INQUIRER FILE PHOTO
The economy is on the brink of a structural shift, with revenues from call centers and other outsourcing firms expected to soon match the contribution of cash transfers from migrant workers.
Overseas Filipino workers’ (OFWs) remittances served as the economy’s main anchor to stability for decades. But these inflows have started to slow and business process outsourcing (BPO) firms are expected to pick up the slack.
“That should reinforce the strength of our consumption,” said BDO chief market strategist Jonathan Ravelas in an interview. Private consumption, which OFW remittances fuel, account for two-thirds of domestic output.
OFW remittances accounted for nearly a tenth of gross domestic product (GDP) last year, reaching a record-high $24 billion. Last July, however, remittances grew by 0.5 percent, matching January’s expansion that was the slowest in six years at the time.
Ravelas said July’s slowdown might be a result of the peso’s recent depreciation. A weaker currency lets OFWs send less money while still providing the same level of support for their families.
Remittances will grow by 5 percent this year to a new record high $25.6 billion, projections from the Bangko Sentral ng Pilipinas (BSP) showed.
“But this is practically only half of the strong structural inflows,” said Joey Cuyegkeng, ING Bank’s economist in Manila.
Finance Secretary Cesar V. Purisima earlier said that BPO revenues were on track to eclipsing remittances as the economy’s main source of strength. By 2017, the BPO industry is expected to rake in $28.9 billion from a projected $21.2 billion this year.
BDO’s Ravelas said remittances might grow at a faster pace later this year as the holiday season approaches.
Apart from supporting domestic consumption, remittances are also the biggest form of dollar income for the Philippines. The steady supply of foreign currencies, which companies and the government need to do business with the rest of the world, helps keep the currency stable.
Due to the stable supply of dollars from recurring sources such as remittances and outsourcing, the economy never runs out of dollars needed to pay for imported goods such as fuel and food, and for foreign debt payments.
A shortfall in foreign exchange will force the public and private sectors to buy the dollars they need from overseas, which would depreciate the peso.