Republic of the Philippines

Investor Presentation
October 2017
Table of Contents

 Strengthening Credit Profile……………………….....................................................................3

 Favorable Macroeconomic Trends.........................................................................................5
 Healthy External Position…..................................................................................................12
 Sound and Stable Financial System……………......................................................................18
 Sound and Strengthening Government Finances.................................................................20
 Infrastructure Development…………....................................................................................29
 Investor Relations Office Brochure………………………………………………………………………32

2
Strengthening Credit Profile
Sustained Strengthening of the Philippines’ Credit Profile
Metric 2013 * 2014 2015 2016 2017
Credit Ratings
• Fitch BBB-/stable BBB-/stable BBB-/positive BBB-/positive BBB-/positive
• Moody’s Baa3/positive Baa2/stable Baa2/stable Baa2/stable Baa2/stable
• S&P BBB-/stable BBB/stable BBB/stable BBB/stable BBB/stable

Real GDP Growth Rate (%) 7.1 6.1 6.1 6.9 6.4 (Jan-Jun)
8,302
GDP Per Capita** (USD), PPP Concept 6,546 6,952 7,333 7,886
(Annualized)
9,943
GNI Per Capita** (USD), PPP Concept 7,953 8,425 8,870 9,408
(Annualized)
Inflation Rate (2006 = 100) (%) 3.0 4.1 1.4 1.8 3.1 (Jan-Sep)
National Government Interest Payments
18.8 16.8 14.7 13.9 13.9 (Jan-Aug)
(as % of Revenues)
Fiscal Balance (as % of GDP) -1.4 -0.6 -0.9 -2.4 -2.1 (Jan-Jun)
Tax Revenue (as % of GDP) 13.3 13.6 13.6 13.7 14.2 (Jan-Jun)
General Government Debt (as % of GDP) 39.2 36.4 36.2 34.6 NA
Gross International Reserves (USD billion) 83.2 79.5 80.7 80.7 81.7 (end-Aug)
‒ Import Cover (months) 11.6 9.9 9.9 8.9 8.6 (end-Aug)
Overseas Filipinos’ Cash Remittances (USD billion) 23.0 24.6 25.6 26.9p/ 16.1 (Jan-Jul)
Foreign Direct Investments (USD billion) 3.7 5.7 5.6r/ 8.0r/ 3.6 (Jan-Jun)
Current Account (as % of GDP) 4.2 3.8 2.5r/ -0.3r/ -0.2 (Jan-Jun)
External Debt (as % of GDP) 28.9 27.3 26.5 24.5r/ 23.5 (Jan-Jun)
* ROP achieved investment grade status in 2013, followed by series of upgrades from S&P, Fitch and
Moody’s
** At current prices
p/ preliminary
r/ revised
NA not available 4
Source: BSP’s Selected Economic and Financial Indicators, DOF, BTr
Favorable Macroeconomic Trends
Philippines is Expected to Remain as One of the Fastest Growing Economies in Asia

GDP growth of selected Asian economies

8.0 2016 Q1 2017 Q2 2017 2017Proj 2018Proj

7.4

6.8 6.9 6.9 6.9 6.8

7.0 6.7 6.6 6.7 6.7
6.4 6.5 6.5 6.4 6.3 6.3
6.1 6.2
6.0 5.7 5.8
5.6
5.4
5.1 5.2 5.3
5.0 5.0 5.0
5.0 4.8
4.2
4.0 3.7 3.7
3.5
3.2 3.3
3.0

2.0

1.0

0.0
India Philippines China Vietnam Indonesia Malaysia Thailand
(BBB-/Baa3/BBB-) (BBB/Baa2/BBB-) (A+/A1/A+) (BB-/B1/BB-) (BBB-/Baa3/BBB-) (A-/A3/A-) (BBB+/Baa1/BBB+)

Rating: S&P/Moody’s/Fitch
Source: PSA; International Monetary Fund (IMF) WEO October 2017; Bloomberg L.P.; BSP SPEI for Q1-Q2 2017 GDP Growth Rates 6
Economic Rebalancing Towards a More Broad-Based Growth
Consumption and services as major drivers of growth
GDP breakdown by component
Contribution to growth: demand (%) 7.0 Contribution to growth: supply side (%)
6.9 7.0
6.1 6.9
6.9 6.3
6.3 6.1 6.4
5.7 6.4
4.5 4.0
3.0 1.4 2.7
2.8 0.2 0.9
0.7 0.7 0.8 0.5 4.5 4.2 4.5
0.4 0.3 3.7
0.3 4.0 4.4 4.8 5.0 4.0 3.8
2.5 3.3 3.9
-0.3 -0.6 2.8
-1.3 2.8
-3.1
-4.5
-6.6
1.8 2.3
2.4 2.8 2.8
1.2 2.2
0.7
0.2 0.4 0.1 0.0 0.5
-0.1 -0.3
1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017 1990-1999 2000-2009 2010-2016 2015 2016 H1 2016 H1 2017
Agriculture Industry Services
Consumption Government Investment Net Exports

Capital formation remains strong … and is an increasingly key driver of growth

Gross capital formation (PHP bn, constant prices) GDP breakdown by expenditure (%)
+23.7%
H1 2017 -7.4 67.7 11.3 28.3
+18.4% 2,275
+27.9% +4.2% 1,838
H1 2016 -7.2 68.1 11.6 27.5
+2.8% -4.3% 1,490 1,553 +9.7%
1,217 1,165 1,197.3
1,091.5 2016 -7.8 69.3 10.5 28.0

2015 -3.8 69.3 10.3 24.2

2011 2012 2013 2014 2015 2016 H1 2016 H1 2017

Household Expenditure Government Spending

Construction Durable Equipment Others
Capital Formation Net Exports
Source: PSA
Note: Numbers may not add up due to rounding 7
Rising Investments Highlight Confidence in Philippine Growth Prospects
Sustained inflows from both foreign and local investors and bright prospects highlight confidence in ROP’s fundamentals
Net Foreign Direct Investment (FDI) Flows* (USD bn) Average Growth of FDI, 2012-2016 (%)*
97.1
9.0 8.0
8.0 78.7
7.0
5.7 5.6
6.0
5.0
3.7 3.6
4.0 3.2 33.8
3.0 2.0 27.8
2.0 1.1 11.5 7.7 6.1
1.0
0.0 -0.5
2010 2011 2012 2013 2014 2015 2016 Jan-Jun
-8.1
2017 -16.3
TH TW PH VN IN SG ID CH MY KR

Increasing FDIs in manufacturing • ROP is in the top 15 investment destinations of

Average Percent Share by Industry, 2012-2016
choice by multinationals for 2017-2019 based
Mining and Construction Others on UNCTAD’s World Investment Report 2017.
Quarrying 2% 4%
4%

Wholesale and • 2017 Investment Climate Statements of the US

Retail Trade
6% State Department’s Bureau of Economic and
Real Estate Manufacturing
9% 37% Business Affairs cites ROP’s increased
Water Supply,
Sewerage, and attractiveness as FDI destination
Waste
Management
14%
Arts, Enternainment Finance and
and Recreation Insurance
11% 13%

Source: PSA, NEDA, BSP, UNCTAD, Bloomberg; * BOP Concept 8

Economy Performed Well in 2016; Growth Momentum Expected to Continue in the
Medium-term

Incremental Capital-Output Ratio Total Factor Productivity

10 9.5
9 2.5
8 2.1
2.0
7 6.4 2.0

6
1.5
5 4.2
4 3.7
1.0
3
0.5
2 0.5
1
0.0
0 0.0
1989-1992 1993-2001 2002-2009 2010-2017Q2 1989-1992 1993-2001 2002-2009 2010-2017Q2

Source: BSP Staff estimates 9

Sustained Low Inflation Environment
Inflation remains manageable demonstrating monetary policy credibility
Headline CPI (yoy, %)
8.3

4.6
5.5 4.2 4.1
3.1
2.9
3.8 1.4 1.8
3.2
3.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Sep '17

Inflation Target Band Headline CPI

Source: BSP; PSA

Inflation condition supportive of growth

GDP, CPI volatility (20Y Standard Deviation, 2001-2020F)

1.5
Poland 1.4 CPI volatility GDP volatility
Colombia 1.7
1.5
Philippines 1.6
1.6
Uruguay 2.9
1.9
0.8
Mexico 2.0
1.4
Spain 2.2
Thailand 1.8
2.2
1.0
Peru 2.2
2.1
Panama 2.4
Kazakhstan 3.2
3.1
3.1
Iceland 3.7

10
Source: IMF World Economic Outlook, April 2017
ROP Expects Continued Robust Growth in the Medium-Term
The Philippine economy is now growing on higher growth plane with increasing contribution from the manufacturing
sector along with robust infrastructure investment, and solid services sector

2017 2018
2015 Actual 2016 Actual
Projections/3

Real GDP Growth (%) 6.1r/ 6.9r/ 6.5-7.5 7.0-8.0

Dubai Crude Oil (USD/bbl) 50.9 41.3 40-55 45-60

Inflation (%, average)1/ 1.4 1.8 2.0-4.0 2.0-4.0

Exchange Rate (PHP/USD) 45.5 47.5 48-50 48-51

Balance of Payments (USD, bn) 2.6 -0.4 -0.52/ NA

Current Account (USD, bn) 7.7 -1.0r/ -0.62/ NA

OF Cash Remittances (USD, bn) 25.6 26.9 28.02/ NA

Merchandise Exports (% growth)

Per BPM6 -13.3 -1.1r/ 5.02/ 7.0
Per PSA -5.3 -2.4r/ 7.03/ 9.0
Merchandise Imports (% growth)
-1.0 17.7r/ 10.02/ 10.0
Per BPM6
8.7 18.3r/ 11.03/ 11.0
Per PSA

Gross International Reserves (USD, bn) 80.7 80.7 80.52/ NA

Sources: PSA, BSP, Bloomberg

1/ Inflation target range for 2017-2018
2/ Assumption approved by the MB May 18, 2017
3/ Assumption adopted by the DBCC June 9, 2016
a/ Based on Balance of Payments and International Investment Position Manual, 6th Ed. (BPM6) 11
NA: Not Available p/: preliminary
Healthy External Position
Healthy External Finances Shield the Economy from External Shocks
… while helping smoothen volatility in the foreign exchange
Reserve buffer provides protection against external payments market by enabling the necessary adjustments in a continued
shocks… volatile global environment
FX reserves (USD bn) and months of import cover Implied Volatility (YOY %, as of September 29, 2017)

11.5 11.6
9.9 9.9 8.9 8.6
11.6
10.4
75.3 10.6
9.2 83.8 83.2 10.0
62.4 79.5 80.7 8.3
6.7 80.7 81.7
6.4 6.9
6.3
5.1
4.6 44.2 5.0 5.0
37.6
33.8
23.0
18.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aug
Thai Baht Chinese Philippine Malaysian Indonesia Japanese Korean Won
2017
FX reserves Import cover Renminbi Peso Ringgit Rupiah Yen

Sustained decline in external debt-to-GDP ratio underscores the health of external finances
External debt (USD bn) and external debt/GDP (%)
73.6 75.6 80.0 78.5 77.7 77.5 74.8
61.6 72.5
66.5 65.2 64.7
61.4

59.7
50.2
44.5
37.6 38.4 36.9 33.7 32.0 28.9 27.3 26.5 24.5 23.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 end-Q2 2017
External Debt External Debt Ratio

Source: BSP, Bloomberg 13

Structural and ‘Sticky’ Current Account Flows
Business Process Outsourcing (BPO) and increasingly tourism sector act as additional, strong economic engines,
helping ensure resiliency of ROP’s external payments position against external stresses
BPO – a strong driver of employment and revenues
BPO employment (‘000s) and revenues (USD bn)
1,800
+11.7% revenue
growth in 2016 1,250
1,146
958 1,044
777 858
640
527
371 424
236 298
4.5 6.1 7.1 8.9 11 13.2 15.8 18.0 20.5 22.9 24.5 38.9
3.4
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017P 2022P
Revenues Employment

Rising tourism receipts provide key support to the current

Sustained growth of remittances over the years account
Overseas Filipinos' cash remittances (USD bn) International visitor receipts (USD bn) and arrivals (mn)
+11.3% growth
+5.0% growth in arrivals in 2016 6.5
6.0
in 2016
+5.0% 5.4
25.6 26.9
24.6 YOY 4.7 4.8
23.0 growth 4.3
20.1 21.4 3.9
18.8 3.5 4.8 5.0 4.8
16.4 17.3 16.1 4.4
14.5 15.3
12.8 3.8
3.0
2.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jul Jan-Jul 2010 2011 2012 2013 2014 2015 2016 2017P
2016 2017
Arrivals Receipts
Sources: BSP, IBPAP 14
Current Account Developments Consistent with Economic Expansion
 Philippine economy’s expansion remains at an accelerated pace resulting in high rate of growth of goods imports
 Over time, as investments enhance the economy’s potential capacity and support needed infrastructure development, goods
exports are expected to increase, eventually alleviating the trade gap

Current Account Drivers of Goods Imports Growth, Q1 2005-Q2 2017

Current Account components, Q1 2005-Q22017 (USD bn) In percentage points

Other imports Consumer non-durables

Goods Exports (lhs) Goods Imports (lhs) BPO receipts (lhs)
Consumer durables (cars, appliances, etc.) Other raw mats. & intermediate goods

OF remittances (lhs) Current Account Balance (rhs) Mat/Acc. for mftr. of elec. eqpt. Chemicals
50.0 Iron & steel Mineral fuels & lubricant

100000 14000 Capital goods Total Imports Growth

40.0
80000
12000
30.0 29.0
60000
10000
40000 20.0 20.7

20000
8000 11.8
15.9 15.0
10.0 10.3
0 6000 3.2
-
-20000 (1.4) (1.2)
4000 (4.5)
(10.0)
-40000
2000
-60000 (20.0)

-80000
0
(30.0)
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
-100000 -2000
2005 2007 2009 2011 2013 2015 Jan-Jun
2017

Source: BSP, PSA 15

Strong fundamentals and adequate reserves lend support to Peso
Year-on-year movements show depreciation of other
regional currencies Flexible and competitive peso
Year-on-year appreciation (+)/ Depreciation (-) of Asian Currencies vs. Peso per USD Rate, NEER (1980=100) and REER (1980=100)
USD (%), 03 Oct 2017 vs. 03 Oct 2016
Jan-2005 Aug-2017
Japanese Yen 140.0
-10.35
Philippine Peso
-5.62
120.0 108.06
Indonesian Rupiah
-4.16
91.96
Malaysian Ringgit 100.0
-2.69 82.44
Chinese Yuan
0.00 80.0
77.89
South Korean Won 63.08
0.00
60.0
Singaporean Dollar
0.08
51.98
Indian Rupee 40.0
1.43
New Taiwan Dollar
2.97
20.0
Thai Baht
3.28
0.0
-12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 2005

2008

2011

2016r

2017r
2006

2007

2009

2010

2012

2013

2014

2015
Note: Based on last done deal transaction (closing price)

Overall Trading Partners Advance Trading Partners

Developing Trading Partners
Source: BSP
16
Peso to Remain Driven by Fundamentals
 Recent depreciation of the peso remains fundamental-driven, reflecting robust economic growth on the back of strong imports,
increasing investments abroad and debt prepayment of residents
 The peso is expected to be broadly stable supported by structural foreign exchange inflows from overseas remittances, BPO
revenues, tourism receipts, sustained FDIs, as well as the country’s robust external payments position

Source: BSP
17
Sound and Stable Financial System
Sound Banking System Effectively Funds Productive Sectors
Solid Asset Growth Improved Quality of Loan Portfolio
Total Asset and Deposit Levels (PHP bn) +14.7% YOY Total Loan Portfolio (PHP bn) and NPL coverage ratio (%)
growth in 9,000 10
16,000 deposits
9
14,248 8,000
13,591
14,000 8
7,000
12,000 8,010 7
6,000
7,612 6
10,000 11,093 5,000
10,507 5
8,000 4,000
4
6,000 3,000
3
4,000 2,000 2
1.9 2.0
2,000 1,000 1
0 0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jul-17 2005 2007 2009 2011 2013 2015 Jul-2017
Assets (in PHP bn) Deposits (in PHP bn) Loans outstanding (in PHP bn, LHS) NPL, Gross ratio

Sustained Profitability Strong capitalization well above international norms

Net Profit and ROE Capital adequacy ratio (%) of U/KBs *
180 14
160 10.5 9.8
12 15.8
140
10
120
156.9 8
100 154.3 15.0
80 6
60 BSP Regulatory Requirement: 10%
4
40
20 2
International Standard: 8%
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mar
Annualized Net Profit (in PHP bn, LHS) ROE (in %, RHS) 2017
Solo basis Consolidated basis
Note: Except otherwise indicated, statistics refers to Philippine Banking System
* UK/Bs – Universal and Commercial Bank 19
Source: BSP
Sound and Strengthening Government Finances
Sustainable Sound Fiscal Position
Reforms in tax administration contributing to stronger revenue effort in 1H2017

National Government Fiscal Performance

Actual
FY2017
FY2018 2
Jan-Jul Jan-Jul Jan-Jul Jan-Jun Adjusted 1
FY2016
2017 2016 2017 2017
YoY
% of % of % of
PHP bn Growth % of GDP PHP bn PHP bn PHP bn
GDP GDP GDP
(%)
Total Revenues 1,371.0 1,271.2 7.8 15.6 2,196.0 15.2 2,426.9 15.3 2,840.5 16.3

Tax Revenues 1,243.6 1,132.9 9.8 14.2 1,980.4 13.7 2,258.3 14.2 2,671.7 15.3

Bureau of Internal
986.1 900.9 9.5 11.3 1,567.2 10.8 1,782.8 n.a. 2,005.0 n.a.
Revenues

Bureau of Customs 245.3 221.5 10.7 2.8 396.4 2.7 459.6 n.a. 637.1 n.a.

Non-Tax Revenues 127.4 138.3 (7.9) 1.4 215.4 1.5 166.5 1.0 166.8 1.0

Bureau of the Treasury 61.2 72.8 (15.9) 0.7 101.7 0.7 n.a. n.a. n.a. n.a.

Privatization 0.3 0.5 (48.8) 0.0 0.7 0.0 2.0 0.0 2.0 0.0

Expenditure 1,576.0 1,442.2 9.3 17.7 2,549.3 17.6 2,909.0 18.3 3,364.1 19.3

Surplus/(Deficit) (205.0) (171.0) 19.9 (2.1) (353.4) (2.4) (482.1) (3.0) 523.6 (3.0)
Primary
(8.8) 22.7 138.6 0.0 (49.0) (0.3) n.a. n.a. n.a. n.a
Surplus/(Deficit)
Note: Some values may not sum up to exact figure due to rounding
1 Medium Term Fiscal program, Development Budget Coordination Committee (DBCC) approved on June 9, 2017
2 Budget of Expenditures and Sources of Financing FY 2018 submitted to Congress on July 24, 2017

n.a. – not available

Source: DOF, Budget of Expenditures and Sources of Financing (BESF) 2018 - Department of Budget and Management (DBM) 21
Sustained Sound Fiscal Position
Manageable Fiscal Deficits
National Government (NG) Revenue, Expenditure and Deficit (% of GDP), General Government Revenue (% of GDP)
25 21.3 21.9
19.8 19.9 20.6
20
17.0 16.7 16.7 17.7 16.9 16.8 16.8 17.6 17.7
16.5 16.0 16.3 15.7
15
15.6 16.5 15.6 15.8 15.6
14.4 14.5 14.9 15.1 15.2
10 14.0 13.4 14.0

5
-1.0 -0.2 -0.9 -0.6 -0.9
-2.0 -2.3 -1.4 -2.4 -2.1
0 -2.6 -3.7 -3.5
-5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun 2017
NG Revenues/GDP NG Expenditures/GDP NG Deficit/GDP Gen. Gov. Revenues/GDP

Healthy fiscal position despite acceleration of government

spending Steady decline in debt/GDP ratio
NG Primary Balance (% of GDP) NG Debt and GG Debt as % of GDP
68.5
4.5 3.9 61.4
3.7
4 59.2 54.7 54.8
53.9 52.4 51
3.5 51.6 51.5
2.7 49.2
2.6 45.4
3 44.2 44.1 44.3 44.7
41.4 40.6 42.1 42.5
2.5 2.0 42.2
39.2 36.4 36.3 34.6
2 1.4 1.4
1.5 0.8
0.7
1
0.5 0.0
-0.2 -0.2 -0.3
0
-0.5
-1
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 End-Jun
2017 2017
Primary Balance/GDP National Gov't Debt General Gov't Debt
*as of end-Sep 2016
Sources: DOF, BTr 22
Ensuring Long-Term Fiscal Sustainability
Administrative measures to complement proposed legislative fiscal reforms to ensure healthy fiscal position. Revenue
impact from administrative measures is estimated to reach PHP102.2bn by 2019
Tax effort is back on a higher trajectory
NG Tax Revenue (% of GDP)
14.2

13.6 13.6 13.6 13.7

13.3
12.9

12.4
12.2 12.1

2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun 2017

Rigorous tax administration continues to yield positive results

NG Revenue (% of GDP), BIR and BOC Revenue (PHP bn)

1800 15.8 15.6 16.0

15.2
1600 15.1 15.5
14.9
1400

1567.2
14.5 15.0

1443.3
1200

1334.8
14.0 14.0 14.5
1216.7

1000 13.4
14.0
1057.9

986.1
800
924.1

396.4
369.3

367.5

843.0
13.5
822.6

304.9
289.9

600
265.1
259.2
750.3

245.3
220.3

210.3
400 13.0
200 12.5
0 12.0
2009 2010 2011 2012 2013 2014 2015 2016 Jan-Jun Jan-July
BIR Revenues BOC Revenues Revenue-to-GDP 2017 2017

Sources: Department of Finance (DOF), Bureau of the Treasury (BTr) 23

 2017 and 2018 Budget: “A Budget for Real Change”
Focus on Social Services to empower human capital development Infrastructure and Other Capital Outlays get a big allocation
2018 Proposed Budget and 2017 GAA by Sector, PHP bn and % Share 2017 National Budget by Expense Class, PHP bn and % Share

Department 2018 2017 Share to Total Allocation to LGUs*

Proposed Budget GAA Budget (%) PHP558.6bn, 16.7% Personnel
Services
Social Services 1,450.5 1,351.5 38.5 40.3
Support to GOCCs PHP990.5bn, 29.6%
Economic Services 1,153.4 922.9 30.6 27.5
PHP138.2bn, 4.1%
General Public
Services
636.5 575.4 16.6 17.2 PHP3,350bn
Infrastructure
Debt Burden 370.8 351.6 9.8 10.5 Maintenance
and other Capital
Defense 155.7 148.7 4.1 4.4 Outlays1 Expenditures
PHP773.3bn, 23.1% PHP537.9bn, 16.1%
Total 3,767.0 3,350.0 100 100 Debt Burden
*Includes other transfers to LGUs
Note: Rounding off may not add up to total PHP351.6bn, 10.5%
2017 General Appropriations Act
 PHP3.35tn budget for 2017 is higher by 11.6% than the PHP3.002tn budget for 2016. It is equivalent to 21% of GDP
 Strictly compliant with the Supreme Court decision on the Disbursement Acceleration Program (DAP) and the Priority Development Assistance Fund (PDAF)
Measures to address underspending and increase absorptive capacity of agencies
 24 hours/7 days a week construction work for major public infrastructure projects in urban areas
 Strengthen project monitoring by geo-tagging projects
 Streamline and accelerate the approval process of major public infrastructure projects
 Simplify the Implementing Rules and Regulations (IRRs) of the Government Procurement Reform Act
 Roll out Program Expenditure Classification(PREXC) to restructure agency budget by grouping all recurring projects under key strategies set at agency level or major
final outputs to clearly monitor public funds
 Proposed Budget Reform Bill to institutionalize budget data disclosure, civil society participation in budgeting and all the requirements of a modern budget system
2018 Proposed National Budget
 PHP3.8tn proposed budget for 2018 is 12.4% higher than 2017’s budget and is equivalent to 21.6% of GDP
 Government agencies implementing investments in education and infrastructure development will get the biggest allocations at estimated amounts of PHP691.1bn
and PHP717.1bn, respectively
 Following early approval by the House of Representatives, the Senate Committee on Ways and Means has issued its report on the 2018 budget; the budget is due to
be deliberated by the Senate on second reading 24
Source: DBM
1 Excludes subsidy to GOCCs, LGU Infra Transfer intended for infra projects
2017 and 2018 Budget: “A Budget for Real Change”
Spending priorities on infrastructure and human capital development

Select Public 2017 2018 2018 Share of Total

Infrastructure Adjusted Proposed 2017 GAA Budget (%)
Spending Priorities Proposed
Items (PHP bn) (PHP bn) (PHP bn)
Budget 2018 2017
Road Networks 327.6 424.9
Infrastructure
Flood Control
82.0 133.4 o/w: Department of Public Works and Highways
Systems 643.3 467.7 17.1 14.0
(DPWH)
Irrigation
27.5 28.7 Department of Transportation (DOTr) 73.8 55.7 2.0 1.7
Systems
Seaport Education
2.6 2.8
Systems
o/w: Department of Education (DepEd) 613.1 568.4 16.3 17.0
Airport Systems 6.8 10.1
State Universities and Colleges 64.6 61.4 1.7 1.8
Railways 22.1 26.0
Commission on Higher Education 13.5 19.6 0.4 0.6
 Total infrastructure spending is
programmed to reach PHP858.1bn*1 Technical Education & Skills Dev’t. Authority 7.0 6.8 0.2 0.2
and PHP1,097.5bn in 2017 and 2018,
Healthcare
respectively
o/w: Department of Health (DOH) 107.2 98.4 2.8 2.9
 Infrastructure development in key
regional areas is expected to bring Social Protection Services
these communities to the mainstream
o/w: Department of Social Welfare and Dev’t. 138.0 128.4 3.7 3.8
of growth and to maximize
connectivity of sustainable urban and
rural communities

Source: DBM
*Adjusted level of infrastructure outlays based on Budget of Expenditure and Sources of Financing (BESF) 2018 and includes other infrastructure lodged in other agencies 25
1Infrastructure expenditure of the National Government, inclusive of infrastructure subsidies to Government Corporations and infra transfers to Local Government Units
National Government Financing 2015 - 2018
Strong bias for domestic sources of financing to minimize FX risks

Strategic Financing Program

Program Emerging Program

Particulars (in millions PHP) Actual 2015 Actual 2016
2017 2017 2018

NET FINANCING 242,851 330,939 584,780 572,088 821,274

External (Net) 64,782 -24,113 43,170 43,161 144,346

External (Gross) 189,538 149,523 182,770 182,770 176,269

Less: Amortization 124,756 173,636 136,900 139,609 61,923

Domestic (Net) 178,069 355,052 541,610 528,927 706,928

Domestic (Gross) 420,072 357,497 544,969 532,286 711,958

Treasury Bills -17,303 23,501 54,969 51,285 71,958

Fixed Rate T Bonds 437,375 333,996 490,000 481,001 640,000

Less: Net Amortization 242,003 2,445 3,359 3,359 5,030

Gross Borrowing 609,610 507,020 727,739 715,056 888,227

Total Amortization 366,759 176,081 145,009 142,968 66,953

Financing Mix (Domestic : External) 69:31 71:29 80:20 74:26 80:20

Source: Budget of Expenditures and Sources of Financing (BESF) FY 2018 , Bureau of the Treasury, Department of Budget and Management
26
Fiscal Deficit is Increasingly being Funded from Domestic Sources
Ample domestic liquidity allows ROP to source majority of its financing
Steady decline in the Republic’s interest service burden needs from domestic market minimizing FX risks
Interest payments / NG revenue (%) and Interest payments / NG expenditure (%) Total debt breakdown (%)

36.7

31.7
48 44
44 41 42 36 35
31.1 43 44 42 34
29.7 24.8 24.4 33 35 35
23.6
22.6
64 66 67 65 65 65
20.5 20.4
18.8 56 59 57 56 58 58
23.3 52 56
21.4 16.8
19.6 14.7 13.9 14.7 13.9
19.3
17.9 17.6 17.2
16.2
13.9 13.4 12.5
11.9
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan-Aug Jan-Aug
2016 2017
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 End-
Interest Payments/Revenue Interest Payments/Expenditure Jun
External Domestic 2017
Long-dated debt profile reduces refinancing risk
Domestic debt breakdown (%) External debt breakdown (%)

29

41
54 100 100 100 100 100 100 100 100
96
90
26 70
78 79
79 82
30 83
20 14 12 90 14
19 10 10 6 10
10 8 9 7 7 5 8 4
2005 2010 2011 2012 2013 2014 2015 2016 End-Jun 2003 2005 2010 2011 2012 2013 2014 2015 2016 End-Jun
2017 2017
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr
Unless otherwise stated, graphs pertain to National Government (NG) debt
Sources: BTr, DOF 27
Fairer, Simpler and More Efficient Tax System
Proposed tax reform packages to broaden the tax base, generate revenues and fund investments
Priority Legislative Measures
 The Comprehensive Tax Reform Package (CTRP) aims for a simpler, more equitable and efficient tax system with a goal of lowering the
tax rate and at the same time broadening the tax base, resulting to net positive gains in government revenues
 Lower personal income and corporate tax rate to be competitive with the region to boost spending power of wage earners and
encourage more investments
 Update: House Bill No. 5636 for Package 1 of CTRP or the Tax Reform for Acceleration and Inclusion Act (TRAIN) was approved by the
House of Representatives on May 31, 2017; Senate Bill No. 1592 or TRAIN is now pending in Senate for second reading
Package 1: Tax Reform Salient features:
for Acceleration and  Lowering of Personal income tax (PIT) rates except for those belonging in the highest income brackets
Inclusion Act, but indexed to cumulative Consumer Price Index (CPI) every three years;
House Bill 5636  A flat rate of 6% for the estate and donor’s taxes;
 Broadening the tax base by removing special laws on VAT exemptions but retaining exemptions for senior
citizens and persons with disabilities;
Revenue impact of
 Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020 but with no indexation to
HB 5636 with inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike;
complementary  A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases;
measures  Excise tax of PHP10 per liter on sugar sweetened beverages;
2018 – PHP133.8bn  Earmarking of the proceeds from the fuel excise tax increase for social protection programs
2019 – PHP233.6bn  Tax administration reforms such as the fuel marking and monitoring system to curb oil smuggling, the use
of electronic receipts, and the mandatory connection of the point-of-sale (POS) system of all
2020 – PHP272.9bn establishments to the BIR, and the relaxation of bank secrecy laws for investigating and combating tax
2021 – PHP253.0bn fraud
2022 – PHP269.9bn  Complementary measures are motor vehicle user’s charge and proposed estate tax amnesty

Other Tax Reforms in the Pipeline:

 Corporate income tax (CIT) - reduce CIT rate to 25% from 30% and rationalize fiscal incentives to be more transparent, targeted,
performance-based, and time-bound sunset provisions to existing incentives
 Capital income tax - harmonize capital income tax rates for dollar deposits and investment, dividends, equity, fixed income
 Property tax –harmonize tax on land valuation
28
 Health, environment and luxury tax – introduce new tax and amend current tax
Infrastructure Development
Spending Big on Public Infrastructure to Improve Competitiveness
Massive Infrastructure Investment

 The government plans to ramp up infrastructure investments to reach PHP8-9tn (or USD160bn to USD170bn) in the next 5 years
 Infrastructure investment is projected to reach 7.3% of GDP by 2022
 A quarter of the 2017 national budget or PHP858.1bn*, equivalent to 5.4%* of GDP has been allocated to jump start the infrastructure buildup

Infrastructure Spending Targets for 2017-2022**

Years 2017P 2018P 2019P 2020P 2021P 2022P
Infrastructure Spending
858.1* 1,101.0 1,295.5 1,456.6 1,584.0 1,840.2
(in PHP bn)
As % of GDP 5.4%* 6.3% 6.8% 6.9% 6.9% 7.3%
Note: Medium Term Fiscal Program FY 2017-2022 (June 9, 2017)
*Adjusted level of infrastructure outlays based on Budget of Expenditure and Sources of Financing (BESF) 2018. Refers to the infrastructure expenditure of the National Government inclusive of
infrastructure subsidies to Government Corporations and infrastructure transfers to Local Government Units
**Refers to the infrastructure expenditure of the National Government inclusive of infrastructure subsidies to Government Corporations and infrastructure transfers to Local Government Units

Top 10 Industries/Sectors that will likely benefit Estimated Impact of Public

from the accelerated infrastructure spending Infrastructure Spending
Additional
In terms of Effect on Gross Value Added In terms of Jobs Created
Additional GVA Employment
Year
• Construction • Construction (% of GDP) (Number of
• Household Sector • Wholesale and retail trade Persons)
• Wholesale and retail trade • Wood, bamboo, cane and rattan articles 2017 0.3 106,824
• Food manufactures • Forestry 2018 2.6 823,696
• Crude oil, natural gas and condensate • Fabricated metal products 2019 3.5 1,115,999
• Basic metal industries • Stone quarrying, clay and sandpits 2020 3.9 1,228,964
• Petroleum and other fuel products • Land transport 2021 4.4 1,399,463
• Chemical and chemical products • Non-metallic mineral products
2022 5.4 1,705,021
• Non-metallic mineral products • Gold mining
• Electricity • Renting and other business activities
Annual
Average 3.4 1,063,328
Source: NEDA Notes: The simulation was based on the 2006 IO semi-
closed global model; Impacts are maximum average
per year; GVA and household income are nominal
values; and PHP 8.2-9.0 tn is based on the
government’s commitment as released to the public at
http://www.dbm.gov.ph/?page_id=16102

30
 Spending Big on Public Infrastructure
Rapid administrative response for infrastructure development

High impact projects envisioned to increase the The NEDA Board, which is
economy’s productive capacity, create jobs, increase chaired by the President,
incomes, and strengthen the investment climate make has approved 30
up the boldest and most ambitious infrastructure infrastructure programs
development plan for the Philippines worth at least and projects as of
USD79.7bn* September 2017*

18 airport 13 railway 6 mass transit 7 seaport/fish 45 major

projects projects projects port projects projects on
USD4,641.0mn USD49,273.6mn USD1,771.5mn USD1,239.9mn roads and
bridges
USD14,478.0mn

8 flood control 12 irrigation/ 7 projects for 5 Other

project water resource new cities projects
USD2,224.4mn projects USD4,481.6mn USD60.3mn
USD1,568.8mn

*Includes 75 Infrastructure Flagship Projects and other infrastructure projects listed in the Build Build Build Portal; Excludes DOTr’s Maritime Safety Capability Project; 24 projects without estimated cost yet
Source links: NEDA Board Approved Projects (Duterte Administration), http://www.neda.gov.ph/wp-content/uploads/2017/07/ICC-NB-Approved-Projects-as-of-17Jul2017-Duterte-Admin.pdf; Infrastructure
Flagship Projects, http://www.neda.gov.ph/wp-content/uploads/2017/07/Infrastructure-Flagship-Projects-as-of-June-27-2017.pdf; http://www.build.gov.ph/Home/Project#; NEDA ODA Pipeline of Programs
and Projects as of June 30, 2017 31
Investor Relations Office
Investor Relations Office
Promoting excellence in investor relations. Enhancing sovereign value
Strengthening the Investor Community 16 Years and Beyond
The effective implementation of the Government’s economic program and its
success depends on regular two-way dialogue between economic policy makers
and the investment community.
The Investor Relations Office (IRO) was established in July 2001 to strengthen
the country’s relations with investors and other stakeholders by promoting
active channels of information flow and dialogue between economic policy
makers and investors.
Based in the Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), the
IRO has a dedicated staff comprised of trained economists and communication
specialists who work with colleagues in the BSP and the economic agencies to
implement a wide-ranging program of investor relations activities.
As the Government has implemented its economic reform program over the
years, the IRO’s program of investor outreach has helped to ensure that
investor decisions benefit from a comprehensive understanding of the progress
in reforms and what they mean for the economic fundamentals of the
Philippines.
In turn, the Government’s economic reform program has made the economy
relatively more resilient amid the global financial and economic crisis.
With stable macroeconomic fundamentals, the Philippines remains as one of the
most viable economies for investments in the emerging market.
The IRO is proud to have played a role in communicating the successes of the
Government’s reform program in the last sixteen years and is committed to
continuing its efforts to promote the Philippine economy.
Serving Philippine and International Stakeholders
The IRO provides services to a wide range of stakeholders – the Government’s
economic agencies, financial institutions, credit rating agencies, bilateral and
multilateral organizations, domestic and foreign investors, the diplomatic corps,
business people, the media and the general public. All services to its stakeholders
are underpinned by a set of fundamental principles: transparency, accessibility,
timeliness, consistency and feedback.
The IRO adopts a multi-pronged approach to serving its stakeholders through:
• Dissemination of key economic and financial information about economic policy
objectives and performance
• Seeking market feedback on current and proposed policy measures
• Providing feedback to economic policy-makers about investor sentiment
• Facilitating candid and constructive dialogue between policy-makers and
investors
33
 Investor Relations Office
Promoting the Philippine economy at home and abroad
The IRO undertakes a range of initiatives to build awareness among domestic and international investment audiences around the Government’s economic
reform program, promote specific investment opportunities in the Philippines and facilitate information exchange and dialogue between key economic policy
decision-makers in the Government and domestic/international investors. These initiatives include:
• Regular Economic Briefings to update the business community, media and industry organizations on the country’s economic performance
• Investor Roadshows to bring the Government’s resilient economic performance record, commitment to sound economic management and responsible
reform to members of the international financial community
• Media Briefings to raise awareness of the Government’s progress in economic reforms and plans for ongoing reforms
• Government Policy Roadshows to increase the business community’s understanding of government policy measures to generate support for the policy
implementation process
• Investor Teleconferences to provide timely updates on key economic performance indicators
• E-mail service to keep investors and other investors abreast of data releases on a regular basis
• An English Language website, www.iro.ph, to provide a wide range of easily accessible information about the Philippines’ economic performance and the
government’s economic policies

Contact Information
For further information about the Investor Relations
Office, or about the Philippine economy, please
contact:
Editha L. Martin
Investor Relations Office
Budget and Bangko Sentral ng Pilipinas
Bangko Sentral ng Finance Secretary Economic Planning Transportation Trade and Industry
Management
Pilipinas Governor Secretary Secretary Secretary A. Mabini St. cor. P. Ocampo St.
Carlos Dominguez Secretary
Nestor Espenilla, Jr. Arthur Tugade Ramon Lopez
Malate Manila, Philippines 1004
Ernesto Pernia Benjamin Diokno
Tel: (632) 708-7487 / (632) 303-1581
Email: emartin@bsp.gov.ph
Fax: (632) 708-7489
Website: www.iro.ph

Tourism Secretary Agriculture Secretary Energy Secretary Public Works and Highways
Emmanuel Piñol Alfonso Cusi Secretary
Wanda Teo 34
Mark Villar
Republic of the Philippines
Investor Presentation
October 2017