Abstract
Although real GDP growth surprised on the upside in Q408, with a 4.5%
year-on-year (y-o-y) expansion
beating a consensus forecast of a 3.5-3.8%
increase and bringing full-year growth for 2008 to 4.6%, we
see no reason
to alter our 2.8% growth forecast for 2009. The slowdown is expected to be led
by declines
in private consumption and investment, with government
spending forecast to accelerate and the
contribution of net exports to be
negligible.
Economic growth in the Philippines surprised on the upside in
Q408, beating consensus expectations of a
3.5-3.8% y-o-y expansion to
register real growth of 4.5%, bringing full-year growth for 2008 to 4.6%.
However, while this has underlined the resilience of the Philippine economy in
the face of the current
hostile environment, we remain sceptical
concerning its ability to escape the unfolding global recession
unscathed.
As such, we retain our below consensus 2.8% growth forecast for 2009.
Private consumption remained buoyant in Q408, expanding by 4.5% y-o-y having
posted growth of 4.1%
and 4.4%, respectively, in the second and third
quarters of the year. This added some 3.4pp to headline
growth, and was
driven in large part by the ongoing strength of remittances from Filipinos
working
overseas, which grew by 3.3% y-o-y and 10.5%, respectively, in
October and November. However, these
figures dragged year-to-date growth
down to 15.0% y-o-y having reached a peak of 18.2% in July, and
with
global economic activity forecast to continue slowing over the coming
quarters, remittances are set
to follow suit.
Indeed, given that
US$7.19bn of a total of US$15.02bn sent back to the Philippines by overseas
workers
came from the US, and that the world' s biggest economy is forecast
by BMI to contract by 2.3% in 2009,
the likelihood of persistent
remittance strength this year remains slim. This in turn bodes ill for the
prospects of private consumption being able to support headline growth in
2009, as it has done in
previous years and, as such, we are expecting
private consumption - which accounts for around 77% of
total GDP - to add
just 0.8pp to full-year GDP growth this year as it registers just 1.0% growth
in real
terms. To put this in context, private consumption has grown on
average by 5.3% over the past five years
and has contributed on average
4.2pp to overall growth over the same timeframe.
In the Asia Pacific, we
profile 23 companies. These are AEGON, AIG, Allianz, Aviva, AXA, Cardif,
Fortis, Generali, Groupama, HDI-Gerling, HSBC Insurance, ING Group, Liberty
Mutual,
Manulife, MetLife, Prudential Financial, Prudential plc, QBE, RSA,
Sun Life Financial, The
Hartford, Principal Financial Group and Zurich
Financial Services.
We also look at various local firms that are active in
the region; some of these companies rank, in terms
of the premiums that
they write, among the largest in the world.
In 2008, total premiums in the
Philippines rose by 25% to PHP123,607mn. Non-life premiums rose by
7% to
PHP42,889mn, while life premiums rose by 38% to an estimated PHP80,719mn.
Between now and the end of the forecast period, we expect that annual non-life
premiums will grow by
PHP33,909mn, while annual life premiums should grow
by PHP192,999mn.
Growth in non-life premiums should be driven by the
general growth of nominal GDP plus a rise in
non-life penetration from the
current level of 0.56% to 0.75%. Growth in life premiums should be driven
by the change in the overall population and a rise in life density from
US$21.44 to US$70.00 per capita.
BMI' s Insurance Business Environment
Rating is 53.5.
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