Keywords : grocery retail, grocery retail
Core Views We estimate that economic growth in 2011 came to 3.7% as reduced government spending and collapsing exports dragged on the economy. Although the government will look to step up its direct participation in the economy in 2012, we expect growth to come in well below potential at 3.9% for the full year. We expect the Bangko Sentral ng Pilipinas to begin to ease monetary policy in Q112, with a 25 basis point cut to i...
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Core Views
We estimate that economic growth in 2011 came to 3.7% as reduced government spending and collapsing exports dragged on the economy. Although the government will look to step up its direct participation in the economy in 2012, we expect growth to come in well below potential at 3.9% for the full year.
We expect the Bangko Sentral ng Pilipinas to begin to ease monetary policy in Q112, with a 25 basis point cut to its benchmark interest rate highly likely following inflation's fall to 4.2% in December. We see the central bank's key interest rate falling to 4.0% by the end of 2012 as inflation remains stable and the BSP moves to support lacklustre growth.
Major Projection Changes
With portfolio investment and current account dynamics set for a weak year in 2012, the Philippine peso is likely to perform poorly. In result, we are projecting for the unit to average PHP44.80/US Dollar on the way to an end of period target of PHP46.00/US Dollar .
Key Risk To Outlook
Risks to our Gross Domestic Product projection are to the upside, with a small possibility that better than expected performance from the US economy leads to outperformance in the global economy, supporting Philippine exports and investment in 2012.
Risks to our currency projection are also to the upside, with a third quantitative easing run from the US Federal Reserve still possible. Should QE3 play out, the peso may find further strength against the US dollar.
Food Retailing Industry in Philippines
Executive Summary 5
Core Views
Major Projection Changes
Key Risks To Outlook.5
Chapter 1: Political Outlook. 7
Industry SWOT Analysis . 7
BMI Political Risk Ratings. 7
Political Outlook. 8
Spratlys, Revisited8
Tensions over the Spratly Islands have once again come to the fore, with the Philippines claiming that the People's Liberation Army
Navy (PLAN) incurred upon its maritime jurisdiction near the Escoda Shoal in early January. Given its pronounced military inferiority
vis-à-vis China's capabilities, the Philippines is now seeking F-16 jets from the United States as it gears up to more resolutely defend its
territorial claims.
TABLE: PHILIPPINES POLITICAL OVERVIEW.8
Long-Term Political Outlook 10
Prospects For Improving Governance10
The Philippines faces a number of political challenges over the coming years which, if handled successfully, could improve governance.
However, given low income levels and high levels of inequality, we expect the political scene to remain vulnerable to intermittent
instances of turmoil.
Chapter 2: Economic Outlook 13
Industry SWOT Analysis . 13
BMI Economic Risk Ratings 13
Economic Activity 14
With Another Year Of Disappointing Growth On Tap For 2012, Can Manila Finally Make The Right Moves?.14
The Philippine economy grew at a disappointing rate of 3.2% y-o-y in Q311, falling well below the government's estimate of 3.8-4.8%
on stubbornly low government spending and falling exports, and marking the second straight quarter of largely disappointing data.
We expect the trend of sluggish growth to continue through 2012, as increased government spending will struggle to offset softening
demand from top export partners the US, China, and Japan. Following an estimated 3.7% performance in 2011, we continue to be
below consensus on our growth outlook for 2012, penciling in a projection of 3.9%.
TABLE: ECONOMIC ACTIVITY14
Fiscal Policy 17
Government To Ramp Up Spending In 2012 Following Quiet 201117
Following a year in which the Philippines government spent well below its already conservative deficit target of PHP300bn, Manila
will look to ramp up spending in 2012 to support economic growth and spur lagging infrastructure development. As the revenue
outlook continues to be supported by the government's growing tax collection capabilities, however, we expect the budget deficit as a
percentage of Gross Domestic Product to increase only marginally from 2.7% in 2011 to 2.8% in 2012.
TABLE: FISCAL POLICY17
Monetary Policy 18
BSP Rate Cut Likely On Falling Inflation, Stagnant Growth18
Philippine inflation fell considerably in December from 4.8% to 4.2%, with both food and transport inflation falling in month-on-month
terms. The result will be a welcome one for the Bangko Sentral ng Pilipinas (BSP), especially as the fall in the politically sensitive
food inflation index indicates that the deleterious effects of recent typhoons on the archipelago's agriculture segment may have been
limited.
TABLE: MONETARY POLICY18
Balance Of Payments. 20
Declining Current Account, Portfolio Investment Means Weakness For Peso In 201220
While the Philippines posted another healthy balance of payments surplus of USD 4.7bn in Q311, we expect a widening trade deficit to
weigh on the current account moving into 2012. This, combined with a poor outlook for portfolio investment given deteriorating global
economic conditions, is likely to effect weakness in the Philippine peso.
TABLE: CURRENT ACCOUNT.20
Chapter 3: 10-Year Projection . 23
The Philippine Economy To 2021. 23
Uncovering A Forgotten Gem? .23
The Philippines holds significant economic growth potential and may come into the investment spotlight within the next few years.
Although currently hampered by political instability and poor investor perception, we believe President Benigno Aquino III will be able
to make progress on both fronts. Moreover, consumerism should really pick up in a big way towards the end of the decade as general
income level rises.
TABLE: LONG-TERM MACROECONOMIC FORECASTS23
Chapter 4: Business Environment. 27
Industry SWOT Analysis . 27
BMI Business Environment Risk Ratings 27
Environment Overview Outlook 28
Introduction .28
Institutions 28
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS.28
TABLE: BMI LEGAL FRAMEWORK RATING29
TABLE: LABOUR FORCE QUALITY30
Infrastructure 31
Market Orientation 32
TABLE: ASIA, ANNUAL FDI INFLOWS.32
TABLE: TRADE AND INVESTMENT RATINGS.33
TABLE: TOP EXPORT DESTINATIONS33
Operational Risk .34
Chapter 5: Key Segments . 35
Autos 35
Environment Overview Ratings.35
TABLE: AUTO INDUSTRY – PRODUCTION & SALES37
TABLE: POULTRY PRODUCTION & CONSUMPTION.40
TABLE: PORK PRODUCTION & CONSUMPTION40
TABLE: BEEF & VEAL PRODUCTION & CONSUMPTION.40
TABLE: WHEAT PRODUCTION & CONSUMPTION.42
TABLE: CORN PRODUCTION & CONSUMPTION42
TABLE: RICE PRODUCTION & CONSUMPTION43
Other Key Segments 44
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS.44
TABLE: FOOD AND DRINK SECTOR KEY INDICATORS44
TABLE: OIL AND GAS SECTOR KEY INDICATORS.45
TABLE: TELECOMS SECTOR KEY INDICATORS.45
TABLE: DEFENCE AND SECURITY SECTOR KEY INDICATORS46
TABLE: PHARMA SECTOR KEY INDICATORS.46
TABLE: FREIGHT KEY INDICATORS46
Chapter 6: BMI World Assumptions. 47
World Outlook 47
Growth Prospects Dim As 2012 Begins47
TABLE: GLOBAL ASSUMPTIONS.47
TABLE: DEVELOPED STATES REAL Gross Domestic Product GROWTH FORECAST48
TABLE: REAL Gross Domestic Product GROWTH CONSENSUS FORECASTS48
TABLE: EMERGING MARKETS REAL Gross Domestic Product GROWTH FORECAST.49
