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Annual Report 2002 : Southeast Asia

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Philippines

Economic performance

The Philippines’ GDP growth rate increased to 4.6% in 2002 from 3.2% in 2001, registering its strongest performance since the 1997 Asian financial crisis, despite an adverse external environment and continued threats to local peace and order. The net factor income from abroad improved by 15.5% over its 2001 level, and the country’s gross national product (GNP) expanded by 5.2%, the highest since 1997. Output from the agriculture, fisheries, and forestry sectors decelerated to 3.5% in 2002 from 3.7% in 2001. The industry sector grew by 4.1%, compared with 1.3% in 2001. The services sector grew by 5.4%, from 4.4% in 2001. The inflation rate fell to 3.1% in 2002 from 6.1% in 2001 due to lower prices across commodity groups—food, services, housing, and energy-related products.

The fiscal deficit was at 5.3% of GDP in 2002, compared with 4.1% of GDP in 2001. The continued revenue decline led to a deficit of about $4.1 billion in 2002. The overall balance-of-payments reversed to a surplus of $751 million as of September 2002 from a deficit of $1.3 billion in 2001. Net portfolio investments flowing into the country rose to $692 million in the first 9 months of 2002, from $208 million in the same period in 2001. The unemployment rate—attributed to the large number of new entrants to the labor force and reflecting, in part, high population growth—rose to 11.2% in July 2002 from 10.1% for the same period in 2001.

ADB operations

Operational strategy: ADB’s strategy supports the Government’s development priorities envisaged in the Medium-Term Philippine Development Plan 2001–2004. The strategy aims to reduce poverty, encourage equity, improve social services delivery, protect the environment, and promote good governance. The proposed program for 2003–2005 supports these areas, and focuses on basic education and health services, urban development, power, roads, environmental management, and financial market development.

Policy dialogue: Dialogue focused on supporting reforms under ongoing program loans, including improving the environment of the Pasig River, and the air quality in Metro Manila. Discussion continued on reforming the power sector, including privatizing the National Power Corporation; improving governance in the nonbank financial sector; identifying the constraints and needs of microfinance; and judiciary reform. ADB worked closely with the Government and the World Bank in preparing a joint review of public expenditure, procurement, and financial management.

Loans, technical assistance, and grants: One loan of $40 million was approved in 2002 for the Electricity Market and Transmission Development. ADB also provided a partial credit guarantee for a public bond issue of $500 million to assist power sector reform. Twelve technical assistance totaling $6.6 million and two grants totaling $4.6 million were approved (see tables 1, 6, 24, 25, and 35 in the Statistical Annex).

Project implementation: Since joining ADB in 1966, the Philippines has received 186 loans totaling $8,034.3 million, of which 46 were active at the end of the year. Contract awards totaled $198.2 million, bringing the cumulative figure to $5,143.5 million. The contract awards ratio for 2002 was 17.1%—lower than ADB’s average of 22.6%. Disbursements in 2002 totaled $230.0 million, bringing cumulative disbursements to $5,468.6 million. The disbursement ratio was 17.0%—lower than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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