REGIONAL ECONOMIC SITUATIONER First Semester 2015 A QUICK LOOK AT THE ECONOMY          

Lower inflation rate from 3.2% in January to 1.0% in June Lower consumer price index from 146.6 in January to 145.1 in June Higher employment rate from 93.9% in April 2014 to 95.4% in April 2015 Lower underemployment rate from 34.3% in April 201 4 to 29.3% in April 2015 Higher corn production but lower palay production Higher abaca fiber production but lower coconut production Higher livestock production but lower fish catch Lower value of metallic and non -metallic minerals Higher investment s in partnerships and corporations Higher tourist arrivals

LABOR AND EMPLOYMENT The region’s employment status showed improvement during the first semester of 2015 in spite of the slower growth in the region’s economy at 4.2 percent in 2014. Employment rate increased by 1.7 percentage points from 93.7 percent in January 2015 to 95.4 percent in April of the same year. Compared to April last year, employment rate was higher by 1.5 percentage points. The total population 15 years old and above increased from 3.89 million in April 2014 to 3.96 million in April 2015. The labor force parti cipation rate or the proportion of those in the labor force to the population aged 15 years old and over, increased to 65.3 percent from 64.1 percent of the same period last year. The increase in employment rate means that m ore people in the labor force w ere employed in April 2015 compared to last year. Correspondingly, unemployment rate decreased by 2.9 percentage points for the period under review compared to 2014 data. A notable decline in underemployment rate by five percentage points was recorded at 29.3 percent in April 2015 from 34.3 percent in April last year. Underemployment is the proportion of employed persons working less than 40 hours a week and wanting more hours of work to total employed persons. Table 1 shows the employment status of the region in January and April 2015 and in April 2014. Table 1. Total Population 15 Years Old and Over and Rates of Labor Force Participation, Employment, Unemployment and Underemployment, in percent, Bicol Region: January & April 2015, and April 2014.

Population 15 years & above (in ‘000) LF Participation Rate Employment Rate Unemployment Rate Underemployment Rate Source: Philippine Statistics Authority Region 5

January 2015 3,937 62.1 93.7 6.6 27.8

April 2015 3,963 65.3 95.4 4.6 29.3

April 2014 3,885 64.1 93.9 6.1 34.2

The improvement in the region’s labor market was due to the growing business and construction projects by both the government and private sectors such as business process outsourcing, construction of malls in urban centers like in Naga City and Legazpi Cit y, and the implementation of projects of the national and local governments. High underemployment rate , however, remains a challenge for the region. Although underemployment rate decreased in April 2015, Bicol was second with highest underemployment rate n ext to Eastern Visayas (34.7 percent) which was devastated by Super Typhoon Yolanda in 2013 . PRICES The movement of prices continued its downtrend during the first semester of the year. The consumer price index (CPI) which is an indicator of the chang e in the average retail prices of a fixed basket of goods and services commonly purchased by households relative to 2006 (base year), decreased in June 2015 at 145.1 from 146.6 in January. A CPI of 145.1 implies that the consumer prices on the average have increased by 45.1 percent from 2006. Compared to June last year, CPI in June 2 015 was higher by 1.4 index point. The region’s inflation rate continued to plunge from 3.2 percent in January to a record low of one percent in June this year. This means that the average price level of consumer goods and services increased by only one percent in June 2015 from the same period last year. A low er inflation rate means that prices continue to increase but at a slower rat e. The Purchasing Power of Peso (PPP) was P0.69 in June 2015 compared to P0.70 in June last year. This means that the same amount of goods that ca n be bought with 69 centavos in 2006 can be bought with one peso in June 2015. Table 2 presents the May and June 2015 price levels compared to the same periods in 2014 while Table 3 presents the level of prices by month during the first semester of 2015. Table 2. Consumer Price Index, Inflation Rate, and Purchasing Power of the Peso in Bicol Region: May and June 2014 and 2015 (2006=100) 2014

2015

Indicators CPI

Table 3. Consumer Price Index, Inflation Rate, Monthly Percent Change and Purchasing Power of Peso in Bicol Region: January to June 2015 (2006 = 100) Month

CPI

Inflation Rate (%)

PPP (P)

May

June

May

June

January

146.6

3.2

0.68

143

143.7

145.2

145.1

February

146.3

2.5

0.68

March

145.8

2.6

0.69

April

146

2.5

0.68

May

145.2

1.5

0.69

June

145.1

1.0

0.69

IR (%)

5.2

5.6

1.5

1.0

PPP (P)

0.70

0.70

0.69

0.69

Source: Philippine Statistics Authority Region 5

Source: Philippine Statistics Authority Region 5

Among the provinces, Masbate exhibited a higher cost of living as manifested by the highest average CPI of 150.3 in June 2015, bringing PPP down to 0.66 pesos. Albay on the other hand, had the lowest CPI of 137.3 and

the highest PPP of 0.73 pesos. In terms of inflation rate, Sorsogon had the highest at 3.1 percent in June 2015 , while Masbate and Catanduanes had the lowest at 1.8 percent each (Table 4). Table 4. Average Consumer Price Index, Inflation Rate, and Purchasing Power of the Peso by Province: First Semester 2014 and 2015 (2006=100)

Province Albay Camarines Norte Camrines Sur Catanduanes Masbate Sorsogon

Average CPI 2014 133.9 144.8 144.3 146.3 147.6 145.6

2015 137.3 147.7 147.1 148.9 150.3 150.2

Ave. Inflation Rate (%) 2014 2015 3.3 2.5 6.8 2 6.9 1.9 4.6 1.8 3.8 1.8 5.1 3.1

Average PPP (Peso) 2014 0.74 0.69 0.69 0.68 0.67 0.69

2015 0.73 0.67 0.68 0.67 0.66 0.67

Source: Philippine Statistics Authority Region 5 AGRICULTURE AND FISHERY The slowdown in the gross value added growth of agriculture, hunting, forestry and fishing in 2014 due to the impact of Typhoons Amang, Glenda and Ruby in 2014 was still evident d uring the first quarter of 2015 . Based on PSA report, palay production in the first quarter of 2 015 decreased by 34 percent from the preceding quarter and by 4 percent the same period in 2014 (Table 5). The decline may be attributed to the weak El Niño in the country which has affected several provinces and municipalities in the region. Among the pro vinces, Sorsogon was the most affected as it experienced below normal rainfall, followed by Albay and Camarines Sur. The weak El Niño was indicated by a deficiency in normal rainfall or dry-spell that hampers the normal cycle of planting and harvesting se ason. In Camarines Sur, the decrease in palay production was also brought by typhoon Amang in January where 8,800 hectares of palay farms were affected , of which 4,100 hectares were totally damaged. Corn production recorded an increase in the first quar ter of the year by 18 percent from the preceding quarter but production was seven percent below that of the same period last year. The DA Regional Field Unit 5 reported that there is a growing demand for corn to support the feedmill industry in the region.

Synthetic Aperture Radar (SAR) -derived flood map of rice areas in Bicol taken during the onslaught of Typhoon Glenda in July 2014 showing Pamplona, Cam. Sur as the most affected by flooding.

The prolonged dry season experienced from January to April affected the production, not only of palay, but also of corn, vegetables and other crops. The threat of Bulusan volcano eruption and spewing of volcanic ashes last May to June 2015 also affected crop production in Sorsogon. Coconut production, which is still recovering from the impact of Typhoon Glenda, registered a decline of 16 percent from the last quarter of 2014 and was 8.5 percent lower than the same period last year. The PCA is continually implementing its coconut rehabilitation program. A remarkable increase in abaca fiber production by 62 percent was observed in the first quarter of the year from the quarter preceding and an increase by seven percent from the same period last year. The region has contributed 42.25 percent share to the national production and remains to be the top abaca-producing region in the country since 2009. Among the provinces, Catanduanes led in abaca fiber production with 77 percent share to the regional output as of December 2014 . In Irosin, Sorsogon, around 94.5 hectares were replanted with abaca and trainings of beneficiaries on abaca -based livelihood projects were conducted. These interventions are ex pected to yield an additional 66,150 kilograms per year of abaca fiber after 18 months of maturity. The contraction of the fishery sub -sector by negative 1.3 percent in 2014 was still apparent during the first quarter of the year as fish production declin ed by 13 percent from the preceding quarter and 16 percent from the same period of 2014. Of the fish production in the first quarter of the year, half was from municipal fishing, 28 percent from aquaculture, and 22 percent from commercial fishing. The decline in municipal and commercial fishing was attributed to frequent gale warnings by PAG -ASA due to inclement weather condition which affected fishing operations in the region. For aquaculture, some fishcage owners temporarily stopped operation due to inten sive heat, resulting to the decline in the fish catch. There was a minim al growth in livestock production during the period, particularly for hog which only grew by 1.8 percent from January to April of this year. Hog production increased by only 0.07 percent from the same period last year. Cattle production in January 2015 was higher by 6.6 percent compared to the same period last year. Inventory of chicken revealed that the number of heads increased by six percent in April 2015 from January, and by three percent from April last year. Increase in animal production was attributed to animal dispersal and artificial insemination programs of the DA in coordinatio n with the different LGUs. In Sorsogon province, 200 heads of carabao were dispersed Goats and sheep were on display during the 1st Small Ruminant Raisers’ Assembly held in Legazpi in May 2015 during the first semester of 2015. photos from bicol.da.gov.ph

Table 5. Agricultural production by commodity, Bicol Region: First Quarter 2015 and First and Fourth Quarter 2014 Period Commodity

Palay Production (in MT)

% Change

1st Qtr. 2015

4th Qtr. 2014

1st Qtr. 2014

1st Qtr. 2015 vs 4th Qtr. 2014

284,034

433,336

297,362

(34.45)

(4.48)

49,173 307,332 4,494 65,972 863,382 (Jan. 1, 2015) 96,635 (July 1, 2014) 8,201,612 (Jan. 1, 2015) Region 5

62,920 283,369 6,813 68,573 878,329 (April 1, 2014) 96,300 (Jan. 1, 2014) 8,445,085 (April 1, 2015)

18.21 (15.64) 61.68 (12.73) 1.80

(7.62) (8.51) 6.65 (16.04) 0.07

6.23

6.60

5.85

2.80

Corn Production (in MT) 58,125 Coconut Production (in MT) 259,257 Abaca Production (in MT) 7,266 Fish Production (in MT) 57,572 Inventory of Hogs (No. of 878,925 Heads) (April 1, 2015) Inventory of Cattle (No. of 102,659 Heads (Jan. 1, 2015) Inventory of Chicken (No. 8,681,356 of Heads) (April 1, 2015) Source: Philippine Statistics Authority

1st Qtr. 2015 vs 1st Qtr. 2014

Harvest festival and farmers fied school mass graduation held at Agri-PInoy Trading Center, Vinzons, Camarines Norte on May 8, 2015. photo credit: bicol.da.gov.ph

MINING The contraction of the mining sub -sector by negative 25 percent in 2014 continued in the first semester of 2015 as growth of the region’s mineral production decreased. All mineral commodities registered a decline in production. The total estimated value of metallic and non -metallic minerals declined by 32.29 percent from P5.58 billion in the previous semester to P3.78 billion this semester. Compared to the same period last year, there was a 17.85 percent decrease (Table 6). The decline was attributed to th e end of mine life of the Rapu-Rapu Polymetallic Project of Rapu -Rapu Processing, Inc. and low production of the Filminera Resources Corporation due to the repair of its major grinding machine. In terms of volume, gold production decreased by 31 percent from 3,144.37 kilograms in the previous semester to 2,173.46 kilograms in the first semester of the year, and a decline by 12 percent compared to same period last year. Silver production also decreased by 16 percent from 1,957.77 kilograms in the previous s emester to 1,645.20 kilograms in the first semester of the year (Table 6).

The value of non -metallic minerals was estimated at P9.54 million which was 3.81 percent lower than the P9.92 million in the previous s emester. Perlite production in the provinces of Albay and Camarines Sur posted negative growth rates of 3.86 percent and 0.16 percent, respectively. The non -production of shale clay, a raw material for making cement, resulted to a significant decrease in cement production during the period . The Goodfound Cement Corporation in Albay produced 3,806,154 cement bags during the period , which was 51.5 percent less than the 7,847,075 cement bags produced in the previous semester. The value of cement production amo unted to P1.25 billion. The total taxes paid by large -scale mining companies in the Bicol region amounted to P507.43 million. The Filminera Resources Corporation and the Philippine Gold Processing and Refining Corporation, the large -scale mining companies in Masbate province that produce gold and silver minerals, were the highest taxpayers that paid P 439.86 million during the first semester of 2015. Table 6. Metallic and Non -metallic products, Bicol Region: First Semester 2014 and 2015 and Second seme ster 2014 Period of Review Province

Commodity

1st Semester 2014 Quantity

Value (P M)

%change

2nd Semester 2014 Quantity

1st Semester 2015

Value (P M)

Quantity

Value (in P M)

1st Qtr. 2015 vs. 4th Qtr. 2014 Quantity

Value (PM)

1st Qtr. 2015 vs. 1st Qtr. 2014 Quantity

Value

TOTAL (Metallic and Non-Metallic)

4,615

5,596

3,791

(32.24)

(17.85)

METALLIC (Kg.)

4,609

5,586

3,782

(32.29)

(17.94)

Masbate

Gold

2,463.68

4,556

3,144.37

5,536

2173.46*

3,743

(30.88)

(32.39)

(11.78)

(17.84)

Masbate

Silver

1,859.76

53.456

1,957.77

49.955

1645.20*

38.817

(15.97)

(22.30)

(11.54)

(27.39)

NON-METALLIC (MT) Albay

Perlite

Albay

Shale Clay

CamSur

Perlite

Albay

Cement

6.330

9.921

9.543

7,812.40

4.647

15,775.00

9.465

15,166.50

9.100

530.00

0.0053

1,190.00

0.012

-

-

1,399.00

1.678

370.00

0.444

369.40

8,500,963.00

1,665

7,847,075.00

1,539

3,806,154.00*

* No r ep or t f or J un e 2 01 5

Source: DENR Mines and GeoSciences Bureau Region 5

(3.81) (3.86)

(3.86)

94.13

95.83

0.44

(0.16)

(0.16)

(73.60)

(73.60)

1,248

(51.50)

(18.94)

(55.23)

(25.05)

INVESTMENTS Data on investments from the Securities and Exchange Commission for the first semester of 2015 showed a significant increase in paid -up capital and contributions from stock, non -stock corporations and partnership firms. The total value of investments from these firms was recorded at P175.08 million , an increase of 69 percent from the same period last year and eight percent from the preceding semester. Of the total investments generated during the first semester of the year, 85 percent came from paid -up capital of stock corporations, 11 percent from non -stock contributions, while the remaining four percent came from partnership contributions. The increase in investment pattern in the region plays an important macroeconomic variable in terms of economic growth as investments provide jobs that will provide quality employment to the Bicolanos. Groundbreaking for Chevrolet car company’s sales and service center in Bicol last May 18, 2015

www.bicolmail.com

The total number of registered corporations and partnerships in the region was 34.18 percent higher than the previous semester but smaller by five percent compared to the same period last year (Table 7). New companies that established presence in Bicol include car sales centers and malls. Table 7. Total value and number of investments by type, Bicol Region: First Semester 2014 and 2015 and Second semester 2014 Type of Firm

Stock No. of Firms Paid-Up capital (P M)

1st Sem. (2015)

1st Sem. (2014)

2nd Sem. 2014)

Percent Change 1st Sem. 2015 vs 1st Sem 2015 vs 1st Sem 2014 2nd Sem. 2014

86

73

59

17.81

45.76

148.84

77.69

138.99

91.58

7.09

199

232

159

(14.22)

25.16

19.82

13.02

19.17

52.24

3.36

29

27

16

7.41

81.25

6.42

13.11

4.24

(51.01)

51.66

Non-Stock No. of Firms Contributions (P M) Partnership No. of Firms Contributions (P M) Total No. of Firms Total value of investments (P M)

314

332

234

(5.42)

34.19

175.08

103.82

162.40

68.64

7.81

Source: SEC Legazpi Extension Office

TOURISM The partial report from the Department of Tourism for the first quarter of 2015 covers data on tourist arrivals in all provinces except Camarines Sur. Report reveals that tourist arrivals reached 822,500, of which 661,902 were domestic and 160,598 were foreign (Table 8). Even without Camarines Sur data, tourist arrivals during the period increased by 3 percent from the same period last year. However, a 26 percent decline was noted from the preceding quarter due to the threat on volcan ic eruption in Albay and Sorsogon. Albay emerged as the most visited province in the region with 321,702 visitors and contributed 39 percent to the regional influx of tourists in the region (Table 9). The most visited destinations in Albay in the first quarter of 2015 were the Quitinday Greenhills and Sumlang Lake in Calamig, and the Kawa-kawa Hills in Ligao City during the Holy W eek. Catanduanes had the least number of tourist arrivals during the first quarter of the year in spite of the celebration of Catandungan Padayaw Festival in Virac, Catanduanes. Sorsogon and Masbate provinces registered the biggest decline in tourist arrivals during the period compared to the preceding quarter and the same period last year. Among the festivals that were celebra ted during the first semester of the year were the Cagsawa Festival in Daraga, Albay, Bantayog Festival in Daet, Camarines Norte Rodeo Masbateño in Masbate, and Tabak festival in Tabaco, Albay. American tourists topped the list followed by Koreans and Chinese. Table 8. Tourist Arr ivals by Province and Cit y, Bicol Region: First and Fourth Quarter 2014 and First Quarter 2015 PROVINCE/ CITY Albay

1st Quarter 2014 Domestic

Foreign

4TH Quarter 2014 TOTAL

Domestic

Foreign

1st Quarter 2015

TOTAL

Domestic

Foreign

TOTAL

45,825

6,961

52,786

85,070

5,776

90,846

87,779

2,529

90,308

Legazpi City

117,574

73,237

190,811

104,563

65,236

169,799

142,580

88,814

231,394

Cam. Norte

30,969

3,808

34,777

88,990

3,689

92,679

106,643

4,107

110,750

Cam. Sur

101,631

41,186

142,817

244,298

46,913

291,211

Naga City

156,546

43,311

199,857

209,747

56,565

266,312

Iriga City Catanduanes Masbate Province Masbate City Sorsogon Province Sorsogon City TOTAL

NDA

NDA

164,187

46,309

NDA 210,496

7,944

1,628

9,572

6,173

4,256

10,429

5,579

2,169

7,748

29,808

2,023

31,831

34,611

5,100

39,711

36,318

3,113

39,431

14,503

148

14,651

12,214

270

12,484

16,315

635

16,950

43,334

693

44,027

54,089

1,177

55,266

36,646

1,342

37,988

35,444

9,049

44,493

57,600

1,958

59,558

37,245

5,255

42,500

27,355

5,020

32,375

28,625

1,435

30,060

28,610

6,325

34,935

610,933

187,064

797,997

925,980

192,375

1,118,355

661,902

160,598

822,500

Source: Department of Tourism Region 5

Table 9. Tourist Arr ivals, Percent Change and Percent Share by Province, Bicol Region: First and Fourth Quarter 2014 and First Quarter 2015 Percent Change

1st Quarter 2014

4th Quarter 2014

1st Quarter 2015

Albay

243,597

260,645

321,702

1st Qtr. 2015 vs 1st Qtr. 2014 32.06

Cam. Norte

34,777

92,679

110,750

Cam. Sur

352,246

567,952

Catanduanes

31,831

Masbate Sorsogon

PROVINCE

TOTAL

1st Qtr. 2015 vs 4th Qtr. 2014

Percent Share

23.43

39.11

218.46

19.50

13.47

218,244

(38.04)

(61.57)

26.53

39,711

39,431

23.88

(0.71)

4.79

58,678

67,750

54,938

(6.37)

(18.91)

6.68

76,868

89,618

77,435

0.74

(13.59)

9.41

797,997

1,118,355

822,500

3.07

(26.45)

100.00

* Camarines Sur data include tourist arrivals in Naga City and Iriga City only. Source: Department of Tourism Region 5

OUTLOOK FOR THE SECOND SEMESTER 2015 Looking ahead, the improvement in the region’s labor market will continue with positive employment prospects in manufacturing, construction, and tourism. Recognizing the effect of government underspending on the country’s economy in 2014, it is expected th at there will be an increase in government spending in the second semester through the implementation of programs and projects geared toward poverty reduction. Consumer prices are expected to remain low and stable in the second semester of the year. Howe ver, there is a need for the government to be cautious of the risks in inflation due to the occurrence of typhoons in the second semester which is expected to intensify of prolonged El Nino. Bicol is one of the regions that are expected to have c utbacks in rice harvest area due to insufficient water supply and intense h eat particularly in the provinces of Sorsogon, Albay, and Camarines Sur. In anticipation of the dry spell, the DA engaged agricultural technologists to implement programs that would help farmers cope with climate change. The on -going researches are on rice seeds varieties which can withstand saline water, flooded water or even dry land. An increased volume of palay seeds is expected to be delivered to farmers through the Agri -Pinoy Rice Prog ram, Plant Now-Pay Later Plan under the Binhing PAMANA, and the DA -SIKAT SAKA Program. More Farmers Field School and Farmers Climate Field School on palay, corn, vegetable and organic agriculture will be conducted. Investments in priority crops like abaca , pili, and sweet potato are also expected to bring high level of production. For the succeeding period, the Rapu -Rapu Polymetallic Project will continue to undertake major mine rehabilitation activities in its mine site in Rapu-Rapu, Albay as specified i n the Final Mine Rehabilitation Decommissioning Plan until all activities have been completed. The rehabilitation works will

provide better land use to the area as it will offer agro -forestry and eco -tourism. Local residents will enjoy additional income and employment opportunities as soon as the area has been restored to normal conditions. The promulgation of DENR Administrative Order (DAO) No. 2015 -03 or the Revised Implementing Rules and Regulations of Republic Act No. 7076, otherwise known as the P eople’s Small-Scale Mining Act of 1991 will fully regulate the small -scale mining industry in the region. The establishment of Minahang Bayan sites in the six provinces is being worked out by the MGB in coordination with the local government units. Through the Minahang Bayan, the small-scale miners will have mining areas where they could mine without being called illegal. The taxes to be paid by small -scale mining contractors will increase the revenues of the local government units. Mining policies on environmental protection will continue to be enforced. Tourism will continue to be one of the growth drivers of the region’s economy. The inter-provincial tourism alliances, i.e., the Albay Masbate Sorsogon (ALMASOR) and the Triple C (Camarines Norte Camarines Sur and Catanduanes) Tourism Alliances is the str ategy adopted by the Regional Development Council to fast track the development of the region’s tourism industry. The major program that supports the tourism industry is the Tourism Road Infrastructure Project Prioritization, a convergence program of the Department of Public W orks and Highways and the Department of Tourism that implements road projects to provide access to tourism sites. The implementation of these projects will generate local employment and additional income to residents. The aggressive promotion of Bicol tourism is expected to attract more tourists both foreign and domestic. The challenge that the region and the whole country will soon face is the upcoming election next year. Until after the May 2016 elections, prospective investors might postpone their decision to do business in the region – the usual wait and see attitude of the business sector thereby resulting to low economic activities across sectors.