BPO to buoy PH growth as remittances slacken

The business process outsourcing (BPO) sector is expected to pump more dollars into the economy next year while slower remittance growth could be the new normal for the Philippines amid a weak global economy, Standard Chartered Bank said Tuesday.

“We expect that remittance growth is likely to be much slower than before as the number of outgoing workers stabilize and overseas income is impacted by a sluggish global economy, particularly in the west which accounts for a significant chunk of remittances,” Chidu Narayanan, Standard Chartered economist for Asia, said in a report.

Nonetheless, Narayanan said they expect remittances to “continue to add more than 6 percentage points to the current account surplus (as a percentage of gross domestic product) in the medium term.”

On top of remittances, he said BPO services exports and electronics exports would support the country’s current account surplus. He said all three would account for more than $67 billion of inflows (21 percent of GDP) this year.

Moving forward, Narayanan said the BPO industry would become “the biggest contributor to current account inflows from 2017, overtaking overseas remittances.”

Narayanan noted the US remained the top source of remittance flows to the Philippines, accounting for about one-third of the total. “Around 10 percent originate from Saudi Arabia, and 7.8 percent from the United Arab Emirates. Asia as a whole accounts for 19 percent, with Singapore, Japan and Hong Kong the biggest contributors in Asia. Around a sixth originate from Europe; 5.5 percent comes from the United Kingdom.”

The latest Bangko Sentral ng Pilipinas data released last Monday showed that cash sent home by Filipinos living and working abroad in August grew at its fastest pace in over two years, jumping 16.3 percent year-on-year to $2.319 billion.

“The double-digit year-on-year growth in remittances is largely due to base effect. It may be recalled that in August last year, the dollar value of remittances was relatively low due to weaker host currencies, such as the euro. The euro has since then remained relatively stable. In addition, other currencies such as the yen and the Singapore dollar have strengthened,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters late Monday.

Narayanan said remittances from the US rose 16.45 percent year-on-year in August after the 5.86-percent drop in July.  He said remittances from Asia rose 31 percent year-on-year.