.1 5,115.6 4,715.0 5,184.3 4,895.2 5,417.9 4,949.0 5,440.1 5,151.1 5,732.4 4,920.8

ANNUAL CHANGE (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Agriculture, Forestry and Fishing -4.1 -1.5 3.5 -1.1 5.1 6.4 3.5 2.5 2.6 . . 1.6 0.5 0.7 3.0 0.8 -0.4 Industry 8.5 7.8 9.3 7.4 5.4 7.0 8.4 7.2 7.0 7.5 6.6 8.0 4.9 2.5 5.4 6.0 -3.0 Mining and Quarrying 11.1 0.1 3.7 7.8 -10.3 9.6 3.8 7.0 5.5 -2.4 -1.6 7.3 3.4 14.2 -3.5 -4.0 -22.3 Manufacturing 7.4 5.8 7.1 7.1 5.0 8.0 11.0 8.6 6.4 7.0 4.0 3.4 5.2 2.0 0.9 4.3 -3.6 Electricity, Steam, Water and Waste Management 10.9 10.1 9.4 6.1 2.6 3.9 4.9 6.7 7.7 5.3 5.9 7.3 3.4 8.1 7.3 7.3 5.3 Construction 10.4 13.3 15.2 9.0 11.7 5.6 4.7 3.8 8.7 11.0 14.5 21.9 5.0 -0.1 15.3 10.7 -1.8 Services 8.4 8.8 7.1 8.4 7.1 7.4 7.8 7.2 6.9 6.8 6.8 6.5 7.1 7.5 7.3 8.1 1.4 Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 6.7 8.4 6.0 7.4 7.2 5.8 7.0 7.5 5.3 6.3 5.3 6.5 7.0 8.6 8.3 8.5 1.1 Transportation and Storage 7.8 10.3 11.6 11.5 10.1 8.4 3.5 6.6 8.8 7.7 10.9 3.6 6.8 6.1 7.9 4.7 -10.7 Accommodation and Food Service Activities 15.9 12.4 8.5 11.2 9.2 13.0 12.1 12.2 11.6 8.2 7.2 7.7 6.0 4.9 6.0 7.8 -15.3 Information and Communication 7.9 8.7 3.9 3.7 2.6 2.4 6.1 6.7 8.1 8.0 4.7 5.9 9.9 5.6 5.5 5.3 5.7 Financial and Insurance Activities 10.8 7.8 9.4 7.6 7.8 10.1 9.6 6.0 8.7 8.6 8.4 7.7 12.1 10.7 12.8 12.1 9.6 Real estate and Ownership of Dwellings 4.3 3.8 5.6 4.3 3.8 7.4 6.5 4.8 6.2 6.4 5.6 3.3 5.1 4.9 6.2 4.5 2.2 Professional and Business Services 20.9 16.0 9.5 17.4 9.5 10.4 11.2 10.4 5.3 3.7 4.0 2.5 1.1 3.0 2.7 2.2 0.7 Public Administration and Defense; Compulsory Social Activities 5.5 6.7 4.0 13.8 7.1 9.9 9.6 9.6 13.2 15.0 17.8 14.7 11.7 11.4 8.7 21.3 5.2 Education 4.0 7.2 7.7 6.6 8.8 5.9 10.2 3.8 5.4 5.6 11.1 14.5 5.1 12.0 2.1 4.5 0.9 Human Health and Social Work Activities 6.4 6.4 9.0 7.9 7.9 7.4 5.7 5.4 2.1 -1.7 -1.9 0.5 3.0 -0.6 5.8 9.2 9.2 Other Services 7.7 12.6 4.9 3.1 3.9 -0.3 0.5 4.6 5.0 5.0 3.6 4.3 6.7 6.6 5.2 7.3 -7.6 Gross Domestic Product 6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7 -0.2 Net Primary Income from the Rest of the World 8.2 5.4 4.2 -1.3 5.6 7.0 9.0 2.7 2.3 -0.9 5.4 1.3 -1.6 0.3 -4.6 -2.8 -4.4 Gross National Income 7.1 7.2 7.0 6.1 6.3 7.2 7.7 6.3 6.0 5.7 6.1 5.9 5.0 4.9 5.2 5.8 -0.6

CONTRIBUTION TO GDP GROWTH (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Agriculture, Forestry and Fishing -0.5 -0.1 0.4 -0.1 0.6 0.6 0.3 0.3 0.3 . . 0.2 0.1 0.1 0.3 0.1 . Industry 2.6 2.4 2.6 2.3 1.7 2.2 2.4 2.2 2.2 2.3 1.9 2.5 1.5 0.8 1.6 1.9 -0.9 Mining and Quarrying 0.1 . . 0.1 -0.1 0.1 . 0.1 0.1 . . 0.1 . 0.1 . . -0.2 Manufacturing 1.5 1.1 1.2 1.4 1.0 1.5 1.9 1.7 1.3 1.3 0.7 0.7 1.1 0.4 0.2 0.8 -0.7 Electricity, Steam, Water and Waste Management 0.3 0.3 0.3 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.2 0.3 0.2 0.2 Construction 0.6 1.0 1.0 0.6 0.7 0.4 0.3 0.3 0.6 0.8 1.0 1.5 0.3 . 1.2 0.9 -0.1 Services 4.8 5.2 4.4 4.8 4.1 4.4 4.8 4.1 4.0 4.1 4.2 3.7 4.2 4.6 4.5 4.7 0.8 Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 1.1 1.4 1.2 1.3 1.1 1.0 1.4 1.4 0.8 1.1 1.1 1.2 1.1 1.4 1.6 1.6 0.2 Transportation and Storage 0.3 0.4 0.4 0.4 0.4 0.3 0.1 0.2 0.4 0.3 0.4 0.1 0.3 0.3 0.3 0.2 -0.5 Accommodation and Food Service Activities 0.3 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.2 0.2 0.2 0.1 0.1 0.1 0.2 -0.4 Information and Communication 0.2 0.3 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.1 0.2 0.3 0.2 0.1 0.2 0.2 Financial and Insurance Activities 0.9 0.6 0.7 0.6 0.6 0.8 0.8 0.4 0.7 0.7 0.7 0.6 1.0 0.9 1.1 0.9 0.9 Real estate and Ownership of Dwellings 0.3 0.3 0.4 0.3 0.3 0.5 0.5 0.3 0.4 0.4 0.4 0.2 0.3 0.3 0.4 0.3 0.1 Professional and Business Services 1.0 1.0 0.6 1.0 0.5 0.7 0.7 0.6 0.3 0.3 0.3 0.2 0.1 0.2 0.2 0.1 . Public Administration and Defense; Compulsory Social Activities 0.2 0.3 0.2 0.5 0.3 0.4 0.4 0.4 0.5 0.6 0.7 0.6 0.5 0.5 0.4 0.9 0.2 Education 0.2 0.3 0.3 0.2 0.4 0.3 0.4 0.1 0.2 0.2 0.4 0.5 0.2 0.5 0.1 0.2 . Human Health and Social Work Activities 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 . . . . 0.1 . 0.1 0.1 0.2 Other Services 0.2 0.3 0.1 0.1 0.1 . . 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.1 0.2 -0.2 Gross Domestic Product 6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7 -0.2

. Rounds off to zero Notes: 1/ The PSA released the Revised and Rebased to 2018 National Accounts of the Philippines (NAP) on 20 April 2020. The salient features of the revision and rebasing are as follows: adoption of the 2008 System of National Accounts (SNA) recommendations and latest classification systems; inclusion of new industries and expenditure commodities; and updating of the base year to 2018. 2/ Total may not add up due to rounding. Source of basic data: Philippine Statistics Authority (PSA) 1a GROSS DOMESTIC PRODUCT BY EXPENDITURE SHARE for periods indicated

LEVELS (in billion pesos; at constant 2018 prices) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Household Final Consumption Expenditure 2,778.0 2,898.2 2,828.1 3,319.2 2,943.5 3,073.4 2,983.4 3,527.5 3,114.8 3,263.9 3,148.7 3,722.7 3,309.0 3,447.0 3,338.0 3,933.2 3,314.5 Government Final Consumption Expenditure 443.2 545.1 431.0 402.1 433.8 583.7 464.8 457.6 494.2 655.5 531.8 518.2 526.0 700.2 578.4 606.3 563.5 Gross Capital Formation 861.8 1,034.7 968.2 1,153.7 1,007.1 1,132.6 1,066.6 1,250.0 1,042.6 1,305.2 1,246.2 1,365.0 1,144.6 1,294.8 1,245.0 1,399.3 935.0 Gross Fixed Capital Formation 848.8 1,041.3 988.3 1,112.4 948.5 1,133.8 1,086.8 1,242.9 1,040.5 1,335.0 1,244.8 1,363.0 1,121.3 1,296.3 1,317.8 1,441.7 1,072.9 Construction 476.1 655.8 580.0 640.8 516.6 704.8 627.4 709.4 591.6 816.1 710.2 821.9 648.2 826.8 811.5 915.7 626.0 Durable Equipment 277.4 292.9 307.2 342.8 326.5 321.6 346.8 393.2 333.3 398.6 407.7 387.4 351.8 338.5 368.2 362.3 324.9 Breeding Stock and Orchard Dev't 77.9 80.4 79.0 107.4 82.8 87.3 84.4 113.8 90.4 94.9 92.1 120.3 92.3 97.7 91.7 122.0 91.1 Intellectual Property Products 17.4 12.3 22.1 21.3 22.7 20.1 28.1 26.6 25.2 25.5 34.8 33.3 29.0 33.2 46.4 41.8 31.0 Changes in Inventories 12.9 -7.1 -20.5 41.2 58.6 -1.2 -20.3 5.7 1.1 -30.4 1.3 1.1 23.0 -2.0 -73.2 -42.7 -138.1 Valuables 0.1 0.4 0.4 0.1 . . 0.1 1.4 1.1 0.6 0.1 0.9 0.2 0.5 0.4 0.3 0.2

Exports of Goods and Services 1,051.6 1,128.3 1,060.9 963.1 1,181.4 1,307.5 1,304.9 1,141.7 1,334.8 1,454.3 1,435.1 1,294.4 1,390.4 1,499.5 1,461.6 1,298.7 1,348.0

Less: Imports of Goods and Services 1,397.9 1,491.6 1,412.6 1,502.3 1,592.6 1,685.0 1,638.3 1,767.5 1,750.4 1,997.9 1,933.5 1,980.5 1,905.6 1,999.2 1,931.3 1,967.3 1,733.4 Net Exports -346.3 -363.3 -351.7 -539.2 -411.2 -377.5 -333.4 -625.9 -415.6 -543.6 -498.4 -686.1 -515.3 -499.7 -469.7 -668.6 -385.3 Statistical Discrepancy -14.0 25.5 -23.1 11.5 -13.2 25.2 -38.8 26.8 -20.5 39.4 -31.1 12.2 -6.7 32.4 -15.8 -10.0 23.2

Gross Domestic Product 3,722.7 4,140.2 3,852.5 4,347.3 3,960.0 4,437.3 4,142.6 4,636.0 4,215.6 4,720.4 4,397.2 4,932.0 4,457.6 4,974.7 4,675.9 5,260.2 4,450.9 Net Primary Income from the Rest of the World 462.0 437.5 433.4 467.0 488.0 468.2 472.4 479.5 499.4 463.9 497.9 485.9 491.3 465.4 475.2 472.2 469.9 Gross National Income 4,184.7 4,577.7 4,285.9 4,814.3 4,448.0 4,905.6 4,615.1 5,115.6 4,715.0 5,184.3 4,895.2 5,417.9 4,949.0 5,440.1 5,151.1 5,732.4 4,920.8

ANNUAL CHANGE (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Household Final Consumption Expenditure 7.2 7.5 7.3 6.7 6.0 6.0 5.5 6.3 5.8 6.2 5.5 5.5 6.2 5.6 6.0 5.7 0.2

Government Final Consumption Expenditure 12.8 14.4 4.0 5.3 -2.1 7.1 7.9 13.8 13.9 12.3 14.4 13.2 6.4 6.8 8.8 17.0 7.1

Gross Capital Formation 20.6 25.2 20.6 17.4 16.9 9.5 10.2 8.3 3.5 15.2 16.8 9.2 9.8 -0.8 -0.1 2.5 -18.3 Gross Fixed Capital Formation 19.2 26.0 23.5 15.6 11.8 8.9 10.0 11.7 9.7 17.7 14.5 9.7 7.8 -2.9 5.9 5.8 -4.3 Construction 12.7 18.8 20.1 9.4 8.5 7.5 8.2 10.7 14.5 15.8 13.2 15.8 9.6 1.3 14.3 11.4 -3.4 Durable Equipment 35.7 55.4 31.6 33.0 17.7 9.8 12.9 14.7 2.1 23.9 17.5 -1.5 5.5 -15.1 -9.7 -6.5 -7.7 Breeding Stock and Orchard Dev't 5.6 4.1 18.0 5.8 6.3 8.6 6.9 5.9 9.2 8.8 9.1 5.8 2.1 3.0 -0.5 1.4 -1.2 Intellectual Property Products 50.7 36.9 29.8 22.7 30.4 63.5 26.9 24.6 11.2 26.5 23.7 25.5 15.2 30.4 33.5 25.4 6.6 Changes in Inventories … … … … … … … … … … … … … … … … … Valuables -34.4 423.3 -35.3 -84.0 -71.0 -95.7 -83.7 1,467.6 2,637.9 2,823.6 125.3 -32.8 -76.9 -14.1 182.9 -68.9 -29.6

Exports of Goods and Services 8.7 10.0 8.1 10.0 12.3 15.9 23.0 18.5 13.0 11.2 10.0 13.4 4.2 3.1 1.8 0.3 -3.0

Less: Imports of Goods and Services 19.5 24.4 14.6 17.1 13.9 13.0 16.0 17.7 9.9 18.6 18.0 12.0 8.9 0.1 -0.1 -0.7 -9.0

Gross Domestic Product 6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7 -0.2 Net Primary Income from the Rest of the World 8.2 5.4 4.2 -1.3 5.6 7.0 9.0 2.7 2.3 -0.9 5.4 1.3 -1.6 0.3 -4.6 -2.8 -4.4 Gross National Income 7.1 7.2 7.0 6.1 6.3 7.2 7.7 6.3 6.0 5.7 6.1 5.9 5.0 4.9 5.2 5.8 -0.6

CONTRIBUTION TO GDP GROWTH (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Household Final Consumption Expenditure 5.4 5.2 5.3 5.1 4.4 4.2 4.0 4.8 4.3 4.3 4.0 4.2 4.6 3.9 4.3 4.3 0.1

Government Final Consumption Expenditure 1.4 1.8 0.5 0.5 -0.3 0.9 0.9 1.3 1.5 1.6 1.6 1.3 0.8 0.9 1.1 1.8 0.8 Gross Capital Formation 4.2 5.4 4.6 4.2 3.9 2.4 2.6 2.2 0.9 3.9 4.3 2.5 2.4 -0.2 . 0.7 -4.7 Gross Fixed Capital Formation 3.9 5.6 5.2 3.7 2.7 2.2 2.6 3.0 2.3 4.5 3.8 2.6 1.9 -0.8 1.7 1.6 -1.1 Construction 1.5 2.7 2.7 1.4 1.1 1.2 1.2 1.6 1.9 2.5 2.0 2.4 1.3 0.2 2.3 1.9 -0.5 Durable Equipment 2.1 2.7 2.1 2.1 1.3 0.7 1.0 1.2 0.2 1.7 1.5 -0.1 0.4 -1.3 -0.9 -0.5 -0.6 Breeding Stock and Orchard Dev't 0.1 0.1 0.3 0.1 0.1 0.2 0.1 0.1 0.2 0.2 0.2 0.1 . 0.1 . . . Intellectual Property Products 0.2 0.1 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1 0.2 0.1 0.1 0.2 0.3 0.2 . Changes in Inventories 0.3 -0.2 -0.6 0.5 1.2 0.1 . -0.8 -1.5 -0.7 0.5 -0.1 0.5 0.6 -1.7 -0.9 -3.6 Valuables ......

Exports of Goods and Services 2.4 2.7 2.2 2.2 3.5 4.3 6.3 4.1 3.9 3.3 3.1 3.3 1.3 1.0 0.6 0.1 -1.0

Less: Imports of Goods and Services 6.5 7.6 5.0 5.4 5.2 4.7 5.9 6.1 4.0 7.0 7.1 4.6 3.7 . -0.1 -0.3 -3.9 Net Exports -4.1 -4.9 -2.8 -3.2 -1.7 -0.3 0.5 -2.0 -0.1 -3.7 -4.0 -1.3 -2.4 0.9 0.7 0.4 2.9 Statistical Discrepancy . -0.1 -0.3 0.3 . . -0.4 0.4 -0.2 0.3 0.2 -0.3 0.3 -0.1 0.3 -0.4 0.7

Gross Domestic Product 6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7 -0.2

. Rounds off to zero …. Blank Notes: 1/ The PSA released the Revised and Rebased to 2018 National Accounts of the Philippines (NAP) on 20 April 2020. The salient features of the revision and rebasing are as follows: adoption of the 2008 System of National Accounts (SNA) recommendations and latest classification systems; inclusion of new industries and expenditure commodities; and updating of the base year to 2018. 2/ Total may not add up due to rounding. Source of basic data: Philippine Statistics Authority (PSA) 2 SELECTED LABOR, EMPLOYMENT AND WAGE INDICATORS for periods indicated

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1P

Employment Status 1 Labor Force (in thousands) 43,144 43,289 43,286 43,724 42,109 42,714 42,544 43,732 44,075 43,257 42,979 43,528 43,313 44,022 45,385 45,194 45,043 Employed 40,689 40,664 40,954 41,685 39,347 40,271 40,171 41,547 41,755 40,896 40,650 41,325 41,030 41,755 42,953 43,144 42,653 Employment Created 1,777 1,910 (1,342) (393) (783) (138) 2,408 625 479 (221) (726) 858 2,303 1,819 1,624 Agriculture 186 40 (881) 125 (1,027) (1,428) 841 (723) (750) (419) (2,023) (732) 716 168 817 Industry 812 785 (1) 41 434 368 716 606 176 406 616 43 153 236 (163) Services 779 1,085 (460) (559) (189) 922 850 742 1,052 (208) 681 1,548 1,435 1,415 969 Unemployed 2,455 2,625 2,332 2,040 2,761 2,443 2,373 2,185 2,320 2,361 2,329 2,203 2,283 2,267 2,432 2,050 2,390 Underemployed 7,975 7,431 7,134 7,510 6,398 6,468 6,541 6,616 7,498 6,935 7,003 5,502 6,326 5,607 5,955 5,616 6,317 Labor Force Participation Rate (%) 63.6 63.5 63.2 63.6 60.7 61.4 60.6 62.1 62.2 60.9 60.1 60.6 60.3 61.3 62.1 61.5 61.7 Employment Rate (%) 94.3 93.9 94.6 95.3 93.4 94.3 94.4 95.0 94.7 94.5 94.6 94.9 94.7 94.9 94.6 95.5 94.7 Unemployment Rate (%) 5.7 6.1 5.4 4.7 6.6 5.7 5.6 5.0 5.3 5.5 5.4 5.1 5.3 5.1 5.4 4.5 5.3 Underemployment Rate (%) 19.6 18.3 17.4 18.0 16.3 16.1 16.3 15.9 18.0 17.0 17.2 13.3 15.4 13.4 13.9 13.0 14.8 NCR Labor Turnover Rate (%) 1.0 2.3 3.7 3.4 1.3 2.1 1.1 1.4 0.5 0.7 Philippines Labor Turnover Rate (%) 2 1.6 1.7 0.8 0.8

Overseas Employment (Deployed, in thousands) 643 666 508 295 609 611 472 301 Land-based 522 552 410 185 488 493 388 245 Sea-based 121 115 98 110 121 118 84 56

Strikes a a a Number of New Strikes 0 3 5 7 2 4 3 0 2 2 7 3 6 3 4 5 4 a a a Number of Workers Involved 0 650 283 2173 352 693 434 0 510 1533 1131 4928 835 498 1108 1104 2554

Nominal Daily Wage Rates (in pesos)3 Non-Agricultural a b b b NCR 481.0 491.0 491.0 491.0 491.0 491.0 491.0 512.0 512.0 512.0 512.0 537.0 537.0 537.0 537.0 537.0 537.0 a b b b Regions Outside NCR 362.5 364.0 378.5 378.5 378.5 380.0 380.0 380.0 380.0 400.0 400.0 400.0 400.0 400.0 400.0 400.0 420.0 Agricultural NCR a b b b Plantation 444.0 454.0 454.0 454.0 454.0 454.0 454.0 475.0 475.0 475.0 475.0 500.0 500.0 500.0 500.0 500.0 500.0 a b b b Non-Plantation 444.0 454.0 454.0 454.0 454.0 454.0 454.0 475.0 475.0 475.0 475.0 500.0 500.0 500.0 500.0 500.0 500.0 Regions Outside NCR a b b b Plantation 337.5 337.5 353.5 353.5 353.5 353.5 353.5 353.5 353.5 370.0 370.0 370.0 391.0 391.0 391.0 391.0 394.0 a b b b Non-Plantation 335.0 335.0 335.0 335.0 348.0 348.0 348.0 348.0 348.0 356.0 368.0 368.0 391.0 391.0 391.0 391.0 394.0 Real Daily Wage Rates (in pesos), 2006=100 4 Non-Agricultural a b b b NCR 364.7 369.2 366.1 361.6 357.9 358.1 349.7 360.3 449.9 447.2 437.6 460.9 457.4 455.5 455.1 448.3 449.8 a b b b Regions Outside NCR 259.1 250.7 268.3 265.2 262.1 254.4 253.2 251.2 333.6 348.7 341.9 342.5 340.7 340.1 337.3 332.2 346.5 Agricultural NCR a b b b Plantation 336.6 341.4 338.6 334.3 330.9 331.2 323.4 334.3 417.4 414.9 406.0 429.2 425.9 424.1 423.7 417.4 418.8 a b b b Non-Plantation 336.6 341.4 338.6 334.3 330.9 331.2 323.4 334.3 417.4 414.9 406.0 429.2 425.9 424.1 423.7 417.4 418.8 Regions Outside NCR a b b b Plantation 241.2 240.0 250.5 247.7 244.8 245.5 243.3 240.6 310.9 322.6 316.2 316.8 325.3 322.9 321.6 319.7 312.5 a b b b Non-Plantation 228.5 225.9 225.1 223.5 230.0 228.2 227.0 224.7 290.0 310.4 297.3 300.4 325.3 322.9 321.6 319.7 312.5

Notes: 1 Starting April 2016 round, the Labor Force Survey (LFS) adopted the 2013 Master Sample Design, with a sample size of approximately 44,000 households as well as the population projections based on the 2010 Census of Population and Housing (2010 CPH). Meanwhile, previous survey rounds were derived using 2000 CPH population projection. Starting January 2017 round, Computer Aided Personal Interviewing (CAPI) using Tablet was utilized in the LFS enumeration. 2 The Labor Turnover Survey covered establishments based located at the NCR only while survey rounds for Q1 to Q4 2018 covers enterprises within and outside the NCR. 3 Source of data for both nominal and real wage rates is the National Wages and Productivity Commission. It includes basic minimum wage and cost of living allowance (COLA). Starting 2006, annual figures reflects December data. Figures outside NCR represent the highest nominal regional rates in a given category and its corresponding value in real terms. 4 Starting 10 November 1990, adjustments in the minimum legislated wage rates are being determined by the Regional Tripartite Wages Productiviity Board. Starting 2018, real terms is computed using 2012 as base year while previous data were computed using 2006 as base year. P Preliminary Details may not add up to totals due to rounding. Sources: Philippine Overseas Employment Administration (POEA), National Wages and Productivity Commission (NWPC), National Conciliation and Mediation Board (NCMB), Department of Labor and Employment (DOLE) - Bureau of Local Employment (BLE) and Philippine Statistics Authority (PSA) 3 CASH OPERATIONS OF THE NATIONAL GOVERNMENT for periods indicated in billion pesos

2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Revenues 532.4 644.0 625.1 671.7 619.8 790.7 701.0 738.7 687.7 859.8 780.4 809.6 775.2 Ratio to GDP (%) 1 14.2 15.5 15.6 14.5 15.1 17.3 15.8 14.4 15.5 17.7 16.5 14.7 17.3 Tax 480.0 589.0 570.0 611.8 558.7 696.1 640.6 r 670.6 616.0 765.0 709.5 737.3 620.8 Non-tax 52.4 55.0 55.1 59.9 61.1 94.7 60.4 68.1 71.7 94.8 70.9 72.2 154.4

Expenditures 615.4 715.5 683.7 809.2 772.0 831.6 886.2 918.7 778.0 812.2 1,036.7 1,170.8 849.2 Ratio to GDP (%) 1 16.4 17.2 17.0 17.4 18.8 18.2 19.9 17.9 17.6 16.7 21.9 21.3 19.0 Interest Payments 97.9 53.7 97.4 61.6 97.2 68.3 105.8 77.9 107.8 72.3 113.7 67.1 119.9 Equity 0.0 3.2 . 2.1 2.0 0.6 1.3 0.1 . 0.5 1.1 1.6 0.0 Net Lending -1.7 0.4 -4.1 1.2 -0.2 1.6 5.5 -2.0 3.5 15.3 -2.9 1.2 -8.9 Subsidy 19.7 38.6 25.4 47.5 45.3 22.5 57.1 11.8 9.3 17.4 130.4 r 44.5 36.2 Allotment to LGUs 122.4 151.3 128.3 128.2 148.7 153.9 140.2 132.8 149.5 146.2 162.6 159.6 187.6 Tax Expenditures 2 0.2 1.4 0.7 1.2 1.6 2.5 2.7 5.8 0.4 3.3 8.1 3.7 0.7 Others - NG Disbursements 377.0 466.9 436.1 567.5 477.4 582.2 573.7 692.2 507.5 557.1 623.7 r 893.1 513.7

Surplus/Deficit (-) -83.0 -71.5 -58.6 -137.6 -152.2 -40.8 -185.2 -180.0 -90.2 47.6 -256.3 -361.2 -74.0 Ratio to GDP (%) 1 -2.2 -1.7 -1.5 -3.0 -3.7 -0.9 -4.2 -3.5 -2.0 1.0 -5.4 -6.6 -1.7 Primary Balance 3 14.9 -17.8 38.8 -76.0 -55.0 27.5 -79.4 -102.1 17.5 119.9 -142.7 -294.1 45.9 Ratio to GDP (%) 1 0.4 -0.4 1.0 -1.6 -1.3 0.6 -1.8 -2.0 0.4 2.5 -3.0 -5.3 1.0

Financing 4 117.4 276.4 106.0 259.1 144.1 235.8 209.7 193.6 582.0 150.1 65.5 78.6 500.6 113.0 86.5 58.6 187.6 152.2 40.8 185.2 180.0 582.0 150.1 65.5 78.6 Foreign Borrowings 29.8 -1.6 9.3 -9.9 82.8 -7.0 116.3 -0.3 91.8 25.7 55.0 12.4 51.3 Domestic Borrowings 87.7 278.0 96.6 269.0 61.3 242.9 93.4 193.9 490.3 124.4 10.5 66.2 449.3

Total Change in Cash: Deposit/Withdrawal (-) 50.5 126.3 -24.0 102.7 -61.9 36.4 -26.6 -0.6 355.0 156.5 -269.6 -466.5 655.0

1 Updated to reflect the revised GDP, based on the revised and rebased national accounts released by the Philippine Statistics Authority. 2 Excludes documentary stamps 3 Primary balance is the government fiscal balance excluding interest payments. 4 Based on the revised data on financing, which are sourced from the National Government Cash Operations of the Bureau of the Treasury (BTr) to conform with the Government Finance Statistics Manual (GFSM) 2014 concept where reporting of debt amortization reflects the actual principal repayments to creditor including those serviced by the Bond Sinking Fund (BSF), while financing includes gross proceeds of liability management transactions such as bond exchange. r Revised . rounds off to zero Note: Details may not add up to total due to rounding Source: Bureau of the Treasury

4 CONSUMER PRICE INDEX IN THE PHILIPPINES 2012=100 period averages

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 107.5 108.0 108.6 109.4 110.6 111.0 111.5 112.7 114.8 116.3 118.4 119.4 119.2 119.8 120.4 121.3 122.4 Food and Non-alcoholic Beverages 111.5 111.4 112.4 113.7 114.7 114.9 115.7 117.4 120.4 121.7 125.5 126.8 125.9 125.4 126.1 127.2 128.8 Food Items 111.9 111.9 112.8 114.3 115.3 115.6 116.4 118.2 121.1 122.0 125.9 127.3 126.1 125.6 126.2 127.3 129.0 Alcoholic Beverages and Tobacco 143.5 145.3 147.5 149.7 153.6 155.8 157.5 159.5 178.0 187.7 191.6 194.1 201.1 205.6 212.8 228.1 238.2 Non-Food 103.9 104.7 105.2 105.6 106.8 107.4 107.6 108.5 109.6 111.0 112.0 112.7 112.9 113.9 114.3 114.7 115.3 Clothing and Footwear 110.7 111.3 112.2 113.0 113.8 114.3 114.8 115.2 116.1 116.8 117.6 118.2 118.9 119.6 120.7 121.4 122.1 Housing, Water, Electricity, Gas, and Other Fuels 102.7 103.4 103.9 104.2 105.7 106.4 106.0 107.5 108.6 110.1 111.5 112.1 112.6 113.6 113.3 113.5 114.7 Electricity, Gas and Other Fuels 90.8 91.5 91.6 91.8 95.5 96.9 94.9 98.4 99.6 102.9 105.0 105.1 104.5 106.0 102.6 102.5 103.7 Furnishing, House Equipment and Routine Maintenance of the House 109.3 109.8 110.6 111.2 111.9 112.4 113.0 113.5 114.6 115.7 116.9 117.8 118.8 119.4 120.3 121.2 123.1 Health 108.3 109.0 109.9 110.8 111.8 112.2 112.6 112.9 114.3 115.2 117.1 118.0 119.0 119.4 120.7 121.5 122.4 Transport 92.7 93.9 93.6 95.1 97.4 98.2 98.5 100.0 102.2 104.1 106.3 107.2 104.6 107.2 106.1 106.5 105.6 Operation of Personal Transport Equipment 70.8 75.6 75.1 77.6 82.2 80.7 82.2 87.0 92.9 98.5 101.6 99.6 94.4 100.6 97.6 97.8 94.9 Communication 100.3 100.4 100.5 100.6 100.7 100.7 100.8 100.9 100.9 101.0 101.2 101.3 101.3 101.4 101.5 101.6 101.7 Recreation and Culture 108.6 108.9 109.3 109.5 109.7 110.0 111.0 110.9 111.2 111.5 113.3 114.4 114.7 115.0 115.7 116.0 116.4 Education 114.3 115.3 117.5 117.8 117.9 118.5 120.0 120.0 120.0 121.5 115.4 115.5 115.4 116.6 120.5 120.8 120.8 Restaurants and Miscellaneous Goods and Services 106.6 107.4 107.7 108.1 108.6 108.9 109.6 110.1 111.4 112.8 113.9 114.9 115.8 116.5 117.5 118.1 118.8

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 0.2 0.5 0.6 0.7 1.1 0.4 0.5 1.1 1.9 1.3 1.8 0.8 -0.2 0.5 0.5 0.7 0.9 Food and Non-alcoholic Beverages 0.3 -0.1 0.9 1.2 0.9 0.2 0.7 1.5 2.6 1.1 3.1 1.0 -0.7 -0.4 0.6 0.9 1.3 Food Items 0.3 0 0.8 1.3 0.9 0.3 0.7 1.5 2.5 0.7 3.2 1.1 -0.9 -0.4 0.5 0.9 1.3 Alcoholic Beverages and Tobacco 1.6 1.3 1.5 1.5 2.6 1.4 1.1 1.3 11.6 5.4 2.1 1.3 3.6 2.2 3.5 7.2 4.4 Non-Food 0 0.8 0.5 0.4 1.1 0.6 0.2 0.8 1.0 1.3 0.9 0.6 0.2 0.9 0.4 0.3 0.5 Clothing and Footwear 0.5 0.5 0.8 0.7 0.7 0.4 0.4 0.3 0.8 0.6 0.7 0.5 0.6 0.6 0.9 0.6 0.6 Housing, Water, Electricity, Gas, and Other Fuels 0.4 0.7 0.5 0.3 1.4 0.7 -0.4 1.4 1.0 1.4 1.3 0.5 0.4 0.9 -0.3 0.2 1.1 Electricity, Gas and Other Fuels -1.2 0.8 0.1 0.2 4.0 1.5 -2.1 3.7 1.2 3.3 2.0 0.1 -0.6 1.4 -3.2 -0.1 1.2 Furnishing, House Equipment and Routine Maintenance of the House 0.6 0.5 0.7 0.5 0.6 0.4 0.5 0.4 1.0 1.0 1.0 0.8 0.8 0.5 0.8 0.7 1.6 Health 0.5 0.6 0.8 0.8 0.9 0.4 0.4 0.3 1.2 0.8 1.6 0.8 0.8 0.3 1.1 0.7 0.7 Transport -2.2 1.3 -0.3 1.6 2.4 0.8 0.3 1.5 2.2 1.9 2.1 0.8 -2.4 2.5 -1.0 0.4 -0.8 Operation of Personal Transport Equipment -7.6 6.8 -0.7 3.3 5.9 -1.8 1.9 5.8 6.8 6.0 3.1 -2.0 -5.2 6.6 -3.0 0.2 -3.0 Communication 0.1 0.1 0.1 0.1 0.1 0 0.1 0.1 0 0.1 0.2 0.1 0 0.1 0.1 0.1 0.1 Recreation and Culture 0.2 0.3 0.4 0.2 0.2 0.3 0.9 -0.1 0.3 0.3 1.6 1.0 0.3 0.3 0.6 0.3 0.3 Education 0 0.9 1.9 0.3 0.1 0.5 1.3 0 0 1.3 -5.0 0.1 -0.1 1.0 3.3 0.2 0 Restaurants and Miscellaneous Goods and Services 0.3 0.8 0.3 0.4 0.5 0.3 0.6 0.5 1.2 1.3 1.0 0.9 0.8 0.6 0.9 0.5 0.6

Year-on-Year Change (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 0.7 1.0 1.5 2.0 2.9 2.8 2.7 3.0 3.8 4.8 6.2 5.9 3.8 3.0 1.7 1.6 2.7 Food and Non-alcoholic Beverages 0.9 1.4 1.7 2.2 2.9 3.1 2.9 3.3 5.0 5.9 8.5 8.0 4.6 3.0 0.5 0.3 2.3 Food Items 0.8 1.5 1.7 2.4 3.0 3.3 3.2 3.4 5.0 5.5 8.2 7.7 4.1 3.0 0.2 0 2.3 Alcoholic Beverages and Tobacco 3.5 4.1 5.1 5.9 7.0 7.2 6.8 6.5 15.9 20.5 21.7 21.7 13.0 9.5 11.1 17.5 18.4 Non-Food 0.3 0.5 1.3 1.6 2.8 2.6 2.3 2.7 2.6 3.4 4.1 3.9 3.0 2.6 2.1 1.8 2.1 Clothing and Footwear 1.7 1.8 2.3 2.6 2.8 2.7 2.3 1.9 2.0 2.2 2.4 2.6 2.4 2.4 2.6 2.7 2.7 Housing, Water, Electricity, Gas, and Other Fuels -0.8 -0.6 1.1 1.9 2.9 2.9 2.0 3.2 2.7 3.5 5.2 4.3 3.7 3.2 1.6 1.2 1.9 Electricity, Gas and Other Fuels -7.0 -6.7 -2.7 -0.1 5.2 5.9 3.6 7.2 4.3 6.2 10.6 6.8 4.9 3.0 -2.3 -2.5 -0.8 Furnishing, House Equipment and Routine Maintenance of the House 1.5 1.5 2.0 2.3 2.4 2.4 2.2 2.1 2.4 2.9 3.5 3.8 3.7 3.2 2.9 2.9 3.6 Health 1.6 2.0 2.3 2.8 3.2 2.9 2.5 1.9 2.2 2.7 4.0 4.5 4.1 3.6 3.1 3.0 2.9 Transport -1.9 -2.2 -1.5 0.3 5.1 4.6 5.2 5.2 4.9 6.0 7.9 7.2 2.3 3.0 -0.2 -0.7 1.0 Operation of Personal Transport Equipment -9.9 -8.7 -5.1 1.3 16.1 6.7 9.5 12.1 13.0 22.1 23.6 14.5 1.6 2.1 -3.9 -1.8 0.5 Communication 0.1 0.3 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.4 Recreation and Culture 0.6 0.8 1.0 1.0 1.0 1.0 1.6 1.3 1.4 1.4 2.1 3.2 3.1 3.1 2.1 1.4 1.5 Education 3.2 3.0 2.9 3.1 3.1 2.8 2.1 1.9 1.8 2.5 -3.8 -3.8 -3.8 -4.0 4.4 4.6 4.7 Restaurants and Miscellaneous Goods and Services 1.3 1.9 1.9 1.7 1.9 1.4 1.8 1.9 2.6 3.6 3.9 4.4 3.9 3.3 3.2 2.8 2.6

Source of Basic Data: Philippine Statistics Authority (PSA) 4a CONSUMER PRICE INDEX IN NATIONAL CAPITAL REGION (NCR) for periods indicated (2012=100) period averages

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 104.2 104.6 105.3 106.2 107.6 108.5 109.0 110.8 112.8 114.2 116.2 116.9 117.1 117.8 118.0 119.0 119.6 Food and Non-alcoholic Beverages 111.4 111.9 113.5 116.2 117.5 118.7 119.6 122.1 125.2 125.7 129.6 130.1 130.2 130.3 131.4 133.8 134.6 Food Items 112.1 112.6 114.4 117.4 118.8 120.1 121.0 123.7 126.8 126.5 130.6 130.9 131.0 131.0 132.1 134.8 135.6 Alcoholic Beverages and Tobacco 132.7 134.4 137.0 138.2 143.0 147.2 149.0 150.3 172.0 180.3 181.4 182.1 184.2 185.9 190.0 203.2 209.3 Non-Food 100.7 101.1 101.4 101.6 103.0 103.6 104.1 105.6 106.8 108.4 109.6 110.4 110.7 111.6 111.3 111.6 112.0 Clothing and Footwear 112.0 112.7 113.5 113.9 114.7 115.7 116.3 116.7 117.4 118.4 118.8 119.5 120.3 120.4 120.8 121.1 121.5 Housing, Water, Electricity, Gas, and Other Fuels 98.0 98.0 98.0 97.8 99.5 100.2 99.7 102.3 103.8 105.7 106.4 106.8 107.7 108.6 107.2 107.3 107.5 Electricity, Gas and Other Fuels 77.4 76.8 76.3 75.6 81.8 83.7 79.5 86.2 87.3 91.9 93.4 93.0 93.3 94.4 88.1 88.3 87.0 Furnishing, House Equipment and Routine Maintenance of the House 109.0 109.3 110.2 110.7 111.1 112.1 112.6 113.0 113.8 115.5 116.1 116.6 117.1 117.3 117.7 118.0 121.3 Health 110.0 110.3 110.7 111.1 112.2 113.2 114.5 114.5 115.3 115.9 119.7 120.1 121.1 121.2 122.2 122.4 123.8 Transport 89.2 89.9 89.8 91.3 95.0 96.0 97.7 99.5 101.3 102.7 107.3 109.1 106.5 107.9 106.4 106.7 106.2 Operation of Personal Transport Equipment 69.8 74.9 74.6 78.2 83.4 81.6 85.0 90.8 95.5 99.8 102.8 100.2 96.3 101.3 96.7 97.1 95.8 Communication 100.3 100.5 100.5 100.5 100.6 100.7 100.8 100.8 100.9 101.1 101.3 101.4 101.4 101.4 101.6 101.6 101.6 Recreation and Culture 107.5 108.1 108.8 108.9 109.2 109.7 110.1 110.2 110.4 111.0 112.2 113.0 113.3 113.5 113.7 113.9 114.3 Education 115.7 116.9 119.2 119.2 119.2 119.8 121.1 121.1 121.1 123.3 123.0 123.0 122.8 124.8 129.3 129.7 129.8 Restaurants and Miscellaneous Goods and Services 102.6 103.4 103.5 103.8 104.3 104.8 105.9 106.7 108.0 109.9 110.7 111.9 112.7 113.6 114.3 115.0 115.6

Quarter-on-Quarter Change (in percent) 2020 2016 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items -0.1 0.4 0.7 0.9 1.3 0.8 0.5 1.7 1.8 1.2 1.8 0.6 0.2 0.6 0.2 0.8 0.5 Food and Non-alcoholic Beverages 0.1 0.4 1.4 2.4 1.1 1.0 0.8 2.1 2.5 0.4 3.1 0.4 0.1 0.1 0.8 1.8 0.6 Food Items 0.1 0.4 1.6 2.6 1.2 1.1 0.7 2.2 2.5 -0.2 3.2 0.2 0.1 0 0.8 2.0 0.6 Alcoholic Beverages and Tobacco 1.2 1.3 1.9 0.9 3.5 2.9 1.2 0.9 14.4 4.8 0.6 0.4 1.2 0.9 2.2 6.9 3.0 Non-Food -0.4 0.4 0.3 0.2 1.4 0.6 0.5 1.4 1.1 1.5 1.1 0.7 0.3 0.8 -0.3 0.3 0.4 Clothing and Footwear 0.3 0.6 0.7 0.4 0.7 0.9 0.5 0.3 0.6 0.9 0.3 0.6 0.7 0.1 0.3 0.2 0.3 Housing, Water, Electricity, Gas, and Other Fuels -0.2 0 0 -0.2 1.7 0.7 -0.5 2.6 1.5 1.8 0.7 0.4 0.8 0.8 -1.3 0.1 0.2 Electricity, Gas and Other Fuels -0.8 -0.8 -0.7 -0.9 8.2 2.3 -5.0 8.4 1.3 5.3 1.6 -0.4 0.3 1.2 -6.7 0.2 -1.5 Furnishing, House Equipment and Routine Maintenance of the House 0.1 0.3 0.8 0.5 0.4 0.9 0.4 0.4 0.7 1.5 0.5 0.4 0.4 0.2 0.3 0.3 2.8 Health 0.2 0.3 0.4 0.4 1.0 0.9 1.1 0 0.7 0.5 3.3 0.3 0.8 0.1 0.8 0.2 1.1 Transport -2.8 0.8 -0.1 1.7 4.1 1.1 1.8 1.8 1.8 1.4 4.5 1.7 -2.4 1.3 -1.4 0.3 -0.5 Operation of Personal Transport Equipment -7.1 7.3 -0.4 4.8 6.6 -2.2 4.2 6.8 5.2 4.5 3.0 -2.5 -3.9 5.2 -4.5 0.4 -1.3 Communication 0 0.2 0 0 0.1 0.1 0.1 0 0.1 0.2 0.2 0.1 0 0 0.2 0 0 Recreation and Culture 0.1 0.6 0.6 0.1 0.3 0.5 0.4 0.1 0.2 0.5 1.1 0.7 0.3 0.2 0.2 0.2 0.4 Education 0 1.0 2.0 0 0 0.5 1.1 0 0 1.8 -0.2 0 -0.2 1.6 3.6 0.3 0.1 Restaurants and Miscellaneous Goods and Services 0.2 0.8 0.1 0.3 0.5 0.5 1.0 0.8 1.2 1.8 0.7 1.1 0.7 0.8 0.6 0.6 0.5

Year-on-Year Change (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items -0.3 0.2 0.9 1.8 3.3 3.7 3.5 4.3 4.8 5.3 6.6 5.5 3.8 3.2 1.5 1.8 2.1 Food and Non-alcoholic Beverages 1.3 2.7 2.7 4.4 5.5 6.1 5.4 5.1 6.6 5.9 8.4 6.6 4.0 3.7 1.4 2.8 3.4 Food Items 1.4 2.9 3.0 4.8 6.0 6.7 5.8 5.4 6.7 5.3 7.9 5.8 3.3 3.6 1.1 3.0 3.5 Alcoholic Beverages and Tobacco 2.2 2.9 4.5 5.4 7.8 9.5 8.8 8.8 20.3 22.5 21.7 21.2 7.1 3.1 4.7 11.6 13.6 Non-Food -1.1 -1.0 -0.1 0.5 2.3 2.5 2.7 3.9 3.7 4.6 5.3 4.5 3.7 3.0 1.6 1.1 1.2 Clothing and Footwear 1.3 1.4 1.8 2.0 2.4 2.7 2.5 2.5 2.4 2.3 2.1 2.4 2.5 1.7 1.7 1.3 1.0 Housing, Water, Electricity, Gas, and Other Fuels -2.8 -2.9 -1.2 -0.4 1.5 2.2 1.7 4.6 4.3 5.5 6.7 4.4 3.8 2.7 0.8 0.5 -0.2 Electricity, Gas and Other Fuels -14.8 -14.1 -6.5 -3.1 5.7 9.0 4.2 14.0 6.7 9.8 17.5 7.9 6.9 2.7 -5.7 -5.1 -6.8 Furnishing, House Equipment and Routine Maintenance of the House 0.4 0.6 1.2 1.7 1.9 2.6 2.2 2.1 2.4 3.0 3.1 3.2 2.9 1.6 1.4 1.2 3.6 Health 0.8 1.1 0.9 1.2 2.0 2.6 3.4 3.1 2.8 2.4 4.5 4.9 5.0 4.6 2.1 1.9 2.2 Transport -3.5 -3.7 -2.5 -0.5 6.5 6.8 8.8 9.0 6.6 7.0 9.8 9.6 5.1 5.1 -0.8 -2.2 -0.3 Operation of Personal Transport Equipment -9.7 -7.8 -3.1 4.1 19.5 8.9 13.9 16.1 14.5 22.3 20.9 10.4 0.8 1.5 -5.9 -3.1 -0.5 Communication 0 0.2 0.2 0.2 0.3 0.2 0.3 0.3 0.3 0.4 0.5 0.6 0.5 0.3 0.3 0.2 0.2 Recreation and Culture 0.8 1.1 1.4 1.4 1.6 1.5 1.2 1.2 1.1 1.2 1.9 2.5 2.6 2.3 1.3 0.8 0.9 Education 4.0 3.6 3.0 3.0 3.0 2.5 1.6 1.6 1.6 2.9 1.6 1.6 1.4 1.2 5.1 5.4 5.7 Restaurants and Miscellaneous Goods and Services 0.5 1.2 1.2 1.4 1.7 1.4 2.3 2.8 3.5 4.9 4.5 4.9 4.4 3.4 3.3 2.8 2.6

Source of Basic Data: Philippine Statistics Authority (PSA) 4b CONSUMER PRICE INDEX IN AREAS OUTSIDE NATIONAL CAPITAL REGION (AONCR) for periods indicated (2012=100) period averages

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 108.4 108.9 109.5 110.4 111.4 111.8 112.2 113.3 115.4 117.0 119.1 120.2 119.9 120.3 121.1 121.9 123.3 Food and Non-alcoholic Beverages 111.5 111.4 112.1 113.2 114.1 114.2 114.9 116.4 119.4 120.9 124.6 126.2 125.0 124.4 125.0 125.9 127.6 Food Items 111.9 111.7 112.5 113.7 114.6 114.7 115.4 117.1 120.0 121.2 125.0 126.6 125.2 124.5 125.0 125.9 127.7 Alcoholic Beverages and Tobacco 145.7 147.5 149.7 152.1 155.8 157.6 159.3 161.4 179.2 189.2 193.7 196.6 204.6 209.6 217.5 233.3 244.2 Non-Food 105.0 106.0 106.5 107.1 108.2 108.7 108.8 109.5 110.7 112.0 112.8 113.5 113.7 114.7 115.3 115.8 116.5 Clothing and Footwear 110.4 110.9 111.9 112.7 113.6 113.9 114.4 114.8 115.7 116.4 117.3 117.9 118.6 119.4 120.7 121.5 122.3 Housing, Water, Electricity, Gas, and Other Fuels 104.7 105.7 106.4 106.8 108.3 109.0 108.6 109.6 110.6 112.0 113.6 114.3 114.7 115.7 115.9 116.1 117.6 Electricity, Gas and Other Fuels 95.2 96.3 96.5 97.0 100.0 101.3 99.9 102.3 103.6 106.5 108.7 109.0 108.1 109.9 107.3 107.0 109.1 Furnishing, House Equipment and Routine Maintenance of the House 109.4 110.0 110.8 111.4 112.1 112.5 113.1 113.6 114.8 115.8 117.1 118.2 119.3 120.0 121.1 122.2 123.7 Health 108.0 108.7 109.7 110.7 111.7 111.9 112.2 112.5 114.0 115.1 116.5 117.5 118.5 119.0 120.4 121.2 122.1 Transport 93.7 95.2 94.8 96.3 98.1 98.8 98.7 100.1 102.5 104.5 105.9 106.6 104.0 107.0 106.0 106.5 105.5 Operation of Personal Transport Equipment 71.1 75.8 75.2 77.4 81.7 80.4 81.3 85.8 92.1 98.0 101.3 99.4 93.8 100.4 97.9 98.1 94.6 Communication 100.3 100.4 100.5 100.7 100.7 100.7 100.8 100.9 100.9 101.0 101.2 101.3 101.3 101.4 101.5 101.6 101.7 Recreation and Culture 109.0 109.2 109.4 109.7 109.8 110.0 111.2 111.1 111.4 111.7 113.7 114.8 115.1 115.5 116.3 116.7 117.1 Education 113.8 114.8 117.0 117.3 117.5 118.1 119.7 119.7 119.7 120.9 112.9 113.0 113.0 113.9 117.6 117.8 117.8 Restaurants and Miscellaneous Goods and Services 108.2 108.9 109.4 109.8 110.3 110.5 111.0 111.5 112.7 113.9 115.1 116.1 117.1 117.6 118.7 119.3 120.1

Quarter-on-Quarter Change (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 0.3 0.5 0.6 0.8 0.9 0.4 0.4 1.0 1.9 1.4 1.8 0.9 -0.2 0.3 0.7 0.7 1.1 Food and Non-alcoholic Beverages 0.4 -0.1 0.6 1.0 0.8 0.1 0.6 1.3 2.6 1.3 3.1 1.3 -1.0 -0.5 0.5 0.7 1.4 Food Items 0.4 -0.2 0.7 1.1 0.8 0.1 0.6 1.5 2.5 1.0 3.1 1.3 -1.1 -0.6 0.4 0.7 1.4 Alcoholic Beverages and Tobacco 1.6 1.2 1.5 1.6 2.4 1.2 1.1 1.3 11.0 5.6 2.4 1.5 4.1 2.4 3.8 7.3 4.7 Non-Food 0.1 1.0 0.5 0.6 1.0 0.5 0.1 0.6 1.1 1.2 0.7 0.6 0.2 0.9 0.5 0.4 0.6 Clothing and Footwear 0.6 0.5 0.9 0.7 0.8 0.3 0.4 0.3 0.8 0.6 0.8 0.5 0.6 0.7 1.1 0.7 0.7 Housing, Water, Electricity, Gas, and Other Fuels 0.6 1.0 0.7 0.4 1.4 0.6 -0.4 0.9 0.9 1.3 1.4 0.6 0.3 0.9 0.2 0.2 1.3 Electricity, Gas and Other Fuels -1.2 1.2 0.2 0.5 3.1 1.3 -1.4 2.4 1.3 2.8 2.1 0.3 -0.8 1.7 -2.4 -0.3 2.0 Furnishing, House Equipment and Routine Maintenance of the House 0.7 0.5 0.7 0.5 0.6 0.4 0.5 0.4 1.1 0.9 1.1 0.9 0.9 0.6 0.9 0.9 1.2 Health 0.6 0.6 0.9 0.9 0.9 0.2 0.3 0.3 1.3 1.0 1.2 0.9 0.9 0.4 1.2 0.7 0.7 Transport -2.1 1.6 -0.4 1.6 1.9 0.7 -0.1 1.4 2.4 2.0 1.3 0.7 -2.4 2.9 -0.9 0.5 -0.9 Operation of Personal Transport Equipment -7.7 6.6 -0.8 2.9 5.6 -1.6 1.1 5.5 7.3 6.4 3.4 -1.9 -5.6 7.0 -2.5 0.2 -3.6 Communication 0.1 0.1 0.1 0.2 0 0 0.1 0.1 0 0.1 0.2 0.1 0 0.1 0.1 0.1 0.1 Recreation and Culture 0.3 0.2 0.2 0.3 0.1 0.2 1.1 -0.1 0.3 0.3 1.8 1.0 0.3 0.3 0.7 0.3 0.3 Education 0 0.9 1.9 0.3 0.2 0.5 1.4 0 0 1.0 -6.6 0.1 0 0.8 3.2 0.2 0 Restaurants and Miscellaneous Goods and Services 0.4 0.6 0.5 0.4 0.5 0.2 0.5 0.5 1.1 1.1 1.1 0.9 0.9 0.4 0.9 0.5 0.7

Year-on-Year Change (in percent) 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

All Items 0.8 1.1 1.6 2.1 2.8 2.7 2.5 2.6 3.6 4.7 6.1 6.1 3.9 2.8 1.7 1.4 2.8 Food and Non-alcoholic Beverages 0.8 1.2 1.4 1.9 2.3 2.5 2.5 2.8 4.6 5.9 8.4 8.4 4.7 2.9 0.3 -0.2 2.1 Food Items 0.8 1.1 1.4 2.0 2.4 2.7 2.6 3.0 4.7 5.7 8.3 8.1 4.3 2.7 0 -0.6 2.0 Alcoholic Beverages and Tobacco 3.7 4.2 5.3 6.1 6.9 6.8 6.4 6.1 15.0 20.1 21.6 21.8 14.2 10.8 12.3 18.7 19.4 Non-Food 0.7 1.0 1.6 2.1 3.0 2.5 2.2 2.2 2.3 3.0 3.7 3.7 2.7 2.4 2.2 2.0 2.5 Clothing and Footwear 1.8 1.9 2.5 2.7 2.9 2.7 2.2 1.9 1.8 2.2 2.5 2.7 2.5 2.6 2.9 3.1 3.1 Housing, Water, Electricity, Gas, and Other Fuels 0.1 0.5 2.0 2.6 3.4 3.1 2.1 2.6 2.1 2.8 4.6 4.3 3.7 3.3 2.0 1.6 2.5 Electricity, Gas and Other Fuels -4.6 -4.7 -1.7 0.6 5.0 5.2 3.5 5.5 3.6 5.1 8.8 6.5 4.3 3.2 -1.3 -1.8 0.9 Furnishing, House Equipment and Routine Maintenance of the House 1.9 1.9 2.3 2.6 2.5 2.3 2.1 2.0 2.4 2.9 3.5 4.0 3.9 3.6 3.4 3.4 3.7 Health 1.8 2.2 2.6 3.1 3.4 2.9 2.3 1.6 2.1 2.9 3.8 4.4 3.9 3.4 3.3 3.1 3.0 Transport -1.5 -1.6 -1.1 0.6 4.7 3.8 4.1 3.9 4.5 5.8 7.3 6.5 1.5 2.4 0.1 -0.1 1.4 Operation of Personal Transport Equipment -10.0 -8.9 -5.8 0.5 14.9 6.1 8.1 10.9 12.7 21.9 24.6 15.9 1.8 2.4 -3.4 -1.3 0.9 Communication 0.2 0.4 0.5 0.5 0.4 0.3 0.3 0.2 0.2 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.4 Recreation and Culture 0.6 0.7 0.8 0.9 0.7 0.7 1.6 1.3 1.5 1.5 2.2 3.3 3.3 3.4 2.3 1.7 1.7 Education 2.9 2.9 2.9 3.1 3.3 2.9 2.3 2.0 1.9 2.4 -5.7 -5.6 -5.6 -5.8 4.2 4.2 4.2 Restaurants and Miscellaneous Goods and Services 1.8 2.1 2.1 1.9 1.9 1.5 1.5 1.5 2.2 3.1 3.7 4.1 3.9 3.2 3.1 2.8 2.6

Source of Basic Data: Philippine Statistics Authority (PSA) 5 MONETARY INDICATORS (DCS CONCEPT: SRF-Based) 1 as of end-periods indicated in billion pesos

2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r Q1 p A. Liquidity 1. M4 (2+7) 12,795.5 12,961.6 13,133.5 13,610.3 13,565.4 13,786.9 14,025.5 14,950.1 15,202.0

2. M3 : Broad Money Liabilities (3+6) 10,919.1 11,067.5 11,179.4 11,643.0 11,583.6 11,801.6 12,027.9 12,976.3 13,129.0 % to GDP 2 64.6 63.9 62.9 63.7 62.3 62.5 62.8 66.5 67.1

3. M2 (4+5) 10,480.8 10,616.5 10,707.1 11,080.2 10,977.1 11,181.0 11,408.1 12,293.2 12,375.8 % to GDP 2 62.0 61.3 60.3 60.7 59.1 59.2 59.6 63.0 63.2

4. M1: Currency Outside Depository Corporations and Transferable Deposits (Narrow Money ) 3,666.2 3,735.1 3,716.0 3,889.0 3,889.5 3,940.1 4,096.8 4,500.3 4,806.4 % to GDP 2 21.7 21.6 20.9 21.3 20.9 20.9 21.4 23.1 24.6

Currency Outside Depository Corporations (Currency in Circulation) 1,056.7 1,050.5 1,065.9 1,231.8 1,189.0 1,181.7 1,180.6 1,395.8 1,420.7 Transferable Deposits (Demand Deposits) 2,609.5 2,684.6 2,650.0 2,657.2 2,700.5 2,758.4 2,916.2 3,104.5 3,385.7

5. Other deposits included in broad money 6,814.6 6,881.4 6,991.2 7,191.1 7,087.6 7,240.9 7,311.3 7,792.9 7,569.4 Savings Deposits 4,477.1 4,580.4 4,691.9 4,672.5 4,570.6 4,576.2 4,667.4 4,969.4 4,990.8 Time Deposits 2,337.5 2,301.1 2,299.3 2,518.6 2,517.0 2,664.6 2,643.9 2,823.5 2,578.6

6. Securities Other Than Shares Included in Broad Money (Deposit Substitutes) 438.3 451.0 472.3 562.8 606.5 620.6 619.8 683.1 753.1 7. Transferable & Other Deposits in Foreign Currency (FCDU Deposits-Residents) 1,876.4 1,894.1 1,954.0 1,967.3 1,981.8 1,985.2 1,997.6 1,973.8 2,073.0 8. Liabilities Excluded from Broad-Money (Other Liabilities) 2,619.0 2,781.7 2,866.6 2,885.6 2,941.7 2,958.7 3,220.4 3,226.0 3,141.4

B. Domestic Claims 10,792.7 11,204.0 11,540.1 12,035.0 11,789.0 12,006.7 12,414.8 13,318.2 13,195.0 1. Net Claims on Central Government 1,778.0 1,816.2 1,825.7 1,911.1 1,782.1 1,750.6 1,923.7 2,363.7 2,166.3 Claims on Central Government 2,485.8 2,555.1 2,591.2 2,690.4 2,940.1 3,038.7 2,990.6 2,953.2 3,448.0 Less: Liabilities to Central Government 707.7 738.9 765.5 779.3 1,158.0 1,288.1 1,066.9 589.5 1,281.8

2. Claims on Other Sectors 9,014.7 9,387.8 9,714.3 10,123.9 10,006.8 10,256.1 10,491.2 10,954.5 11,028.7 Claims on Other Financial Corporations 879.4 957.1 1,041.5 1,088.3 1,110.8 1,124.9 1,175.1 1,232.4 1,171.7 Claims on State and Local Government 81.9 81.6 83.7 87.5 91.9 95.3 97.1 99.1 98.6 Claims on Public Nonfinancial Corporations 280.7 272.4 248.4 260.7 261.1 242.8 239.5 259.6 255.2 Claims on Private Sector 7,772.8 8,076.7 8,340.6 8,687.4 8,543.0 8,793.1 8,979.4 9,363.4 9,503.2

C. Net Foreign Assets 4,621.7 4,539.3 4,460.0 4,460.9 4,718.1 4,738.9 4,831.1 4,857.9 5,148.4 1. Bangko Sentral ng Pilipinas 4,130.1 4,064.2 3,977.3 4,088.9 4,326.2 4,280.0 4,364.0 4,399.1 4,474.6 Claims on Non-residents 4,216.7 4,149.6 4,064.1 4,172.4 4,410.6 4,361.3 4,445.6 4,479.4 4,555.9 Less: Liabilities to Non-residents 86.6 85.4 86.8 83.5 84.4 81.3 81.6 80.3 81.3

2. Other Depository Corporations 491.7 475.1 482.7 372.1 391.9 458.9 467.1 458.8 673.8 Claims on Non-residents 1,367.4 1,374.3 1,448.9 1,501.7 1,512.7 1,583.5 1,693.6 1,654.6 1,677.7 Less: Liabilities to Non-residents 875.7 899.2 966.2 1,129.7 1,120.8 1,124.6 1,226.6 1,195.8 1,003.9

1 Based on the Standardized Report Forms (SRFs), a unified framework for reporting monetary and financial statistics to the International Monetary Fund. 2 2018-based GDP. Computed using annualized nominal GDP i.e. data for the immediately preceeding four (4) quarters. p Preliminary r Revised - Not available Note : Details may not add up to totals due to rounding. Source : Bangko Sentral ng Pilipinas 6 SELECTED DOMESTIC INTEREST RATES in percent per annum for periods indicated

NOMINAL INTEREST RATES1 REAL INTEREST RATES1 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Bank Interest Rates Interbank Call Loans 2.5289 2.5293 2.5247 2.5074 2.5354 2.5851 2.5824 2.9203 3.0794 3.2855 4.0293 4.7553 5.1365 5.0769 4.5025 4.0458 3.6559 1.8289 1.5293 1.0247 0.5074 -0.3646 -0.2149 -0.1176 -0.0797 -0.7206 -1.5145 -2.1707 -1.1447 1.3365 2.0769 2.8025 2.4458 0.9559 Savings Deposits 2 0.7370 0.7140 0.7290 0.6990 0.6890 0.6650 0.6980 0.6880 0.7420 0.7840 0.9190 1.1350 1.3480 1.3090 1.2780 0.9890 - 0.0370 -0.2860 -0.7710 -1.3010 -2.2110 -2.1350 -2.0020 -2.3120 -3.0580 -4.0160 -5.2810 -4.7650 -2.4520 -1.6910 -0.4220 -0.6110 - Time Deposits (All Maturities) 2 1.6120 1.5210 1.4450 1.5770 1.6880 1.7530 1.7890 1.9720 2.5260 2.6300 3.1940 4.0610 4.7470 4.5340 3.5270 3.1280 - 0.9120 0.5210 -0.0550 -0.4230 -1.2120 -1.0470 -0.9110 -1.0280 -1.2740 -2.1700 -3.0060 -1.8390 0.9470 1.5340 1.8270 1.5280 - Lending Rates 2 High 6.8407 6.7760 6.6280 6.4397 6.5050 6.4571 6.4772 6.5299 6.6208 6.9164 7.0562 7.8424 8.3720 8.5076 7.8361 7.3549 - 6.1407 5.7760 5.1280 4.4397 3.6050 3.6571 3.7772 3.5299 2.8208 2.1164 0.8562 1.9424 4.5720 5.5076 6.1361 5.7549 - Low 4.4055 4.4067 4.2788 4.1097 4.2013 4.1736 4.0875 4.0874 4.1654 4.3067 4.5897 5.2283 5.6607 5.8173 5.4369 5.0724 - 3.7055 3.4067 2.7788 2.1097 1.3013 1.3736 1.3875 1.0874 0.3654 -0.4933 -1.6103 -0.6717 1.8607 2.8173 3.7369 3.4724 - All Maturities 3 5.6310 5.6240 5.6840 5.6290 5.5410 5.6220 5.6560 5.6920 5.6410 5.8930 6.1860 6.7580 7.1230 7.2950 7.1590 6.7960 - 4.9310 4.6240 4.1840 3.6290 2.6410 2.8220 2.9560 2.6920 1.8410 1.0930 -0.0140 0.8580 3.3230 4.2950 5.4590 5.1960 -

Bangko Sentral Rates 4 Overnight Lending Facility (OLF) … 3.5000 3.5000 3.5000 3.5000 3.5000 3.5000 3.5000 3.5000 3.7930 4.2920 5.1880 5.2500 5.1273 4.8062 4.5000 - … 2.5000 2.0000 1.5000 0.6000 0.7000 0.8000 0.5000 -0.3000 -1.0070 -1.9080 -0.7120 1.4500 2.1273 3.1062 2.9000 - Overnight RRP 4.0000 3.4280 3.0000 3.0000 3.0000 3.0000 3.0000 3.0000 3.0000 3.1770 3.7840 4.6270 4.7500 4.6139 4.3480 4.0000 - 3.3000 2.4280 1.5000 1.0000 0.1000 0.2000 0.3000 0.0000 -0.8000 -1.6230 -2.4160 -1.2730 0.9500 1.6139 2.6480 2.4000 - Overnight Deposit Facility (ODF) … 2.5000 2.5000 2.5000 2.5000 2.5000 2.5000 2.5000 2.5000 2.6840 3.2680 4.1440 4.2500 4.1529 3.8555 3.5000 - … 1.5000 1.0000 0.5000 -0.4000 -0.3000 -0.2000 -0.5000 -1.3000 -2.1160 -2.9320 -1.7560 0.4500 1.1529 2.1555 1.9000 - Term Deposit Auction Facility (TDF) … 2.5000 2.5090 2.8910 3.3790 3.4270 3.4770 3.4800 3.1070 3.5170 4.0920 4.8880 5.1420 4.7347 4.5432 4.3119 - … 1.5000 1.0090 0.8910 0.4790 0.6270 0.7770 0.4800 -0.6930 -1.2830 -2.1080 -1.0120 1.3420 1.7347 2.8432 2.7119 - 7-Day … 2.5000 2.5000 2.7882 3.0160 3.1759 3.3057 3.3881 3.0341 3.5258 4.0512 4.8597 5.0663 4.7143 4.4909 4.2503 3.9704 … 1.5000 1.0000 0.7882 0.1160 0.3759 0.6057 0.3881 -0.7659 -1.2742 -2.1488 -1.0403 1.2663 1.7143 2.7909 2.6503 1.2704 14-Day … … … … … … … … 3.1386 3.5774 4.1368 4.9276 5.1445 4.7282 4.5274 4.3027 3.9846 … … … … … … … … -0.6614 -1.2226 -2.0632 -0.9724 1.3445 1.7282 2.8274 2.7027 1.2846 28-Day … 2.5000 2.5129 2.9071 3.3812 3.4639 3.4935 3.4929 3.1758 3.5560 4.1664 4.9766 5.1613 4.7465 4.5422 4.3236 4.0163 … 1.5000 1.0129 0.9071 0.4812 0.6639 0.7935 0.4929 -0.6242 -1.2440 -2.0336 -0.9234 1.3613 1.7465 2.8422 2.7236 1.3163

Rate on Government Securities

Treasury Bills, All Maturities 1.6130 1.6990 1.5050 1.5630 2.3640 2.5000 2.4770 2.4040 2.7720 3.7560 4.2340 5.9730 5.9415 5.4743 3.7611 3.3083 3.5066 0.9130 0.6990 0.0050 -0.4370 -0.5360 -0.3000 -0.2230 -0.5960 -1.0280 -1.0440 -1.9660 0.0730 2.1415 2.4743 2.0611 1.7083 0.8066 91-Day 1.5550 1.5970 1.4160 1.4400 2.1790 2.2060 2.1280 2.0340 2.6370 3.4080 3.2830 5.1050 5.5836 5.2038 3.4150 3.1183 3.1608 0.8550 0.5970 -0.0840 -0.5600 -0.7210 -0.5940 -0.5720 -0.9660 -1.1630 -1.3920 -2.9170 -0.7950 1.7836 2.2038 1.7150 1.5183 0.4608 182-Day 1.5800 1.6540 1.4520 1.6890 2.3800 2.5370 2.5480 2.4970 2.8130 3.8290 4.1900 6.1060 5.9998 5.5521 3.7227 3.2289 3.4498 0.8800 0.6540 -0.0480 -0.3110 -0.5200 -0.2630 -0.1520 -0.5030 -0.9870 -0.9710 -2.0100 0.2060 2.1998 2.5521 2.0227 1.6289 0.7498 364-Day 1.7230 1.8570 1.6790 1.8800 2.7100 2.9090 2.9360 2.8780 3.0880 4.2620 4.8920 6.3570 6.0978 5.6268 4.0402 3.5284 3.7887 1.0230 0.8570 0.1790 -0.1200 -0.1900 0.1090 0.2360 -0.1220 -0.7120 -0.5380 -1.3080 0.4570 2.2978 2.6268 2.3402 1.9284 1.0887

Government Securities in the Secondary Market 5 3-Month 1.7650 1.7567 1.5857 2.0755 2.9696 2.8139 2.0251 2.4316 3.0723 3.9071 4.3094 5.7760 5.7990 4.4600 3.1020 3.2040 3.2900 1.1650 0.4567 -0.1143 -0.1245 -0.1304 0.3139 -0.9749 -0.4684 -1.2277 -1.2929 -2.3906 0.6760 2.4990 1.7600 2.2020 0.7040 0.7900 6-Month 1.8950 1.5949 1.2931 2.9464 2.4222 2.4615 2.4988 3.3075 3.2063 3.8453 4.6491 6.5140 5.9400 4.7600 3.3940 3.3730 3.4310 1.2950 0.2949 -0.4069 0.7464 -0.6778 -0.0385 -0.5012 0.4075 -1.0937 -1.3547 -2.0509 1.4140 2.6400 2.0600 2.4940 0.8730 0.9310 1-Year 1.7313 2.1671 2.0107 2.4520 2.6708 3.2257 2.8674 3.0320 3.0750 4.4742 5.2760 6.7830 6.0970 4.9690 3.7040 3.4150 3.7720 1.1313 0.8671 0.3107 0.2520 -0.4292 0.7257 -0.1326 0.1320 -1.2250 -0.7258 -1.4240 1.6830 2.7970 2.2690 2.8040 0.9150 1.2720 2-Year 3.4700 2.3877 2.2855 3.8676 3.2500 3.8718 3.7821 3.9864 4.1613 4.7842 6.1990 6.8850 5.8220 4.9490 4.0410 3.7380 4.4690 2.8700 1.0877 0.5855 1.6676 0.1500 1.3718 0.7821 1.0864 -0.1387 -0.4158 -0.5010 1.7850 2.5220 2.2490 3.1410 1.2380 1.9690 3-Year 3.6900 3.0660 3.2925 3.5170 4.0988 3.8916 3.6651 4.2977 4.6098 5.0223 7.0339 6.9760 5.7480 4.9590 4.1920 3.8300 4.5400 3.0900 1.7660 1.5925 1.3170 0.9988 1.3916 0.6651 1.3977 0.3098 -0.1777 0.3339 1.8760 2.4480 2.2590 3.2920 1.3300 2.0400 4-Year 3.2332 3.3067 2.8798 3.8814 4.2500 4.0321 4.5768 4.9211 5.0179 5.6768 7.4464 7.0160 5.6790 4.9750 4.3400 3.9400 4.6030 2.6332 2.0067 1.1798 1.6814 1.1500 1.5321 1.5768 2.0211 0.7179 0.4768 0.7464 1.9160 2.3790 2.2750 3.4400 1.4400 2.1030 5-Year 3.4583 2.8997 3.6321 4.7426 4.2577 4.0336 4.6375 4.7437 5.2403 5.7620 7.0395 7.0370 5.6270 4.9970 4.4810 4.0610 4.5960 2.8583 1.5997 1.9321 2.5426 1.1577 1.5336 1.6375 1.8437 0.9403 0.5620 0.3395 1.9370 2.3270 2.2970 3.5810 1.5610 2.0960 7-Year 4.2283 2.9197 3.4483 4.8857 5.0625 4.9171 4.3206 5.3279 6.7375 6.2482 7.1101 7.0610 5.5990 5.0370 4.6700 4.2790 4.6760 3.6283 1.6197 1.7483 2.6857 1.9625 2.4171 1.3206 2.4279 2.4375 1.0482 0.4101 1.9610 2.2990 2.3370 3.7700 1.7790 2.1760 10-Year 4.6900 4.2183 3.6455 4.6281 5.0554 4.6691 4.6085 5.6986 6.0000 6.4217 7.2348 7.0650 5.6050 5.0720 4.8010 4.4610 4.8720 4.0900 2.9183 1.9455 2.4281 1.9554 2.1691 1.6085 2.7986 1.7000 1.2217 0.5348 1.9650 2.3050 2.3720 3.9010 1.9610 2.3720 20-Year 5.2317 4.2415 4.6482 5.3771 5.0302 5.0844 5.1479 5.7038 7.1625 7.3607 8.2969 7.4910 5.8190 5.1770 5.0220 5.1590 5.0610 4.6317 2.9415 2.9482 3.1771 1.9302 2.5844 2.1479 2.8038 2.8625 2.1607 1.5969 2.3910 2.5190 2.4770 4.1220 2.6590 2.5610 25-Year ...... 7.5280 6.0950 5.1250 4.9900 5.2180 5.0680 ...... 2.4280 2.7950 2.4250 4.0900 2.7180 2.5680

1 Nominal interest rate less inflation rate with base year 2012 2 Starting 1 January 2020, universal and commercial banks are required to submit the amended reporting templates on banks' lending and deposit rates or "Interest Rates on Loans and Deposits (IRLD)" in accordance with Circular Nos. 1029 and 1037, series of 2019. Moreover, per BSP Memorandum No. M-2020-011 dated 19 March 2020, banks' submission of IRLD weekly reports that fall due within the months of March - May 2020 is suspended until further notice. Hence, data for the entire Q1 2020 are not available. 3 Refers to the weighted average interest rate of reporting commercial banks' interest incomes on their outstanding peso-denominated loans 4 Beginning 3 June 2016, the BSP shifted its monetary operations to an interest rate corridor (IRC) system. The repurchase (RP) and Special Deposit Account (SDA) windows were replaced by standing overnight lending and overnight deposit facilities, respectively. The reverse repurchase (RRP) facility was modified to a purely overnight RRP. In addition, the term deposit facility (TDF) will serve as the main tool for absorbing liquidity. The OLF and ODF will serve as the upper bound and lower bound, respectively, of the IRC system. The weighted average interest rates (WAIR) of BSP rates are based on outstanding balance as of month-end. 5 End-of-Period; beginning 29 October 2018, data refer to the Philippine Peso Bloomberg Valuation Service (PHP BVAL) Reference Rates while those for earlier periods refer to the Philippine Dealing System Treasury Reference Rates 2 (PDST-R2). - Not Available .. No Transaction/No Quotation/No Issue ... Blank Source: Bangko Sentral ng Pilipinas 7 NUMBER OF FINANCIAL INSTITUTIONS 1 as of periods indicated

2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 P

T o t a l 29,044 20,924 24,237 24,998 25,845 26,283 26,743 27,220 27,242 Head Offices 6,173 1,451 1,736 1,827 1,864 1,862 1,877 1,873 1,868 Branches/Agencies 22,871 19,473 22,501 23,171 23,981 24,421 24,866 25,347 25,374

Banks 11,936 12,066 12,148 12,364 12,427 12,543 12,688 12,870 12,892 Head Offices 585 581 574 571 569 554 552 547 542 Branches/Agencies 11,351 11,485 11,574 11,793 11,858 11,989 12,136 12,323 12,350

Universal and Commercial Banks 6,527 6,569 6,610 6,642 6,660 6,676 6,865 6,915 6,985 Head Offices 43 43 44 45 46 46 46 46 46 Branches/Agencies 6,484 6,526 6,566 6,597 6,614 6,630 6,819 6,869 6,939 Thrift Banks 2,453 2,525 2,562 2,657 2,666 2,720 2,616 2,683 2,653 Head Offices 55 55 54 54 53 51 51 50 49 Branches/Agencies 2,398 2,470 2,508 2,603 2,613 2,669 2,565 2,633 2,604 Savings and Mortgage Banks 1,849 1,920 1,944 2,029 1,921 1,988 1,879 1,948 - Head Offices 24 24 24 24 23 23 22 22 - Branches/Agencies 1,825 1,896 1,920 2,005 1,898 1,965 1,857 1,926 - Private Development Banks 420 421 426 435 435 422 426 429 - Head Offices 17 17 17 17 17 15 16 16 - Branches/Agencies 403 404 409 418 418 407 410 413 - Stock Savings and Loan Assns. 179 179 187 188 305 305 306 306 - Head Offices 13 13 12 12 12 12 12 12 - Branches/Agencies 166 166 175 176 293 293 294 294 - Microfinance Banks 5 5 5 5 5 5 5 0 - Head Offices 1 1 1 1 1 1 1 0 - Branches/Agencies 4 4 4 4 4 4 4 0 - Rural Banks 2,956 2,972 2,976 3,065 3,101 3,147 3,207 3,272 3,254 Head Offices 487 483 476 472 470 457 455 451 447 Branches/Agencies 2,469 2,489 2,500 2,593 2,631 2,690 2,752 2,821 2,807

Non-Banks 2, * 17,106 8,856 12,087 12,632 13,416 13,738 14,054 14,349 14,349 Head Offices 5,586 868 1,160 1,254 1,293 1,306 1,324 1,325 1,325 Branches/Agencies 11,520 7,988 10,927 11,378 12,123 12,432 12,730 13,024 13,024 Investment Houses 24 24 24 24 24 24 24 14 5 Head Offices 14 14 14 14 14 14 14 13 4 Branches/Agencies 10 10 10 10 10 10 10 1 1 Finance Companies 163 163 163 163 171 174 180 180 131 Head Offices 23 23 23 23 23 23 24 24 5 Branches/Agencies 140 140 140 140 148 151 156 156 126 AAB Forex Corporations 5 5 5 5 4 4 4 2 - Head Offices 5 5 5 5 4 4 4 2 - Branches/Agencies 0 0 0 0 0 0 0 0 - Investment Companies 1 1 1 1 1 1 1 1 - Head Offices 1 1 1 1 1 1 1 1 - Branches/Agencies 0 0 0 0 0 0 0 0 - Securities Dealers/Brokers 13 13 13 13 13 13 13 13 - Head Offices 13 13 13 13 13 13 13 13 - Branches/Agencies 0 0 0 0 0 0 0 0 - Pawnshops 16,582 8,331 11,563 12,107 12,879 13,190 13,497 13,801 13,801 Head Offices 5,346 627 920 1,013 1,051 1,062 1,076 1,077 1,077 Branches/Agencies 11,236 7,704 10,643 11,094 11,828 12,128 12,421 12,724 12,724 Lending Investors 1 1 1 1 1 1 1 1 - Head Offices 1 1 1 1 1 1 1 1 - Branches/Agencies 0 0 0 0 0 0 0 0 - Non-Stock Savings and Loan Assns. 198 198 197 196 200 200 200 200 200 Head Offices 64 64 63 62 63 63 63 63 63 Branches/Agencies 134 134 134 134 137 137 137 137 137 Government Non-Banks 3 4 4 4 4 4 4 4 4 - Head Offices 4 4 4 4 4 4 4 4 - Branches/Agencies 0 0 0 0 0 0 0 0 - Venture Capital Corporations 0 0 0 0 0 0 0 0 - Head Offices 0 0 0 0 0 0 0 0 - Branches/Agencies 0 0 0 0 0 0 0 0 - Credit Card Companies 4 4 4 5 5 5 5 5 - Head Offices 4 4 4 5 5 5 5 5 - Branches/Agencies 0 0 0 0 0 0 0 0 - Other Non-Bank with QBF 1 1 1 1 1 1 1 1 1 Head Offices 1 1 1 1 1 1 1 1 1 Branches/Agencies 0 0 0 0 0 0 0 0 0 Electronic Money Issuer 7 8 8 9 10 18 21 24 - Head Offices 7 8 8 9 10 12 15 18 - Branches/Agencies 0 0 0 0 0 6 6 6 - Remittance Agent 1 1 1 1 1 1 1 0 - Head Offices 1 1 1 1 1 1 1 0 - Branches/Agencies 0 0 0 0 0 0 0 0 - Credit Granting Entities 9 9 9 9 9 9 9 9 - Head Offices 9 9 9 9 9 9 9 9 - Branches/Agencies 0 0 0 0 0 0 0 0 - Trust Corporations 4 3 3 3 3 3 3 3 4 - Head Offices 3 3 3 3 3 3 3 4 - Branches/Agencies 0 0 0 0 0 0 0 0 - Private Insurance Companies 5 90 90 90 90 90 90 90 90 90 Head Offices 90 90 90 90 90 90 90 90 90 Branches/Agencies 0 0 0 0 0 0 0 0 0

Offshore banking Units 2 2 2 2 2 2 1 1 1

1 Refers to the number of financial establishments which includes the head offices and branches; excludes the Bangko Sentral ng Pilipinas. In 2017, per Circular 987 dated 28 December 2017, the term "Other banking units" was replaced by branch/ branch-lite units. A branch shall refer to any permanent office or place of business in the Philippines other than the head office where a bank may perform activities and provide products and services that are within the scope of its authority and relevant licenses. In this respect, a complete set of books and records shall be maintained in each branch. A branch-lite unit shall refer to any permanent office or place of business of a bank, other than its head office or a branch. A branch-lite unit performs limited banking activities and records its transactions in the books of the head office or the branch to which it is annexed. 2 Includes Private Insurance Companies 3 Includes Government Service Insurance System (GSIS) and Social Security System (SSS) 4 Trust Corporations started only in December 2016. 5 Covers only the head offices and their foreign branches. * Details do not add up to total due to 83 head offices and 36 branches that are collectively classified as "Others" which includes Investment House (without Quasi Banking function), Financing Co. (without Quasi Banking function), Investment Co. (without Quasi Banking function), Securities Dealer/Broker, Lending Investor, Venture Capital Corp, Credit Card Co., Govt NBFI, Electronic Money Issuer (EMI) - Others, AAB Forex Corporations , Remittance Agent, Credit Granting Entities (CGEs) and Trust Corporations. P Preliminary - Not Available Source: Bangko Sentral ng Pilipinas, Insurance Commission 8 TOTAL RESOURCES OF THE PHILIPPINE FINANCIAL SYSTEM 1 as of periods indicated in billion pesos

2018 2019 2020 p Institutions Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

r T o t a l 19,442.5 19,810.2 20,245.3 21,062.3 21,085.7 21,599.9 22,154.7 22,856.6 22,926.7

Banks 15,676.0 16,052.7 16,463.2 17,258.6 17,387.0 17,589.4 18,029.8 18,711.5 r 18,781.6

Universal and Commercial Banks 14,202.8 14,554.5 14,940.0 15,691.5 15,813.9 16,018.9 16,568.1 17,216.1 17,345.8 Thrift Banks 1,214.4 1,236.6 1,254.0 1,293.2 1,297.9 1,287.8 1,176.7 1,203.9 1,144.4 Rural Banks 258.8 261.5 269.2 273.9 275.2 282.6 285.0 291.5 r 291.5 a 2 Non-Banks 3,766.5 3,757.6 3,782.1 3,803.7 3,698.7 4,010.5 4,124.9 4,145.1 r 4,145.1 a

1 Excludes the Bangko Sentral ng Pilipinas; amount includes allowance for probable losses. 2 Includes Investment Houses, Finance Companies, Investment Companies, Securities Dealers/Brokers, Pawnshops, Lending Investors, Non Stocks Savings and Loan Associations, Credit Card Companies (which are under BSP supervision), and Private and Government Insurance Companies (i.e., SSS and GSIS). a As of end-December 2019 p Preliminary r Revised

Notes: (1) Data on Non-Banks are based on Consolidated Statement of Condition (CSOC). (2) Data on Rural Banks are based on Financial Reporting Package (FRP). (3) Details may not add up to total due to rounding off. Source: Bangko Sentral ng Pilipinas 9 NON-PERFORMING LOANS (NPL), TOTAL LOANS AND LOAN LOSS PROVISIONS OF THE BANKING SYSTEM 1 as of periods indicated in billion pesos

2 2 Gross Non-Performing Loans Net Non-Performing Loans Total Loans Loan Loss Provisions UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total UB&KBs TBs RBs Total

2015 91.598 31.199 13.706 136.503 21.672 14.692 5.513 41.877 5719.665 689.019 118.711 6527.395 129.220 23.045 9.381 161.646 2016 93.801 36.654 13.703 144.158 21.264 17.340 4.679 43.283 6706.311 778.133 127.674 7612.118 135.699 26.775 10.353 172.827 2017 97.531 40.449 15.006 152.986 36.919 24.795 6.326 68.040 7867.078 860.303 138.219 8865.600 145.835 26.929 11.487 184.251

2018 Mar 104.400 44.633 16.790 165.823 40.841 30.151 7.355 78.348 7996.321 865.484 135.299 8997.103 159.597 26.654 12.225 198.475 Jun 110.606 46.664 17.514 174.784 45.425 30.691 7.741 83.857 8331.360 885.685 135.944 9352.989 158.846 27.995 12.668 199.509 Sep 112.762 47.095 16.754 176.611 48.373 31.466 6.876 86.715 8658.774 907.083 140.962 9706.820 155.904 27.114 12.747 195.766 Dec 113.518 48.261 16.066 177.845 48.459 33.086 6.315 87.860 9017.780 916.874 143.275 10077.929 148.339 26.256 12.530 187.124

2019 Mar 134.564 54.458 16.836 205.858 60.169 39.912 6.663 106.745 8918.522 925.944 144.697 9989.163 158.379 25.801 12.794 196.974 Jun 143.793 55.187 16.927 215.907 68.377 41.034 7.008 116.419 9204.615 935.267 148.674 10288.556 162.826 25.852 12.744 201.421 Sep 158.671 51.723 17.210 227.604 73.308 37.397 7.473 118.178 9552.943 860.726 150.563 10564.232 171.386 25.049 12.634 209.069 Dec 156.527 51.670 15.908 224.105 71.552 37.347 6.949 115.848 9953.964 860.307 151.840 10966.112 170.518 24.831 12.158 207.507

2020 Mar p 187.980 44.197 15.908 a 248.085 93.616 31.075 6.949 a 131.640 10137.354 803.596 151.840 a 11092.790 192.078 23.020 12.158 a 227.256

1 Data include banks under liquidation, foreign office transactions and interbank loans. 2 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned. As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012. p Preliminary a As of end-December 2019 Details may not add up due to rounding off. Source: Bangko Sentral ng Pilipinas 9 RATIOS OF NON-PERFORMING LOANS (NPL) AND LOAN LOSS PROVISIONS 1 TO TOTAL LOANS OF THE BANKING SYSTEM as of periods indicated, in percent

Gross NPL/Total Loans 2 Net NPL/Total Loans 2 Loan Loss Provisions/Total Loans UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total UBs &KBs TBs RBs Total

2015 1.601 4.528 11.546 2.091 0.379 2.132 4.644 0.642 2.259 3.345 7.902 2.476 2016 1.399 4.711 10.733 1.894 0.317 2.228 3.665 0.569 2.023 3.441 8.109 2.270 2017 1.240 4.702 10.857 1.726 0.469 2.882 4.577 0.767 1.854 3.130 8.310 2.078

2018 Mar 1.306 5.157 12.409 1.843 0.511 3.484 5.436 0.871 1.996 3.080 9.035 2.206 Jun 1.328 5.269 12.883 1.869 0.545 3.465 5.694 0.897 1.907 3.161 9.319 2.133 Sep 1.302 5.192 11.885 1.819 0.559 3.469 4.878 0.893 1.801 2.989 9.043 2.017 Dec 1.259 5.264 11.213 1.765 0.537 3.609 4.408 0.872 1.645 2.864 8.745 1.857

2019 Mar 1.509 5.881 11.636 2.061 0.675 4.310 4.605 1.069 1.776 2.786 8.842 1.972 Jun 1.562 5.901 11.385 2.099 0.743 4.387 4.713 1.132 1.769 2.764 8.572 1.958 Sep 1.661 6.009 11.430 2.154 0.767 4.345 4.963 1.119 1.794 2.910 8.391 1.979 Dec 1.573 6.006 10.477 2.044 0.719 4.341 4.577 1.056 1.713 2.886 8.007 1.892

2020 Mar p 1.854 5.500 10.477 a 2.236 0.923 3.867 4.577 a 1.187 1.895 2.865 8.007 2.049

1 Data include banks under liquidation, foreign office transactions and interbank loans. 2 Starting January 2013, NPL data are based on BSP Circular No. 772. Gross NPL represents the actual level of NPL without any adjustment for loans treated as "loss" and fully provisioned. As a complementary measure to computing gross NPL, banks shall likewise compute their net NPLs, which shall refer to gross NPLs less specific allowance for credit losses on the total loan portfolio, Under Circular No. 772, there are no available data for Gross NPLs and Net NPLs earlier than 2012. p Preliminary a As of end-December 2019 Details may not add up due to rounding off. Source: Bangko Sentral ng Pilipinas 10 STOCK MARKET TRANSACTIONS volume in million shares, value in million pesos for periods indicated 2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Volume 97,625.31 135,027.58 118,016.90 91,600.70 140,555.10 109,228.07 106,922.13 83,842.10 176,368.76 77,403.69 73,147.70 76,927.02 118,437.27 68,292.75 94,723.73 50,850.46 65,360.84 Financials 741.11 1,012.40 1,905.97 1,449.51 1,494.89 1,855.35 1,153.34 983.32 1,691.30 918.73 866.73 878.91 988.08 849.69 948.76 707.92 894.66 Industrial 6,153.47 6,409.56 11,121.62 5,344.90 9,603.84 8,540.72 16,458.74 6,357.53 6,709.75 7,032.50 5,558.32 9,259.84 8,503.59 11,244.40 6,961.13 6,795.33 8,505.36 Holding Firms 8,600.39 11,583.96 9,080.60 7,749.47 29,925.79 12,966.29 6,082.04 5,942.57 9,900.75 8,262.96 12,040.93 7,305.76 15,166.19 8,336.65 8,209.33 8,993.59 6,511.73 Property 10,445.61 11,770.44 20,014.93 12,974.29 22,112.95 26,846.85 23,254.68 13,481.64 29,646.66 16,290.35 13,057.13 9,918.88 10,488.32 10,661.23 11,569.70 8,124.49 8,775.65 Services 17,038.11 17,875.55 31,138.63 20,533.43 29,620.77 21,897.34 13,572.51 14,093.07 26,533.78 9,909.69 15,136.08 12,894.89 22,320.22 10,736.35 12,499.88 5,679.05 9,838.84 Mining & Oil 54,421.19 85,693.07 44,045.74 42,982.43 47,548.56 36,877.26 46,142.53 42,548.76 101,365.44 34,755.01 26,028.00 36,146.06 59,639.12 25,970.92 53,799.51 20,170.32 30,638.17 SME (in thousand shares) 222,461.91 681,589.21 708,472.66 565,684.51 247,653.15 243,479.20 257,034.11 433,789.64 518,403.30 232,923.99 459,872.31 521,981.35 1,331,137.77 493,010.10 734,728.79 379,175.70 192,707.49 ETF (in thousand pesos) 2,963.88 1,008.14 943.11 987.38 656.00 775.47 1,251.54 1,405.90 2,669.01 1,518.76 648.07 705.98 615.90 504.87 689.96 593.11 3,731.60

Value 407,066.36 524,668.89 576,328.98 421,435.00 436,165.38 557,721.60 509,396.60 455,080.53 520,924.61 394,543.07 361,275.84 460,078.84 488,944.71 443,994.24 442,192.02 397,447.97 400,594.39 Financials 51,044.39 81,395.61 78,796.41 64,291.23 62,313.96 97,068.69 68,693.92 65,769.55 85,980.22 61,896.89 60,084.23 63,110.03 71,699.61 69,698.97 67,156.74 61,878.65 58,705.13 Industrial 90,690.81 88,096.51 130,478.61 92,712.81 95,489.04 124,385.03 160,294.25 106,937.03 82,559.19 77,427.38 61,868.59 133,338.65 83,951.13 88,542.93 84,172.39 60,437.96 74,440.53 Holding Firms 98,157.99 141,839.96 145,256.10 106,019.47 107,783.53 117,476.74 92,603.00 110,077.77 124,682.97 95,230.78 92,800.99 87,756.71 127,680.38 97,898.87 103,251.91 134,980.92 98,857.38 Property 74,675.94 93,800.83 103,546.23 75,656.41 73,842.80 91,340.89 79,276.90 73,557.35 95,940.50 80,284.39 72,660.22 70,210.07 95,409.31 101,224.12 98,445.18 68,185.02 102,444.66 Services 74,500.79 94,777.36 96,593.36 64,267.94 76,891.34 109,908.80 86,867.92 76,297.12 109,823.19 68,917.92 61,026.58 93,142.16 101,331.64 77,768.03 70,051.23 63,291.93 61,278.24 Mining & Oil 15,737.55 17,146.45 16,669.00 15,622.36 17,704.20 15,512.58 19,889.11 18,925.90 18,827.94 9,660.99 10,797.85 11,561.69 6,453.15 8,090.87 14,772.38 7,280.99 4,105.81 SME (in thousand pesos) 1,927,800.34 7,488,170.35 4,868,616.50 2,748,376.11 2,061,917.61 1,931,746.40 1,621,229.93 3,338,478.72 2,760,867.64 949,655.45 1,964,591.75 883,959.02 2,347,074.10 710,905.94 4,259,331.31 1,323,137.39 420,402.32 ETF (in thousand pesos) 331,093.34 123,995.73 120,653.95 116,416.07 78,598.62 97,128.21 150,269.19 177,322.51 349,733.29 175,059.50 72,778.74 75,578.02 72,405.52 59,547.11 82,847.94 69,350.11 342,221.15

Composite Index (end of period) 7,262.30 7,796.25 7,629.73 6,840.64 7,311.72 7,843.16 8,171.43 8,558.42 7,979.83 7,193.68 7,276.82 7,466.02 7,920.93 7,999.71 7,779.07 7,815.26 5,321.23

Sum of details may not add up to totals due to rounding. Source : Philippine Stock Exchange (PSE) 11 PHILIPPINES: BALANCE OF PAYMENTS in million US dollars 2019 2020 p Growth (%) Q1 Q2 Q3 Q4 Q1 Q1 2020 p

Current Account -1688 144 333 748 92 105.4 (Totals as percent of GNI) -1.8 0.1 0.3 0.6 0.1 (Totals as percent of GDP) -2.0 0.2 0.4 0.7 0.1 Export 31768 33713 35024 35618 30193 -5.0 Import 33456 33569 34692 34871 30101 -10.0

Goods, Services, and Primary Income -8326 -6519 -6635 -6605 -6728 19.2 Export 24914 26836 27893 28072 23238 -6.7 Import 33240 33355 34528 34677 29966 -9.9

Goods and Services -9653 -7728 -7895 -8145 -7973 17.4 (Totals as percent of GNI) -10.3 -7.5 -7.8 -6.9 -8.2 (Totals as percent of GDP) -11.4 -8.3 -8.6 -7.5 -9.1 Export 21693 23501 24627 24534 20091 -7.4 Import 31346 31229 32522 32680 28064 -10.5

Goods -12238 -11140 -11713 -11375 -10245 16.3 (Totals as percent of GNI) -13.1 -10.9 -11.6 -9.7 -10.5 (Totals as percent of GDP) -14.5 -11.9 -12.8 -10.5 -11.6 Credit: Exports 12197 13740 13861 13584 11666 -4.3 Debit: Imports 24434 24880 25575 24959 21912 -10.3

Services 2585 3412 3819 3229 2272 -12.1 Credit: Exports 9497 9761 10766 10950 8424 -11.3 Debit: Imports 6912 6349 6947 7721 6152 -11.0

Primary Income 1327 1209 1260 1540 1246 -6.1 Credit: Receipts 3221 3335 3266 3538 3147 -2.3 Debit: Payments 1894 2126 2006 1998 1902 0.4

Secondary Income 6638 6662 6968 7352 6820 2.7 Credit: Receipts 6854 6876 7131 7546 6955 1.5 Debit: Payments 216 214 164 194 135 -37.4

Capital Account 21 18 16 15 43 101.3 Credit: Receipts 27 22 20 21 53 97.4 Debit: Payments 6 4 4 7 10 82.6

Financial Account -4584 572 121 -2374 3796 182.8 Net Acquisition of Financial Assets 1638 3429 3375 35 1360 -16.9 Net Incurrence of Liabilities 6222 2857 3254 2409 -2436 -139.2

Direct Investment -1053 -692 -769 -1824 -1116 -6.0 Net Acquisition of Financial Assets 892 1005 795 618 553 -38.0 Net Incurrence of Liabilities 1945 1697 1564 2442 1669 -14.2

Portfolio Investment -2043 -1071 890 497 555 127.1 Net Acquisition of Financial Assets 1257 481 2074 36 -450 -135.8 Net Incurrence of Liabilities 3301 1552 1184 -462 -1005 -130.4

Financial Derivatives -40 -42 -60 -30 -74 -85.3 Net Acquisition of Financial Assets -235 -233 -235 -193 -271 -15.5 Net Incurrence of Liabilities -195 -192 -175 -163 -197 -1.2

Other Investment -1447 2377 60 -1018 4432 406.2 Net Acquisition of Financial Assets -277 2177 742 -426 1529 652.3 Net Incurrence of Liabilities 1171 -200 682 592 -2903 -348.0

NET UNCLASSIFIED ITEMS 880 1402 551 -859 3594 308.3

OVERALL BOP POSITION 3797 991 778 2277 -68 -101.8 (Totals as percent of GNI) 4.1 1.0 0.8 1.9 -0.1 (Totals as percent of GDP) 4.5 1.1 0.9 2.1 -0.1 Debit: Change in Reserve Assets 3808 980 789 2266 -58 -101.5 Credit: Change in Reserve Liabilities 11 -11 10 -11 10 -7.3

Details may not add up to total due to rounding. 2019 data on trade-in-goods are based on the preliminary data sourced from the Philippine Statistics Authority (PSA). Revised 2019 trade-in-goods data based on the final PSA data will be released in September 2020 in accordance with the BSP's revision policy on BOP statistics. p Preliminary. The overall BOP position was computed based on final data on the country’s Gross International Reserves (GIR). However, the balances of the the current, capital, and financial accounts and their components are preliminary, as these were based on partial and preliminary data and estimates, considering the operational constraints of our data sources amid the community quarantine.

Technical Notes: 1. Balance of Payments Statistics are based on the IMF's Balance of Payments and International Investment Position Manual, 6th Edition. 2. Financial Account, including Reserve Assets, is calculated as sum of net acquisitions of financial assets less net incurrence of liabilities. 3. Balances in the current and capital accounts are derived by deducting debit entries from credit entries. 4. Balances in the financial account are derived by deducting net incurrence of liabilities from net acquisition of financial assets. 5. Negative values of Net Acquisition of Financial Assets indicate withdrawal/disposal of financial assets; negative values of Net Incurrence of Liabilities indicate repayment of liabilities. 6. Overall BOP position is calculated as the change in the country's net international reserves (NIR), less non-economic transactions (revaluation and gold monetization/demonetization). Alternatively, it can be derived by adding the current and capital account balances less financial account plus net unclassified items. 7. Net unclassified items is an offsetting account to the overstatement or understatement in either receipts or payments of the recorded BOP components vis-à-vis the overall BOP position. 8. Data on Deposit-taking corporations, except the central bank consist of transactions of commercial and thrift banks and offshore banking units (OBUs). Source: Bangko Sentral ng Pilipinas 12 INTERNATIONAL RESERVES as of periods indicated in million US dollars

2 0 1 7 2 0 1 8 2 0 1 9 2020 MarMar 17 JunJun 17 SepSep 17 DecDec 17 MarMar 18 Jun 18 Sep 18 Dec 18 Mar Jun Sep Dec Mar

Gross International Reserves 80,894 81,321 80,962 81,570 80,511 77,525 74,939 79,193 83,613 84,932 85,582 87,840 88,861

Gold 7,888 7,835 8,065 8,337 8,375 7,913 7,577 8,153 8,214 8,016 8,016 8,016 8,016 SDRs 1,149 1,178 1,198 1,211 1,233 1,194 1,186 1,184 1,183 1,186 1,164 1,182 1,168 Foreign Investments 67,677 68,160 65,371 65,815 64,931 62,356 59,850 66,733 71,409 72,541 72,971 75,304 76,480 Foreign Exchange 3,735 3,695 5,880 5,783 5,542 5,573 5,842 2,649 2,283 2,665 2,870 2,747 2,619 Reserve Position in the Fund 446 453 448 424 430 489 483 474 525 524 561 590 578

Net International Reserves 80,881 81,318 80,948 81,567 80,497 77,521 74,924 79,189 83,598 84,927 85,567 87,836 88,848

Details may not add up to total due to rounding Source: Bangko Sentral ng Pilipinas 13 EXCHANGE RATES OF THE PESO pesos per unit of foreign currency period averages

Pound Australian Singapore Hongkong Malaysian Indonesian New Taiwan South Korean Emirati US Dollar Japanese Yen Euro Thai Baht Chinese Yuan Saudi Rial Sterling Dollar Dollar Dollar Ringgit Rupiah Dollar Won Dirham

2016 Ave 47.4925 0.4375 52.5568 64.3793 35.3147 34.4082 6.1185 11.4772 1.3461 0.0036 1.4741 0.0410 7.1506 12.6651 12.9315 Q1 47.2904 0.4099 52.1602 67.7775 34.0756 33.6929 6.0823 11.2646 1.3255 0.0035 1.4296 0.0394 7.2283 12.6109 12.8766 Q2 46.5171 0.4304 52.5524 66.8251 34.6919 34.2659 5.9942 11.6239 1.3192 0.0035 1.4359 0.0400 7.1224 12.4060 12.6658 Q3 47.0561 0.4594 52.5180 61.8380 35.6558 34.8125 6.0671 11.6323 1.3513 0.0036 1.4844 0.0420 7.0585 12.5485 12.8127 Q4 49.1063 0.4504 52.9967 61.0765 36.8357 34.8616 6.3303 11.3881 1.3884 0.0037 1.5466 0.0425 7.1934 13.0951 13.3710

2017 Ave 50.4037 0.4495 56.9491 64.9706 38.6418 36.5254 6.4686 11.7326 1.4866 0.0038 1.6574 0.0446 7.4593 13.4412 13.7244 Q1 49.9910 0.4401 53.2686 61.9521 37.8889 35.3106 6.4419 11.2478 1.4234 0.0037 1.6098 0.0434 7.2569 13.3323 13.6123 Q2 49.8577 0.4488 54.8473 63.7537 37.4333 35.8146 6.4038 11.5068 1.4537 0.0037 1.6481 0.0442 7.2646 13.2954 13.5756 Q3 50.8408 0.4580 59.7174 66.5855 40.1118 37.3672 6.5061 11.9324 1.5230 0.0038 1.6805 0.0449 7.6207 13.5575 13.8428 Q4 50.9255 0.4511 59.9631 67.5910 39.1333 37.6091 6.5227 12.2433 1.5461 0.0038 1.6914 0.0460 7.6951 13.5796 13.8669

2018 Ave 52.6614 0.4769 62.1943 70.3179 39.3810 39.0471 6.7197 13.0642 1.6302 0.0037 1.7481 0.0479 7.9713 14.0414 14.3387 Q1 51.4540 0.4753 63.2595 71.6146 40.4724 39.0190 6.5741 13.1161 1.6310 0.0038 1.7570 0.0480 8.0939 13.7207 14.0106 Q2 52.4470 0.4808 62.5318 71.3816 39.6907 39.3140 6.6830 13.2919 1.6446 0.0038 1.7628 0.0486 8.2271 13.9854 14.2803 Q3 53.5494 0.4805 62.2967 69.8379 39.1524 39.1621 6.8260 13.0914 1.6240 0.0037 1.7472 0.0478 7.8721 14.2786 14.5802 Q4 53.1953 0.4709 60.6894 68.4375 38.2084 38.6933 6.7959 12.7575 1.6213 0.0036 1.7255 0.0472 7.6920 14.1811 14.4839

2019 Ave 51.7958 0.4752 57.9894 66.1447 36.0008 37.9748 6.6105 12.5106 1.6686 0.0037 1.6767 0.0445 7.5021 13.8112 14.1026 Q1 52.3571 0.4754 59.4752 68.2126 37.2996 38.6528 6.6732 12.8023 1.6562 0.0037 1.6993 0.0466 7.7609 13.9610 14.2556 Q2 52.0591 0.4738 58.4750 66.8978 36.4156 38.1884 6.6405 12.5591 1.6475 0.0036 1.6738 0.0447 7.6297 13.8823 14.1744 Q3 51.7676 0.4824 57.5713 63.8264 35.4755 37.6554 6.6118 12.4355 1.6863 0.0037 1.6608 0.0434 7.3796 13.8028 14.0949 Q4 50.9993 0.4692 56.4359 65.6419 34.8126 37.4025 6.5164 12.2454 1.6842 0.0036 1.6728 0.0434 7.2381 13.5987 13.8857

2020 Ave 50.8290 0.4666 56.0530 65.1249 33.5008 36.7322 6.5413 12.1848 1.6280 0.0036 1.6892 0.0427 7.2866 13.5470 13.8393 Q1 50.8290 0.4666 56.0530 65.1249 33.5008 36.7322 6.5413 12.1848 1.6280 0.0036 1.6892 0.0427 7.2866 13.5470 13.8393

Source: Bangko Sentral ng Pilipinas 13a EXCHANGE RATES OF THE PESO units of foreign currency per peso period averages

Pound Australian Singapore Hongkong Malaysian Indonesian New Taiwan South Korean Emirati US Dollar Japanese Yen Euro Thailand Baht Chinese Yuan Saudi Rial Sterling Dollar Dollar Dollar Ringgit Rupiah Dollar Won Dirham

2016 Ave 0.0211 2.2901 0.0190 0.0156 0.0283 0.0291 0.1635 0.0871 0.7432 280.3255 0.6790 24.4225 0.1399 0.0790 0.0774 Q1 0.0211 2.4394 0.0192 0.0148 0.0293 0.0297 0.1644 0.0888 0.7544 286.1586 0.6995 25.3916 0.1383 0.0793 0.0777 Q2 0.0215 2.3236 0.0190 0.0150 0.0288 0.0292 0.1668 0.0860 0.7580 285.4377 0.6964 24.9697 0.1404 0.0806 0.0790 Q3 0.0213 2.1769 0.0190 0.0162 0.0280 0.0287 0.1648 0.0860 0.7400 279.4355 0.6737 23.7994 0.1417 0.0797 0.0780 Q4 0.0204 2.2203 0.0189 0.0164 0.0271 0.0287 0.1580 0.0878 0.7203 270.2703 0.6466 23.5294 0.1390 0.0764 0.0748

2017 Ave 0.0198 2.2252 0.0176 0.0154 0.0259 0.0274 0.1546 0.0853 0.6735 265.9140 0.6036 22.4187 0.1342 0.0744 0.0729 Q1 0.0200 2.2721 0.0188 0.0161 0.0264 0.0283 0.1552 0.0889 0.7025 267.1416 0.6212 23.0270 0.1378 0.0750 0.0735 Q2 0.0201 2.2282 0.0182 0.0157 0.0267 0.0279 0.1562 0.0869 0.6879 268.4602 0.6068 22.6453 0.1377 0.0752 0.0737 Q3 0.0197 2.1836 0.0167 0.0150 0.0249 0.0268 0.1537 0.0838 0.6566 262.3447 0.5951 22.2646 0.1312 0.0738 0.0722 Q4 0.0196 2.2168 0.0167 0.0148 0.0256 0.0266 0.1533 0.0817 0.6468 265.7095 0.5912 21.7380 0.1300 0.0736 0.0721

2018 Ave 0.0190 2.0972 0.0161 0.0142 0.0254 0.0256 0.1488 0.0766 0.6134 269.8477 0.5721 20.8761 0.1255 0.0712 0.0698 Q1 0.0194 2.1040 0.0158 0.0140 0.0247 0.0256 0.1521 0.0762 0.6131 263.6854 0.5692 20.8331 0.1235 0.0729 0.0714 Q2 0.0191 2.0798 0.0160 0.0140 0.0252 0.0254 0.1496 0.0752 0.6081 265.2805 0.5673 20.5740 0.1215 0.0715 0.0700 Q3 0.0187 2.0813 0.0161 0.0143 0.0255 0.0255 0.1465 0.0764 0.6158 273.4316 0.5723 20.9209 0.1270 0.0700 0.0686 Q4 0.0188 2.1237 0.0165 0.0146 0.0262 0.0258 0.1471 0.0784 0.6168 276.9934 0.5795 21.1766 0.1300 0.0705 0.0690

2019 Ave 0.0193 2.1047r 0.0173 0.0151 0.0278 0.0263 0.1513 0.0800 0.5994 273.1630r 0.5965 22.4860r 0.1334 0.0724 0.0709 Q1 0.0191 2.1036 0.0168 0.0147 0.0268 0.0259 0.1499 0.0781 0.6038 269.5659 0.5885 21.4654 0.1289 0.0716 0.0701 Q2 0.0192 2.1108 0.0171 0.0149 0.0275 0.0262 0.1506 0.0796 0.6070 274.1912 0.5975 22.3788 0.1311 0.0720 0.0705 Q3 0.0193 2.0731 0.0174 0.0157 0.0282 0.0266 0.1512 0.0804 0.5930 272.7659 0.6021 23.0442 0.1355 0.0724 0.0709 Q4 0.0196 2.1315 0.0177 0.0152 0.0287 0.0267 0.1535 0.0817 0.5937 276.1289 0.5978 23.0556 0.1382 0.0735 0.0720

2020 Ave 0.0197 2.1434 0.0178 0.0154 0.0299 0.0272 0.1529 0.0821 0.6143 278.6507 0.5920 23.4217 0.1372 0.0738 0.0723 Q1 0.0197 2.1434 0.0178 0.0154 0.0299 0.0272 0.1529 0.0821 0.6143 278.6507 0.5920 23.4217 0.1372 0.0738 0.0723

Note: Annual data may or may not be equal to the average of the monthly data due to rounding. r Revised Source: Bangko Sentral ng Pilipinas 13b EFFECTIVE EXCHANGE RATE INDICES OF THE PESO 1980 = 100 period averages

N O M I N A L R E A L

Trading Partners Index Trading Partners Index

Overall 1 Advanced 2 Developing 3 Overall Advanced Developing

2016 15.00 12.15 24.03 86.98 82.15 114.06 Jan 15.41 12.65 24.45 91.78 88.95 118.22 Feb 15.18 12.41 24.17 88.39 85.43 114.07 Mar 15.30 12.54 24.32 88.56 85.27 114.60 Apr 15.24 12.44 24.27 88.68 84.62 115.45 May 15.16 12.28 24.27 88.20 82.95 115.99 Jun 15.20 12.24 24.46 88.74 82.89 117.24 Jul 14.98 12.05 24.09 86.51 81.25 113.86 Aug 14.94 11.96 24.12 85.83 79.94 113.62 Sep 14.75 11.80 23.81 84.43 78.40 112.00 Oct 14.59 11.71 23.53 83.75 77.81 111.05 Nov 14.62 11.78 23.51 84.30 78.82 111.30 Dec 14.74 12.04 23.47 84.86 80.28 111.14

2017 14.13 11.51 22.54 83.04 r 79.07 108.35 Jan 14.70 11.99 23.43 88.03 85.16 113.72 Feb 14.48 11.83 23.08 85.70 82.74 110.85 Mar 14.37 11.75 22.87 84.54 81.32 109.62 Apr 14.41 11.73 23.01 85.30 81.20 111.30 May 14.39 11.73 22.96 84.90 80.57 111.00 Jun 14.29 11.61 22.83 84.34 79.81 110.46 Jul 14.04 11.41 22.44 81.93 77.91 106.97 Aug 13.82 11.17 22.17 80.28 75.61 105.43 Sep 13.73 11.15 21.96 79.81 75.22 104.77 Oct 13.75 11.20 21.94 80.30 75.96 105.19 Nov 13.78 11.28 21.92 80.71 76.72 105.41 Dec 13.89 11.41 22.07 81.09 77.16 105.84

2018 13.29 10.83 21.21 80.80 76.96 105.39 Jan 13.61 11.19 21.62 83.06 80.89 107.01 Feb 13.17 10.77 20.97 79.35 76.98 102.44 Mar 13.06 10.65 20.84 78.86 75.67 102.44 Apr 13.07 10.71 20.80 79.63 76.42 103.43 May 13.25 10.90 21.03 80.41 77.00 104.57 Jun 13.13 10.77 20.88 80.19 76.51 104.50 Jul 13.25 10.74 21.20 80.28 76.15 104.97 Aug 13.36 10.80 21.42 81.06 76.36 106.40 Sep 13.21 10.68 21.19 80.45 75.56 105.75 Oct 13.29 10.74 21.30 81.26 76.23 106.88 Nov 13.60 11.04 21.75 83.10 78.34 109.03 Dec 13.56 11.02 21.66 82.13 77.53 107.68

2019 13.76 11.16 22.02 84.49 80.31 110.34 r Jan 13.49 10.94 21.57 85.04 81.78 110.33 Feb 13.53 11.07 21.54 83.78 81.27 108.19 Mar 13.52 11.06 21.51 83.21 80.23 107.81 r Apr 13.63 11.17 21.68 84.21 r 80.84 109.38 r May 13.71 11.10 21.95 84.58 79.92 110.81 Jun 13.76 11.09 22.08 84.97 80.00 111.56 r Jul 13.90 11.26 22.27 85.02 r 80.82 111.03 r Aug 13.78 11.03 22.22 83.87 r 78.53 110.45 r Sep 13.79 11.09 22.18 83.62 78.47 109.99 r Oct 13.92 11.24 22.34 84.57 r 79.66 111.00 r Nov 14.08 11.43 22.51 85.68 81.26 112.02 Dec 14.06 11.42 22.49 85.67 81.13 112.11

2020 14.10 11.44 22.57 88.38 85.31 114.44 Jan 13.96 11.41 22.24 88.63 86.41 114.13 Feb 14.15 11.52 22.58 88.17 85.70 113.72 Mar 14.21 11.38 22.89 88.34 83.82 115.49

1 Australia, Euro Area, U.S., Japan, Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E. 2 U.S., Japan, Euro Area, and Australia 3 Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E.

Source: Bangko Sentral ng Pilipinas 13b EFFECTIVE EXCHANGE RATE INDICES OF THE PESO 1980 = 100 period averages

N O M I N A L R E A L

Trading Partners Index Trading Partners Index

Overall 1 Advanced 2 Developing 3 Overall Advanced Developing

2016 15.00 12.15 24.03 86.98 82.15 114.06 Q1 15.30 12.53 24.31 89.58 86.55 115.63 Q2 15.20 12.32 24.33 88.54 83.49 116.23 Q3 14.89 11.94 24.01 85.59 79.86 113.16 Q4 14.65 11.84 23.50 84.30 78.97 111.16

2017 14.13 11.51 22.54 83.04 r 79.07 108.35 Q1 14.52 11.86 23.13 86.09 83.07 111.40 Q2 14.36 11.69 22.93 84.85 80.53 110.92 Q3 13.86 11.24 22.19 80.67 76.25 105.72 Q4 13.81 11.30 21.97 80.70 76.61 105.48

2018 13.29 10.83 21.21 80.80 76.96 105.39 Q1 13.28 10.87 21.15 80.42 77.85 103.96 Q2 13.15 10.80 20.90 80.08 76.64 104.17 Q3 13.28 10.74 21.27 80.60 76.02 105.70 Q4 13.48 10.93 21.57 82.16 77.37 107.86

2019 13.76 11.16 22.02 84.49 80.31 110.34 r Q1 13.51 11.02 21.54 84.01 81.09 108.78 Q2 13.70 11.12 21.91 84.59 80.25 110.58 Q3 13.83 11.13 22.22 84.17 r 79.27 110.49 r Q4 14.02 11.36 22.45 85.31 80.68 111.71

2020 14.10 11.44 22.57 88.38 85.31 114.44 Q1 14.10 11.44 22.57 88.38 85.31 114.44

1 Australia, Euro Area, U.S., Japan, Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E. 2 U.S., Japan, Euro Area, and Australia 3 Hong Kong, Taiwan, Thailand, Indonesia, Malaysia, Singapore, South Korea, China, Saudi Arabia, and U.A.E. r Revised Source: Bangko Sentral ng Pilipinas 16 SELECTED FOREIGN INTEREST RATES period averages; in percent

2016 2017 2018 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

US Prime Rate 3.5000 3.5000 3.5000 3.5119 3.7935 4.0455 4.2500 4.2976 4.5265 4.7976 5.0083 5.2817 5.5000 5.5000 5.3016 4.8297 4.4167 US Discount Rate 1.0000 1.0000 1.0000 1.0492 1.2935 1.5455 1.7500 1.7976 2.0265 2.2917 2.5042 2.7778 3.0000 3.0000 2.8016 2.3297 r 1.8258 US Federal Funds Rate 0.3695 0.3831 0.3994 0.4491 0.6974 0.9486 1.1551 1.2015 1.4356 1.7289 1.9140 2.2048 2.4002 2.3828 2.1713 1.6332 1.2280 LIBOR (90 days) 0.6248 0.6433 0.7853 0.9208 1.0684 1.2023 1.3150 1.4656 1.9274 2.3384 2.3373 2.6325 2.6855 2.5062 2.1947 1.9299 1.5337 SIBOR 1 (90 days) 1.2369 1.0062 0.8807 0.9059 0.9529 0.9961 1.1101 1.1681 1.2800 1.5115 1.6331 1.7326 1.9218 1.9769 1.9188 1.8011 1.5556

1 SIBOR data refers to SIBOR rates in Singapore dollar r revised Source: Bloomberg 17 BALANCE SHEET OF THE BANGKO SENTRAL NG PILIPINAS as of periods indicated; in billion pesos

2018 2019 2020 Mar Jun Sep Dec Mar Jun Sep Dec u Mar p

Assets 4,781.7 4,726.6 4,646.3 4,851.3 5,145.2 5,064.5 5,096.0 5,082.9 5,439.0 International Reserves 4,187.1 4,116.8 4,031.0 4,140.2 4,375.2 4,326.7 4,405.8 4,434.1 4,484.2 Domestic Securities 224.9 224.6 224.2 223.3 224.2 224.9 226.1 226.1 237.7 Loans and Advances 167.0 170.9 180.2 277.5 329.7 301.5 248.8 200.2 162.6 Government Securities Purchased Under Repurchase Agreements ------300.0 Bank Premises and Other Fixed Assets 23.0 22.8 22.9 23.7 23.9 24.2 24.3 24.4 23.5 Derivative Instruments in a Gain Position 0.1 0.1 . 0.1 0.0 0.1 0.0 . 0.1 Other Assets 179.6 191.5 188.0 186.5 192.2 187.1 190.9 198.1 231.0

Liabilities 4,690.3 4,616.1 4,523.8 4,734.9 5,018.3 4,920.2 4,959.9 4,938.6 5,305.5 Currency Issue 1,250.9 1,232.5 1,247.1 1,490.2 1,382.6 1,383.0 1,386.6 1,679.1 1,697.7 Deposits 2,466.8 2,418.0 2,298.2 2,304.1 2,709.5 2,659.1 2,642.0 2,411.2 2,729.8 1 Reserve Deposits of Other Depository Corporations (ODCs) 1,792.9 1,746.2 1,767.8 1,843.8 1,841.0 1,725.9 1,700.3 1,550.5 1,442.0 2 Reserve Deposits of Other Financial Corporations (OFCs) 2.0 1.3 1.3 1.3 0.7 0.7 0.4 0.4 0.4 Secured Settlement Accounts - 0.3 1.6 2.7 2.7 4.3 3.5 8.1 22.6 3 Overnight Deposit Facility 24.6 20.1 6.1 58.6 59.9 26.8 82.3 266.2 312.3 3 Term Deposit Facility 182.5 152.2 109.4 69.2 70.1 42.9 174.7 283.2 80.1 4 Treasurer of the Philippines 318.8 338.6 257.5 170.2 575.1 709.7 533.9 159.9 722.5 Other Foreign Currency Deposits 0.8 0.8 1.1 1.1 1.3 1.1 1.1 1.1 1.2 Foreign Financial Institutions 115.1 122.9 122.8 122.8 120.0 115.6 113.2 107.7 107.7 5 Other Deposits 30.2 35.6 30.6 34.4 38.7 32.2 32.7 34.1 41.0 Foreign Loans Payable ...... 0.0 0.0 Net Bonds Payable 26.7 26.7 27.6 26.3 26.9 25.6 26.5 25.4 25.9 Derivative Instruments in a Loss Position . . 0.0 0.0 0.1 0.0 . 0.0 0.0 Derivatives Liability 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Allocation of SDRs 63.7 63.0 63.4 61.4 61.3 59.8 59.3 58.9 58.1 6 Revaluation of Foreign Currency Accounts 562.5 588.3 575.4 535.0 569.7 471.0 511.7 425.9 474.2 3 Reverse Repurchase Facility 305.1 272.0 299.2 301.0 250.7 305.1 302.1 305.1 305.0 Other Liabilities 14.3 15.5 12.9 16.9 17.5 16.5 31.7 33.0 14.7

Net Worth 91.4 110.5 122.5 116.4 126.8 144.3 136.0 144.2 133.5

Capital 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 Surplus/Reserves 41.4 60.5 72.5 66.4 76.8 94.3 86.0 94.2 83.5

Note: Details may not add up to total due to rounding. 1 ODCs are deposit generating institutions other than the BSP such as universal and commercial banks (UB/KBs), specialized government banks (SGBs), thrift banks (TBs), rural banks (RBs) and non-banks with quasi-banking functions (NBQBs). 2 OFCs are trust units of banks. 3 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively, and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system. Includes accrued interest payables. 4 Includes foreign currency deposits 5 Mostly GOCC deposits 6 Previously named Revaluation of International Reserves p Based on the tentative BSP Financial Statements (FS) as of end-March 2020. u Based on the unaudited pre-closing BSP FS as of end-December 2019. p & u Figures may change once the end-2019 FS become final and audited. - Not applicable . Rounds off to zero

Source: Bangko Sentral ng Pilipinas 18 INCOME POSITION OF THE BANGKO SENTRAL NG PILIPINAS for periods indicated; in billion pesos

2018 2019 2020 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4u FYu Q1p

Revenues 14.918 22.160 12.556 18.361 67.995 26.410 38.906 30.005 26.404 121.725 26.124

Interest Income 16.878 19.006 19.914 22.353 78.151 25.675 27.546 25.070 22.134 100.425 20.799 International Reserves 14.182 15.865 16.387 17.721 64.155 20.195 20.761 19.925 17.822 78.703 17.198 Domestic Securities 1.461 1.686 2.023 2.346 7.516 3.051 3.232 2.712 2.401 11.396 1.962 Loans and Advances 0.480 0.524 0.543 1.126 2.673 1.509 2.370 1.510 0.831 6.220 0.615 Others 0.755 0.931 0.961 1.160 3.807 0.920 1.183 0.923 1.080 4.106 1.024 Miscellaneous Income 1 -2.013 3.104 -7.532 -3.879 -10.320 0.711 11.221 4.848 4.215 20.995 5.296 Net Income from Branches 0.053 0.050 0.174 -0.113 0.164 0.024 0.139 0.087 0.055 0.305 0.029

Expenses 12.143 16.981 15.641 21.139 65.904 18.950 22.483 20.851 24.338 86.622 18.225

Interest Expenses 6.431 6.592 7.881 9.023 29.927 10.330 11.162 12.224 10.980 44.696 10.957 Legal Reserve Deposits of Banks 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 National Government Deposits 1.954 1.879 2.385 3.194 9.412 4.452 6.668 5.822 3.041 19.983 2.514 Reverse Repurchase Facility 2 2.266 2.179 2.564 3.104 10.113 3.176 2.801 3.241 3.040 12.258 2.843 Overnight Deposit Facility 2 0.592 0.231 0.172 0.346 1.341 0.601 0.241 0.605 1.101 2.548 1.704 Term Deposit Facility 2 0.908 1.539 1.876 1.495 5.818 1.153 0.545 1.698 2.976 6.372 3.077 Loans Payable and Other Foreign Currency Deposits 0.696 0.724 0.832 0.847 3.099 0.886 0.850 0.837 0.782 3.355 0.756 Other Liabilities 0.015 0.040 0.052 0.037 0.144 0.062 0.057 0.021 0.040 0.180 0.063 Cost of Minting/Printing of Currency 1.893 2.329 2.818 4.220 11.260 3.544 3.082 2.611 3.236 12.473 2.442 Taxes and Licenses 0.397 2.476 0.446 2.215 5.534 0.774 3.868 0.753 3.671 9.066 0.320 Others 3.422 5.584 4.496 5.681 19.183 4.302 4.371 5.263 6.451 20.387 4.506

Net Income/(Loss) Before Net Gain/(Loss) on FX Rate Fluctuations and Income Tax Expense/(Benefit) 2.775 5.179 -3.085 -2.778 2.091 7.460 16.423 9.154 2.066 35.103 7.899

Net Gain/(Loss) on Foreign Exchange Rate Fluctuations 3 7.040 14.471 27.292 4.305 53.108 5.670 3.330 5.365 0.360 14.725 2.021

Income Tax Expense/(Benefit) 0.000 0.019 8.425 6.910 15.354 0.000 3.000 5.753 -6.024 2.729 0.005

Net Income/(Loss) After Tax 9.815 19.631 15.782 -5.383 39.845 13.130 16.753 8.766 8.450 47.099 9.915

Note: Details may not add up to total due to rounding. 1 This includes trading gains/losses, fees, penalties and other operating income, among others. 2 Starting 3 June 2016, the Reverse Repurchase Agreement and Special Deposit Account have been replaced by the Reverse Repurchase Facility and Overnight Deposit Facility, respectively, and a Term Deposit Facility was introduced in line with the implementation of the Interest Rate Corridor (IRC) system. 3 This represents realized gains or losses from fluctuations in foreign exchange rates arising from foreign currency-denominated transactions of the BSP. p Based on the tentative BSP Financial Statements (FS) as of end-March 2020. u Based on the unaudited pre-closing BSP FS as of end-December 2019. p & u Figures may change once the end-2019 FS become final and audited. Source: Bangko Sentral ng Pilipinas