December 2013

Resilient Against All Odds

The Republic of the Philippines

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Outline

I. Update – Typhoon Yolanda and Impact on the Philipp ines ........................4

II. Investment Grade Philippines – Sovereign Credi t Highlights ……………..6

III. Powerful Reform Momentum – Gains in Governance and Supportive Political Backdrop ………………………………………………….26

I. Update – Typhoon Yolanda and Impact on the Philipp ines

� Landfall on 11/8/2013

� Sustained winds of 270kph (168mph) with gusts up to 312kph (194mph)

� State of National Calamity declared by the President. Local governments units of Samar, Leyte, Cebu, Iloilo, Capiz, Aklan & Palawan have also declared state of calamity in their respective areas

� Estimated damage over PHP 27.8 billion (USD 634.4m) to date*

� PHP 15.6bn (USD 354.5m) to infrastructure

� PHP 12.3bn (USD 279.9m) to agriculture

� PHP 631.0m (USD 14.4m) worth of relief assistance has been provided to affected families*

Impact and Response to Super Typhoon Yolanda (Haiya n)Assessment of the damage and funding the recovery

5

� Power has been restored in 33% of municipalities and the Government targets to restore power in all municipalities before Christmas

� All air and sea ports affected are open for commercial flights and sea vessels except Tacloban airport

� All national roads in affected areas have been cleared and are now passable

� The government is implementing cash for work program which employs Yolanda victims for clearing and cleaning operations, and reconstruction of schools and government buildings

� DPWH has started to construct bunkhouses in Tacloban City and Palo, Leyte as temporary shelter for disaster victims

Super Typhoon Yolanda: Immediate Response

� 5,598 reported dead*

� 1,759 persons missing*

� 26,136 injured*

� 1,095 evacuation centers sheltering 48,239 families (219,158 people )*

The government has imposed price controls on basic goods and

commodities in the affected areas and is in charge of the use of funds

for rescue, recovery, relief, and rehabilitation efforts

ROP Response: Progress in Impacted Areas

Funding the Recovery

Sources: Bangko Sentral ng Pilipinas (BSP), National Economic and Development Authority (NEDA), and National Disaster Risk Reduction and Management Council (NDRRMC)* Figures as of November 29, 2013, 6:00 a.m. Exchange rate used is USD1=PHP43.884

� Foreign nations and international organizations have pledged USD 414.6 million (PHP 18.2bn) in cash and kind.* Status of donations can be viewed in www.gov.ph under the Foreign Aid Transparency Hub (FAiTH)

� ROP has ample fiscal space to spend for relief efforts. Actual expenditure for Jan-Sep 2013 was 5.0% below program; overall fiscal deficit for Jan-Sep 2013 was PHP 101.2bn, well within the program of PHP 144.5bn for the same period and PHP 238.0bn for 2013

� Under the proposed 2014 budget, PHP 55.5 billion (USD 1.26bn) will be earmarked for reconstruction of affected areas

II. Investment Grade Philippines – Sovereign Credit Highlights

2005 vs. Latest

2005 Latest Change

Sovereign Credit Ratings

Fitch Ratings BB BBB- (Mar 2013)

Standard and Poor’s BB- BBB- (May 2013)

Moody’s Investors Service B1 Baa3 (Oct 2013)

GDP Growth Rate 4.8 7.4 (Jan-Sep 2013)

GDP Per Capita1 (USD), PPP concept 3,061 4,381 (2012)

GNI Per Capita1 (USD), PPP concept 3,855 5,770 (2012)

National Government Interest (% of Revenue) 36.7 20.4 (Jan-Sep 2013)

Fiscal Balance (% of GDP) (2.6) (1.2) (Jan-Sep 2013)

General Government Debt (% of GDP) 59.2 38.5 (end-Mar 2013)

Gross International Reserves (USD bn) 18.5 83.6 (end-Oct 2013)

Import Cover (months) 3.8 11.9 (end-Oct 2013)

OF Remittances (USD bn) 10.7 18.2 (end-Sep 2013)

External Debt Service Burden (% of CAR) 12.6 7.6 (Jan-Aug 2013)

Current Account (% of GDP) 1.9 4.2 (Jan-Jun 2013)

Sources: BSP, NEDA, Department of Finance (DOF)1/ At current prices

ROP Achieves Investment Grade from Fitch, S&P and M oody'sImproved credit metrics over the past 7 years

7

6.87.7 7.67.0

0

1

2

3

4

5

6

7

8

Singapore Taiwan Korea India Thailand Malaysia Vietnam Indonesia Philippines China

FY 2012

Q1 2013

Q2 2013

Q3 2013

Sources: National Statistical Coordination Board (NSCB)

The Philippines is one of the fastest growing and m ost dynamic economies in Asia

Real GDP Growth (%)

Robust Economic Outperformance in AsiaROP’s economy has grown faster than most peers

8

2012 Q1-Q3 2012 Q1-Q3 2013GDP Growth (constant, base year = 2000) 6.8% 6.7% 7.4%

By Industrial Origin Share to GDPGrowth Share Growth

Share to GDPGrowth

Rate to GDP Rate RateAgri, Fishery, Forestry and Hunting 11.1 2.8 10.7 2.0 10.1 1.1Industry 32.0 6.8 31.8 6.1 32.5 9.8

Of which: Manufacturing 22.1 5.4 21.8 5.4 22.3 9.8Services 56.9 7.6 57.5 8.0 57.4 7.3By ExpenditureHousehold Final Consumption 70.4 6.6 69.0 6.7 67.8 5.6Government Final Consumption 10.3 12.2 11.1 13.0 11.6 12.3Capital Formation 18.5 -3.2 16.9 -8.5 19.6 24.4

Of which: Fixed Capital 20.3 10.4 19.9 17.2 21.1 14.0

of which: Public Construction 1.8 29.8 1.7 37.0 2.1 31.8

Private Construction 6.4 11.5 6.1 3.7 4.3 11.5Exports 48.4 8.9 52.6 8.9 48.3 -1.4Imports 47.6 5.3 49.5 4.5 48.0 4.4

443.1

299.5

506.5

657.3 672.3

281.3

384.5

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 Jan-Jul 2012 Jan-Jul 2013

Broad-based growth highlights overall health of the economy

Sources: NSCB, Department of Trade and Industry (DTI)*Philippines, Indonesia, Malaysia, Thailand, Vietnam

Decade of rapid and sustained economic growth is se t to continue

Strong and Consistent Growth

� The Philippines is one of the fastest growing nations in Asia, GDP growth in the first nine months of 2013 is 7.4%

� Philippine growth is increasingly broad based with particular strength coming from services and the resurgence of the industry sector led by construction and manufacturing

� Government’s focus on attracting investment and facilitating infrastructure development coupled with the nation’s favourable demographics will help propel economic growth in the long term

Real GDP Growth (% yoy)

9

Continued increase in foreign investment inflows in to the Philippines

BOI-PEZA Approved Investments (PHP bn) � Investors are beginning to take note of improving investment climate

and governance in the ROP

� Infrastructure development is accelerating with private and public construction increasing 16.3% in the first nine months of 2013

� Budgetary allocation for public infrastructure increased by 17.7% in 2013

� ROP posted the highest FDI growth rate of 54% in ASEAN* in 2012

Note: Figures are at constant 2000 prices

5.0

6.7

4.85.2

6.6

4.2

1.1

7.6

3.9

6.6 6.77.4

012345678

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q-3Q

2012

1Q-3Q

2013

2003 - 2012Average: 5.2%

+36.7% yoy

201520102010

20052005

19951990

198519801980

1965

20502050

204520402040

20302025

202020152015

1995

1950 1970 1990 2010 2030 2050 2070

PhilippinesIndia

MalaysiaVietnam

IndonesiaThailand

ChinaKorea

SingaporeHong Kong

Japan

� The median age in the Philippines is only 22.2 years, well below other “young” countries in Asia, such as Malaysia (25), India (25.1), Indonesia (27.8) and Vietnam (28.2)

� According to United Nations’ population projections, in 2015 the Philippines will enter its Demographic Window, when the proportion of the population that is of working age is particularly prominent

� The Philippines is the last major Asian economy to benefit from this demographic dividend, which is typically associated with accelerated economic growth

� Extended periods of high GDP growth in Asia’s fastest-growing economies have coincided with countries entering their Demographic Windows. On average, growth over the 10-year period following the beginning of the Demographic Window has been 7.3%

Sources: UN World Population to 2030, UN World Population Prospects (2010 Revision)IMF World Economic Outlook

1/ Defined as the period when population under 15 years old drops below 30% and population over 65 years old is less than 15%.

Youngest population in Asia supports a strong mediu m-term economic growth outlook

Philippines has the youngest population in Asia

Demographic Windows1 in Asia

Poised for strong future GDP growth

Avg. GDP Growth for First 10-years in Dem. Window (%)*

10.3

9.08.2 8.1 7.8 7.4 7.0

6.25.4

3.3

0

2

4

6

8

10

12

Chi

na

Kor

ea

Indi

a

Japa

n

Sin

gapo

re

Hon

g K

ong

Vie

tnam

Indo

nesi

a

Mal

aysi

a

Tha

iland

10

Demographics to Support Continued Fast GrowthReaping the demographic dividend will help medium-t erm growth

*For nations that have not yet been in their demographic windows for 10 years, the figure is an average of their growth rate for the time in the window

Less Vulnerable to External Trade Shocks Diversified export markets and ROP is well-position ed to benefit from US and Japan recovery

ROP’s export markets are well diversified with Euro pe and China accounting for only a small portion of total exports

Exports by Destination (USD bn)

� The Republic, while remaining less trade dependent than most countries in Asia, has diversified its exports markets and is therefore less exposed to the lower consumption and slower growth experienced in much of Europe and a slowing China

� In addition to being less trade dependent, exports to both China and Europe account for only a small portion of total exports for the ROP, further insulating the economy from growth uncertainties emanating from those two regions

� Despite marginal decline of exports to Europe in 2012, ROP’s total volumes of exports have actually increased, highlighting the nation’s strong resiliency

� ROP is well-positioned to benefit from economic recoveries in the U.S. and Japan, the Philippines’ major exports markets

Source: National Statistics Office (NSO)11

8.5 8.4 7.9 6.6 5.9 5.9 4.6 4.7

5.7 5.5 2.9 5.7 6.1 6.2

4.8 4.8

7.3 7.7 6.2

7.8 8.9 9.8 7.7 8.2

8.6 8.2

6.8 7.6 7.1 7.4

5.8 5.5

20.4 19.3

14.6

23.8 20.0 22.7

17.2 16.8

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 Jan-Sep 2012 Jan-Sep 2013

Others United States Japan China Europe

Ability to Meet Debt Obligations

2

34

1

Automatic Appropriation for Public Debt

Service

Sound Debt Management

Strategy

Strengthening Fiscal

Framework

Bond Sinking Fund

� The Republic’s ability to meet its debt obligations has been strengthened even further due to improving macroeconomic fundamentals

− Sound debt management strategy has reduced rollover risks and increased debt carrying capacity

− Improving fiscal metrics make this ability ever stronger

− Unlike many peers, the ROP is not encumbered by large structural subsidies, providing additional fiscal flexibility

− Government financing is shifting towards being domestically funded and denominated in Peso

� The national government’s willingness to service it s debt obligations is enshrined in the legal system

− Bond Sinking Fund which necessitates consistent cash allocations to ensure that debt servicing ability remains intact

– Presidential Decree 1177 or the Budget Reform Decree of 1977 which provides for the automatic appropriation of principal and interest payments on public debt

Rapidly Strengthening Public Finances and Debt Dyna micsStrong framework in place to guarantee ability to m eet debt obligations

12

On track to meet 2013 deficit target

Sources: Bureau of the Treasury (BTr), Department of Budget and Management (DBM) *Note: Some values may not sum up to exact figure due to rounding

Improved Fiscal Metrics Creating a sustainable fiscal revenue and spending path

(in Billion Pesos)Jan-Sep 2013

ActualJan-Sep 2012

Actual% Growth

2012 v. 20132013

% of GDP

Total Revenues 1,266.6 1,118.9 13.2 15.3

Tax Revenues 1,134.1 996.8 13.8 13.7

Bureau of Internal Revenues

898.0 772.5 16.2 10.8

Bureau of Customs 224.6 213.7 5.1 2.7

Non-Tax Revenues 132.4 122.1 8.4 1.6

Bureau of the Treasury 68.1 65.1 4.6 .8

Privatization .3 .5 (40.0) 0

Expenditure 1,367.8 1,222.9 11.8 16.5

Surplus/(Deficit) (101.2) (103.9 ) (2.6) (1.2)

Primary Surplus 156.9 141.3 11.0 1.9

13

14

Fiscal Consolidation On TrackFiscal performance further solidifies under the Aqu ino Administration

2013 Deficit-to-GDP is expected to be lower than pr ogram

Fiscal Performance (PHP bn) and Deficit/GDP (%)

1,13

7

1,20

3

1,12

3

1,20

8 1,36

0

1,53

5

1,26

7

1,14

9

1,27

1

1,42

2

1,52

2 1,55

8

1,77

8

1368

0.20.9

3.73.5

2.02.3

1.20

1

2

3

4

5

0

300

600

900

1,200

1,500

1,800

2007 2008 2009 2010 2011 2012 Jan-Sep 2013

Revenues (LHS) Expenditures (LHS) Deficit/GDP (RHS)

Aquino Administration Takes Office June 2010

Improving revenue buoyancy due to rapid revenue gro wth

12-Month Rolling Revenue Growth (%)

17.2%

5.9%

8.9%

-20%

-10%

0%

10%

20%

30%

Feb

-09

Mar

-09

Apr

-09

May

-09

Jun-

09Ju

l-09

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10F

eb-1

0M

ar-1

0A

pr-1

0M

ay-1

0Ju

n-10

Jul-

10A

ug-1

0S

ep-1

0O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12F

eb-1

2M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-

12A

ug-1

2S

ep-1

2O

ct-1

2N

ov-1

2D

ec-1

2Ja

n-13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-13

Bureau of Internal Revenue Bureau of Customs Other Offices

Sources: DOF

10 4

90 96 100 100 100 100

0

20

40

60

80

100

2003 2005 2010 2011 2012Long-term: >10yrs Medium-term: 1yr to 10yrShort-term: <1yr

Increasing reliance on domestic financing sources

Sources: DBCC (as of Feb 2013), BTr*Pertains to National Government debt

Share of external debt to national government debt has been gradually declining over the years

Debt Breakdown (% of total)*

Domestic debt mix has become longer dated

Domestic Debt Breakdown (% of total)*

External debt is all long-dated with maturity profi les exceeding 10 years

External Debt Breakdown (% of total)*

ROP Funding Becoming Increasingly Domestic

Jan-Sep 2013

15

Financing increasingly completed domestically, enha ncing ROP’s debt sustainability

Financing by Domestic and Foreign Sources (% of total)*

5666 65

84 94 86

4434 35

166

14

0

20

40

60

80

100

2009 2010 2011 2012 Jan-Sep 2013

2013 Program

Foreign Domestic

51 52 56 56 59 57 56 58 5864 65

49 48 44 44 41 43 44 42 4236 35

0

20

40

60

80

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jan-Sep 2013External Domestic

3225

1910 8 9

3431

2620 14 11

3544

54

7078 80

0

20

40

60

80

100

2008 2009 2010 2011 2012 Jan-Sep 2013

Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr

Sources: BTr, DOF, Standard & Poors 16

Sustained declines in ROP’s government debt ratios

Debt- to-GDP Ratio (%)

54.8

52.450.9 51.5

48.9 49.5

44.3 43.541.4 40.6

38.5

30

40

50

60

2009 2010 2011 2012 Q1 2013 Q2 2013

National Gov't Debt General Gov't Debt

35.436.9 36.7

31.7

23.6 22.624.8 24.4

20.5 20.4

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Increased ability to service debt

Interest Payments/Revenue (%)

Strengthening Government FinancesDeclining debt ratios and interest payments support ROP’s credit

� Government finances in the Philippines continue to strengthen with sustained and rapid declines in government debt ratios

� ROP’s general government debt ratio of 38.5% as of Q1 2013 is below S&P’s BBB category median of 41%

� The Republic’s effective debt management strategy resulted in increased ability to service debt as the portion of revenue that goes to interest payments has drastically declined over the years from a high of 36.9% in 2004 to 20.4% at end Q32013.

Key Fiscal Reforms

Bureau of Internal Revenue’s

Administrative Reforms

� Run After Tax Evaders (RATE) Program

� Re-engineering of business processes

� Electronic Tax Information Systems (eTIS) Project

� Organizational and Management Development Program/Rationalization Plan (RATPLAN)

Bureau of Customs’

Administrative Reforms

� Run After The Smugglers (RATS) Program

� Cleansing of the List of Accredited Importers and Consignees by the Interim Customs Accreditation and Registration unit (ICARE)

� Integrate National Single Window (NSW) with Electronic to Mobile System (E2M)

� Intensive utilization of the Post Entry Audit Group (PEAG)

� Strengthening the Valuation Reference Information System

Sources: DOF, BIR and BOC 17

� Fiscal Incentives Rationalization

� Review of the Fiscal Regime of the Mining Sector

� Tax Incentives Management and Transparency Act

� The Customs Modernization and Tariff Bill

Legislative Agenda

Fiscal Reforms and Programs for 2013 and BeyondFocus to ensure that positive momentum in governmen t finances will continue

Gen. Public Service17.3%

Defense4.5%

Social Service34.9%

Economic Service25.4%

Debt Burden18.0%

2013 Empowerment Budget for Inclusive DevelopmentThe PHP 2.006 trillion 2013 budget prioritizes inves tments on Social Services

By Sector By Expense Class

Greater and deeper commitment to empowering the peo ple as nation-builders through transparent, account able and participatory governance

2013 Adjusted Budget (%)

18

� Record 2013 PHP 2,006 billion “Empowerment Budget” is 10.5% larger than the 2012 “Results-Focused Budget” of PHP 1,816 billion. The budget includes increased spending on public services that provide jobs, education, health care, housing and empowering each Filipino to participate in economic activity

� Social services sector received the biggest share of the budget at PHP 699.4 billion, growing by 14.0% from 2012

� Greater openness and deeper public engagement transpired in crafting the budget by involving members of civil society, people’s groups, and communities representing the country’s most marginalized and impoverished

Sources: Office of the President

Personal Services

31.9%

Maintenance & Other

Expenditures17.2%

Other Current Operating

Expenditures12.4%

Capital Outlays20.5%

Debt Burden18.0%

0%

2%

4%

6%

8%

10%

12%

14%

Headline Inflation Lower Bound of Target Upper Bound of Target

0%

2%

4%

6%

8%

10%

12%

14%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

M3 (LHS) Bank lending rates (RHS) Reverse repurchase rate (RHS)

Sound and Stable Inflation EnvironmentMonetary policy settings remain supportive of robus t and non-inflationary growth

Sources: BSP 19

Firm control over inflation has proven the effectiv eness and credibility of monetary policy

Headline Inflation (%)

Ample liqidity and low interest-rate environment supportive of healthy economic growth

Money Supply and Interest Rates (PHP bn, %)

September 2013: PHP 6,202.6bn

Jan-September 2013: 5.81%

September 2013: 3.50%

Jan - Oct 2013 – 2.8%

October 2013 – 2.9%

2002 2003 2013201220112010200920082007200620052004

Global inflationary cycle

38

39

40

41

42

43

44

45

46

Jan-

12F

eb-1

2M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-

12A

ug-1

2

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13F

eb-1

3M

ar-1

3

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Peso Performance Supports Macroeconomic StabilityEffective monetary policy contributes to low PHP vo latility

20Sources: Bloomberg as of 24 November 2013

PHP 43.86

-19.4%

-15.0%

-7.0%

-5.2%

-4.0%

2.4%

-20% -15% -10% -5% 0% 5%

IDR

INR

PHP

MYR

THB

CNY

PHP performance remains broadly in line with other regional currencies

2013 YTD Change vs USD

PHP has stabilized since potential QE tapering was f irst announced in May 2013

USD/PHP Exchange Rate

3,818

2.7

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2004

2005

2006

2007

2008

2009

2010

2011

2012

Aug

-13

Loans Outstanding (LHS) (PHP bn) NPL Ratio (RHS) (%)

Prudent NPL coverage ratios will ensure that the ba nking system is well–prepared for any unforeseen shocks

NPL Coverage Ratio (%)

Banks continue to fortify their balance sheets with increased capitalization, well above international norms

Capital Adequacy Ratio (%)

� The Philippines’ banking system remains healthy

� The banking system continues to improve its asset quality, with the universal and commercial banks’ NPL ratio at 2.7% as of Aug 2013

� Bank balance sheet continues to strengthen through increased capitalization and high loan-loss reserves

� Banks remain funded predominately through domestic deposits and not through wholesale channels, reducing liquidity and funding risk and minimizing potential contagion from the lingering uncertainty in the Euro-zone

Sources: BSP*Banking system statistics refers to Universal and commercial banks data

Healthy Banking System a Key IG CredentialROP exhibits an exceptionally healthy and resilient banking system

Asset quality of the banking system remains extreme ly strong with an NPL ratio of only 2.7%

Gross Loans (PHP bn) and NPL Ratios (%)

21

18%19%

5%

7%

9%

11%

13%

15%

17%

19%

2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q2013CAR, solo CAR, consolidated

BSP Regulatory Requirement: 10%

International Standard: 8%

129%

40%

60%

80%

100%

120%

140%

160%

2004

2005

2006

2007

2008

2009

2010

2011

2012

Sep

-13

Banking System Poses Minimal RiskRelatively smaller banking system limits potential contingent liabilities

Potential contingent liabilities of the banking sec tor is smaller than peers given relatively smaller size

Domestic Credit to Private Sector (% of GDP)1

Strong deposit base supports banking sector funding

Gross Loans-to-Deposits Ratio (%)

� Banking sector remains well-funded through domestic deposits – prudent and conservative underwriting standards and credit have kept system loans-to-deposit ratio low at 68.7% as of June 2013

� Reduces the probability of banks seeking emergency funding from the sovereign in times of stress

� Minimal risk of credit-fueled asset bubbles that threaten many other Asian nations with high growth rates

� Banking system assets remain small relative to the total size of the economy compared to major peers - even in the extremely unlikely scenario that a banking system crisis were to occur, potential government contingent liabilities for the ROP would still be lower than peers

Sources: BSP, World Bank1Based on 2012 World Bank data

22

73.372.4

69.3

70.969.7

68.1

64.5

70.0

73.5

68.7

60

62

64

66

68

70

72

74

76

2004

2005

2006

2007

2008

2009

2010

2011

2012

Jun-

13147.6

131.6

118.2

148.0

33.4

34.9

0 50 100 150 200

Thailand

China

Malaysia

Korea

Philippines

Indonesia

Sources: BSP, NSCB

Robust External Profile Despite External ChallengesStructurally strong balance of payments bolsters ex ternal finances

The Philippines enjoys a structurally positive BOP

Balance of Payments (USD m)

� ROP’s current account continues to be in surplus supported by robust remittances from overseas Filipino workers (“OFWs”), substantial Business Process Outsourcing (“BPO”) revenues and increasing tourism receipts

� BOP surplus sustained at USD 3.8bn as of end-Oct 2013

� While exports remain relatively subdued due to the global economic environment, the Philippines nonetheless posted a 7.6% yoy growth of total exports in 2012, highlighting the relative resiliency of exports despite global uncertainty

� In 2012, FDI grew 54% to USD 2.8bn from USD 1.8bn in 2011, the sharpest rise among ASEAN countries

-202 810 115-280

2,4103,769

8,557

89

6,421

14,308

-5,000

0

5,000

10,000

15,000

20,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Capital and Financial Accounts

Current Account

Net Unclassified Items

Balance of Payments

BOP Statistics beginning in 2011 are based on IMF’s BPM6

BOP Statistics for 2001 to 2010 are based on IMF’s BPM5

23

11,400

9,236

1,3162,577

2011 2012 1H 2012 1H 2013 p/

2.53.0

3.8

1.2 1.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010 2011 2012 Q1 2012 Q1 2013

Structural Consistent Current Account SurplusesStrong support provided by remittances, tourism, an d BPO

Sources: BSP, Department of Tourism, Information Technology and Business Processing Association of the Philippines 24

Strong and stable rise in remittances over the year s

Overseas Filipinos’ Cash Remittances (USD bn)

Tourism is a growing source for national growth

International Visitor Receipts (USD bn)

BPO – a strong driver of employment and revenues

BPO Employment (‘000s) and Revenues (USD bn)

� The Republic’s balance of payments is supported by a structural current account surplus due to robust OF emittances as well as rapidly expanding tourism and BPO sectors

8.6

10.7

12.8

14.5

16.417.3

18.8

20.1

21.4

15.616.5

0

5

10

15

20

25

2004

2005

2006

2007

2008

2009

2010

2011

2012

Jan-

Sep

20

12

Jan-

Sep

20

13

+5.8% yoy

1.52.4

3.24.8

6.17.1

8.9

11.0

13.4

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

800

900

2004 2005 2006 2007 2008 2009 2010 2011 2012Employment ('000) (LHS) Revenues (USD bn) (RHS)

Sources: BSPNote: October GIR preliminary

International reserves provide strong buffers to an y BOP problems

Adequate International Reserves and Declining Debt Ratios

25

ROP is effectively protected against any balance of payment shocks through adequate international reserves

FX Reserves (USD Bn) and Months of Import Cover

� ROP currently enjoys a healthy level of international reserves of USD 83.6bn as of end-October 2013, enough to cover 11.9 months of total imports

� The Republic’s foreign exchange reserves now exceeds gross external debt

� Strong reserve buildup is a prudent measure to guard against external shocks and underscores the ability of ROP to pay back any foreign currency denominated debt

� The Philippines is now a net external creditor nation to the IMF, a relatively rare occurrence for a nation at the Philippines level of development

� Furthermore, the Philippines is a fully participating member of the Chiang Mai Initiative and the BSP has in addition negotiated several large bilateral foreign currency swap agreements with China, Korea, and Japan, enhancing the strength of ROP’s external and FX positions

External debt-to-GDP ratio has significantlydeclined, underscoring the health of external finan ces

External Debt (USD Bn) and External Debt / GDP (%)

17.1 16.2 18.523.0

33.837.6

44.2

62.4

75.3

83.8 83.6

4.0x 3.6x 3.8x 4.2x

5.8x 6.0x

8.7x 9.5x

12.1x 11.9x 11.9x

–

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

0

10

20

30

40

50

60

70

80

90

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Oct

-13

FX Reserves (LHS) # Months of Import Cover (RHS)

5554

54 5554

55

6060 60

6160.2

52.7

44.137.1

31.3 32.630.1

27.024.1 21.8

0

10

20

30

40

50

60

70

50

52

54

56

58

60

62

2004

2005

2006

2007

2008

2009

2010

2011

2012

Aug

-13

External Debt (USD bn) (LHS) External Debt/GDP (RHS)

III. Powerful Reform Momentum – Gains in Governance a nd Supportive Political Backdrop

Real progress being made in helping the poor

Net Satisfaction with the National Administration on Helping the Poor (%)

Administration has a strong national mandate and vi ewed as sincere in fighting graft and corruption

Net Satisfaction with the National Administration on Eradicating Graft and Corruption (%)

C.AQUINO RAMOS ESTRADA ARROYO B.AQUINO

Widespread Support for the Aquino AdministrationStrong mandate by the public to improve governance

Record satisfaction rankings for the Aquino Adminis tration provide popular backing for reforms

Net Satisfaction with General Performance of the National Administration (%)

27Sources: 2013 SWS Survey Review (23 September 2013), Social Weather Station National SurveysNet figures (% Satisfied minus % Dissatisfied) correctly rounded.

-60

-40

-20

0

20

40

60

80

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

+66

Delivery of Public Services Improved

Legislation and Policy Review

Transparency

Disclosure of Official Acts

Public Access to Information

Punitive Measures

Anti-Corruption Efforts

Performance Management

Preventive Measures

Improving Public

ReSourcesManagement

Citizen Engagement

Participation in Governance

Partnership & Constituency

Building

Establishing Results-Oriented

Management

Enhancing Frontline & Regulator Processes

Good Governance and Anti-Corruption

Accountability

Corruption CurbedBusiness

Environment Enhance

Enforcement of LawsDigitization and

InnovationAdvocacy and

Communication

Good Governance and Anti-Corruption remain front an d center

Improving Governance Framework

Continued focus on Good Governance and Anti-Corrupt ion is already reaping results, with more to come

Sources: DBM 28

ROP has shown improvements in governance and compet itiveness indicators

• Zero Based Budgeting to improve expenditure management

• Pocket Open Skies to support tourism potential

• Peace Agreement to unleash Mindanao’s potential

• Sin Tax Law to further strengthen the fiscal position

• Reproductive Health Act to improve family health planning

• Judicial Reform to enhance the regulatory environment and ensure level playing field

Strong political will to

pursue and implement

difficult reforms

Results are Significant - Good Governance is Winning Out

The reforms that the Republic has been implementing in past years are already bearing fruit as confirm ed by improved rankingsof the country from third party assessors

29

Third Party Report Latest Previous Change

World Bank’s 2014 Ease of Doing Business Report

108 /189 133/185 +25

Transparency International 2012 Corruption Perception Index

105/179 129/183 +24

World Bank 2013 Worldwide Governance Indicators’Regulatory Quality*

52 45 +7

IMD 2013 World Competitiveness Report

38/60 43/59 +5

Heritage Foundation 2013 Economic Freedom Index

97/177 107/179 +10

Thomson Reuters/INSEADAsia Business Sentiment Survey** (Q3 2013 vs Q2 2013)

100 94 +6

Grant Thornton 2013 Global Dynamism Index

21/60 46/50 +25

* Percentile Ranking

* * % of Respondents with positive outlook on the Philippines

GlobalCompetitiveness Rankings

2010 - 2011 2011 - 2012 2012 - 2013 2013 - 2014

Overall Rank 85 10 75 10 65 6 59

Institutions 125 8 117 23 94 17 79

Infrastructure 104 -1 105 7 98 2 96

MacroeconomicEnvironment

68 14 54 18 36 -4 40

Health and Primary Education

90 -2 92 -6 98 2 96

Higher Education and Training

73 2 71 7 64 -3 67

Goods Market Efficiency

97 9 88 2 86 4 82

Labor Market Efficiency

111 -2 113 10 103 3 100

Financial Market Development

75 4 71 13 58 10 48

Technological Readiness

95 12 83 4 79 2 77

Market Size 37 1 36 1 35 2 33

Business Sophistication

60 3 57 8 49 - 49

Innovation 111 3 108 14 94 25 69

� The Philippines has improved by 26 spots in the WEF Global Competitiveness Rankings over the past four years, making it one of the most improved countries in the world during this period

� Sub-rankings in Institutions and Innovation have in particular improved dramatically, improving 46 and 42 positions, respectively, over the past 3 years

� Improving governance and the economy have been key areas of focus for the Aquino Administration

� Proof that ROP is making real progress in improving governance and institutions

� Strong improvement in Innovation implies a bright future for the Philippines andhigher value-added services

SIgnificant improvements for the Republic in the W orld Economic Forum Global Competitiveness Rankings

30Sources: World Economic Forum Global Competitiveness Rankings

A Structurally More Competitive NationConsistent improvements in competitiveness

1997: Privatization of water services

1997: Privatization of water services

2002: Adoption by BSP of Inflation Targeting Framework;

Passage of the Special Purpose Vehicle Act

2002: Adoption by BSP of Inflation Targeting Framework;

Passage of the Special Purpose Vehicle Act

2001: Liberalization of the Power sector (EPIRA)

2001: Liberalization of the Power sector (EPIRA)

2000: Passage of the Philippine E-Commerce Act

2000: Passage of the Philippine E-Commerce Act

2007: Full implementation of risk-based bank

supervision

2007: Full implementation of risk-based bank

supervision

2006: Establishment of the Wholesale Electricity Spot

Market (WESM)

2006: Establishment of the Wholesale Electricity Spot

Market (WESM)

2003: Passage of the Government Procurement

Reform Act

2003: Passage of the Government Procurement

Reform Act

2004: Passage of the Securitization Act; Adoption of

Basel II

2004: Passage of the Securitization Act; Adoption of

Basel II

1998: Deregulation of the oil industry and adoption of

consolidated bank supervision

1998: Deregulation of the oil industry and adoption of

consolidated bank supervision

2005: Passage of the Expanded Value-Added

Tax (VAT)

2005: Passage of the Expanded Value-Added

Tax (VAT)

1994-95: Liberalization of entry of foreign banks and the telecommunications

industry

1994-95: Liberalization of entry of foreign banks and the telecommunications

industry

31

1990s 2000 - 2009

1993: Creation of the BangkoSentral ng Pilipinas

1993: Creation of the BangkoSentral ng Pilipinas

2009: Privatization of the National Transmission

Corporation’s (TransCo) and National Power Corporation’s

(NPC) assets

2009: Privatization of the National Transmission

Corporation’s (TransCo) and National Power Corporation’s

(NPC) assets

ROP's Track Record of ReformsPositive transformation of economy is a result of l ong history of structural reforms

ROP's Track Record of Recent ReformsProven ability to institute critical reforms

Reinvigorated implementation of programs against corrupt

officials, tax evaders and smugglers

Reinvigorated implementation of programs against corrupt

officials, tax evaders and smugglers

Set up the Debt Management Office at the

Department of Finance

Set up the Debt Management Office at the

Department of Finance

Applied Zero Based Budgeting Approach in

preparing the 2011 Budget

Applied Zero Based Budgeting Approach in

preparing the 2011 Budget

Launched PPP Program Launched PPP Program

Implementation by the Bureau of Customs (BOC)

of Electronic to Mobile System; Enhancement of the agency’s post-entry

audit capability

Implementation by the Bureau of Customs (BOC)

of Electronic to Mobile System; Enhancement of the agency’s post-entry

audit capability

Issued guidelines on the adoption of Philippine

Financial Report Standards (PFRS) 9: Adopted phased-

immigration to Basel III

Issued guidelines on the adoption of Philippine

Financial Report Standards (PFRS) 9: Adopted phased-

immigration to Basel III

Passage of the Government-Owned-and-Controlled Corporations

(GOCCs) Governance Act of 2011

Passage of the Government-Owned-and-Controlled Corporations

(GOCCs) Governance Act of 2011

Bureau of Customs National Single Window

Bureau of Customs National Single Window

Enhanced Business Name Registration System

Enhanced Business Name Registration System

Program Budgeting ApproachProgram Budgeting Approach

Nationwide Launch of Philippine Business

Registry Facility

Nationwide Launch of Philippine Business

Registry Facility

Launched Food Staples Sufficiency Program

Launched Food Staples Sufficiency Program

Passage of Amendments to Sin Tax Law; Amendments

to the Anti-Money Laundering

Act of 2001, and Reproductive Health Law

Passage of Amendments to Sin Tax Law; Amendments

to the Anti-Money Laundering

Act of 2001, and Reproductive Health Law

Issued EO 29 on Open Skies Policy

Issued EO 29 on Open Skies Policy

Issued EO 79 Institutionalizing and Implementing Reforms in the Philippine Mining Sector

Providing Policies and Guidelines to Ensure

Environmental Protection and Responsible Mining in the

Utilization of Mineral Resources

Issued EO 79 Institutionalizing and Implementing Reforms in the Philippine Mining Sector

Providing Policies and Guidelines to Ensure

Environmental Protection and Responsible Mining in the

Utilization of Mineral Resources

Enacted RA 10574 "An Act Allowing the Infusion of

Foreign Equity in the Capital of Rural Banks

Enacted RA 10574 "An Act Allowing the Infusion of

Foreign Equity in the Capital of Rural Banks

Bangsamoro Peace Framework SignedBangsamoro Peace Framework Signed

2010 2011 2012 2013

32

Pipeline Developmental Reforms and Programs Accelerating reforms to achieve sustainable and inc lusive growth

Amendments to the Build Operate Transfer Law or RA

7718

Amendments to the Build Operate Transfer Law or RA

7718

Amendments to the Anti-Money Laundering Act

Amendments to the Anti-Money Laundering Act

Amendments to the Bangko Sentral ng Pilipinas

Charter

Amendments to the Bangko Sentral ng Pilipinas

Charter

Customs Modernization andTariff Act (CMTA)

Customs Modernization andTariff Act (CMTA)

Full implementation of the Government Integrated Financial Management Information Systems

(GIFMIS) in 2013

Full implementation of the Government Integrated Financial Management Information Systems

(GIFMIS) in 2013

Site or Location for National Government Infrastructure

Projects

Site or Location for National Government Infrastructure

Projects

Removal of Investment Restrictions in Specific

Laws cited in the Foreign Investment Negative List

(FINL)

Removal of Investment Restrictions in Specific

Laws cited in the Foreign Investment Negative List

(FINL)

Amendments to RA8974 or the Act to Facilitate the Acquisition

of Right-of-Way

Amendments to RA8974 or the Act to Facilitate the Acquisition

of Right-of-Way

Rationalization of the Mining Fiscal RegimeRationalization of the Mining Fiscal Regime

Amendments to the Cabotage Law

Amendments to the Cabotage Law

Tax Incentives Management and Transparency Act

Tax Incentives Management and Transparency Act

33

2013 & Beyond January 2014

Rationalization of Fiscal Incentives Law

Rationalization of Fiscal Incentives Law

January 2014: Implementation of

Basel III

January 2014: Implementation of

Basel III

December 2013

Resilient Against All Odds

The Republic of the Philippines