BPO revenues to soon surpass OFW remittances

Outsourcing firms will within the decade surpass remittances sent home by migrant workers as the Philippines' main source of dollar income, giving the domestic economy another boost.

The Bangko Sentral ng Pilipinas (BSP) said it was only a matter of time before the business process outsourcing (BPO) industry, which has been booming for more than a decade, would replace cash transfers as the economy’s main economic engine.

Money received by millions of Filipino families from their relatives working overseas would continue to grow at a steady but subdued pace this year, BSP Deputy Governor Diwa C. Guinigundo said.

The BPO sector’s outlook, however, is much brighter. “BPO revenues are expected to grow by at least 15 percent,” Guinigundo said, citing industry data. Remittances from overseas Filipino workers (OFW), meanwhile, would grow by 6 percent, at most, in 2015.

Remittances from OFWs were the biggest source of dollar income for the country last year, helping keep the peso stable despite volatile financial market conditions. In 2014, money sent home by the country’s 10 million migrant workers reached a record-high $24 billion, accounting for nearly a tenth of gross domestic output.

Income from BPOs, which employ more than a million Filipinos, reached $18.4 billion, up 18.4 percent year-on-year. The IT and Business Process Association of the Philippines (IBPAP) said it expected the industry’s earnings to rise by 15 to 17 percent in 2015.

By 2016, BPOs would earn $25 billion annually, industry estimates showed.

Even with the shift, Guinigundo said remittances would stay as a vital pillar for the domestic economy. He said demand for OFWs remained high. “If other countries had substitutes for Filipino labor, we can get worried. But there aren’t any,” Guinigundo said.

Cash remittances from overseas Filipino workers (OFWs) coursed through banks increased by 11.3 percent year-on-year to $2.1 billion in March 2015, latest data from the central bank showed.

Philippine Daily Inquirer

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Philippines Aims for 'A' Credit Rating from Standard and Poor's

Standard and Poor’s Ratings Services (S&P) has kept its credit score on the Philippines, and is likely to stay at that level in the next six months at the least.

In a statement, S&P said it affirmed the Philippines’ ‘BBB’ long-term foreign currency rating, and assigned a stable outlook, which means the current score stays for the next six months to a year.

According to S&P, its move was driven by the country’s strong external position amid rising foreign exchange reserves and a smaller foreign debt burden.

Remittances by overseas Filipino workers (OFWs) and revenue from the business process outsourcing (BPO) industry have propped up the country’s external payments position. A recovering U.S. economy also has fueled exports growth, lending further support to the Philippines.

The Philippines is rated a notch above the minimum investment grade by both S&P and Moody’s at 'BBB' and 'Baa2', respectively. Fitch however has kept the Philippines at the minimum investment grade of 'BBB-'.

In a statement, government officials said the Philippines is aiming to hit the “A” rating over the medium term.

“Fundamentals of the Philippines significantly improved over the last few years. With the trend staying positive, additional upgrades in the credit ratings over the medium term should be achievable,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said.

“On the part of the BSP, efforts to further improve the regulatory environment for financial institutions, maintain price stability, and strengthen external payments position would be its contributions to placing the economy on an even higher gear,” Tetangco said.

Finance Secretary Cesar Purisima said a credit rating in the “A” category should be attainable, especially since the Philippines still remains underrated if one would compare the country’s credit ratings with how the market prices Philippine debt papers.

“If compared with those of other emerging markets, fundamentals of the Philippines are one of the strongest. And with continually improving major credit indicators, including debt manageability, credit ratings ideally should adjust accordingly,” Purisima said.

“Throughout the past five years of pursuing initiatives toward good governance, we have managed to outperform even our own targets and expectations. Moving forward, we expect to sustain the reform momentum and to raise the bar even higher,” he added.

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Optimistic Filipino Business Execs on a Hiring Spree

Philippine business leaders are Southeast Asia’s most optimistic and the world’s third most bullish.

In its International Business Report, Grant Thornton said at least eight out of every 10 business executives in the Philippines are upbeat about the country’s economic prospects in the next 12 months.

Audit firm Punongbayan & Araullo conducted the survey in the country for Grant Thornton.

Filipino executives were behind their Irish and Indian counterparts, optimism among whom reached 92 percent and 89 percent, respectively, of survey respondents.

Filipinos however were the most optimistic in Southeast Asia, with Indonesians coming the closest at 68 percent, followed by Thais, 36 percent; and Singaporeans, 4 percent. Malaysians bucked the trend, with pessimists outnumbering optimists.

Filipino executives also are in the mood for hiring, with the percentage of respondents expecting an increase in employment at 56 percent, up 14 percentage points from last year.

Despite the improved hiring outlook, more than a third of respondents are hard put looking for qualified workers, albeit down 5 percentage points from last year.

“Although there’s a slight improvement in our skilled workers compared to last year, the gap between businesses’ hiring appetite and the depth of the local talent pool is still alarming,” Marivic Españo, chair and chief executive of P&A, said. 

"The country needs to cultivate the kind of workforce it needs to stay competitive and prevent our most highly skilled professionals from emigrating for job opportunities abroad,” she added.

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Philippines Soon to Become Economic Heavyweight of Asia

The Philippine economy is forecasted to expand significantly over the next fifteen years to become one of Southeast Asia’s heavyweights, fueled by a growing middle class and an invigorated manufacturing sector.

Think tank IHS Global said that the government’s business-friendly policies would lead to higher levels of investment, helping create more jobs and raise incomes in the country.

Over the next five years, gross domestic product (GDP) growth may average 5.5 percent, forecasts showed. If this expansion were to be sustained, per capita income, or the money the average Filipino makes, could double to $6,000 a year by 2024. By 2029, the size of the economy is expected to more than triple from $310 billion in 2015 to over $1 trillion.

“These significant increases in per capita GDP will create one of Asean’s largest consumer markets of the future, as the middle class rapidly expands over time,” IHS Global Asia Pacific chief economist Rajiv Biswas said. “This will help attract foreign direct investment by multinationals into the Philippines manufacturing and services industry.”

The main growth drivers for the Philippines economy are the rapidly growing outsourcing sector and the strong flow of remittances from Filipino workers abroad. The expected gains may be attributed to the large pool of university-educated workers as well as the strong English-language skills of the workforce in the country.

In the Philippines, the export revenue from the business process outsourcing (BPO) sector more than doubled between 2008 and 2014, reaching an estimated $18 billion in revenues by 2014, while the total number of employees in the IT-BPO industry exceeded 1 million.

By 2016, the Philippines’ IT-BPO industry is projected to have 1.3 million employees. The rapid growth of this industry is also driving economic development in a number of cities across the Philippines, with Manila and Cebu now ranked among the world’s leading BPO hubs.

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BPO Industry a Big Factor in Poverty Alleviation in the Philippines

Poverty in the Philippines may decline rapidly in a couple of years if the government can sustain efforts that lead to higher growth and more jobs, the World Bank said in a new report.

The Philippine economy will grow by a faster rate this year and the next, the World Bank said, beating all other major Southeast Asian markets.

The country’s economic engines will be fueled by higher government spending, and revenue from migrant remittances and business process outsourcing (BPO) activities.

“Philippine growth is still one of the fastest among the major economies in the East Asia region, trailing only China,” the multilateral lender said in its East Asia and Pacific economic update.

“Strong remittances, falling oil prices, and upbeat consumer and business sentiments indicate stronger growth in 2015,” the bank said.

For 2015 and 2016, growth is expected to clock in at 6.5 percent, faster than 2014’s 6.1 percent.

The projection for 2015 is slightly lower than the World Bank’s previous forecast late last year, a cut that was in line with the outlook for the rest of the region.

Meanwhile, the rest of Asia is expected to grow by 6.7 percent, slower than 2014’s 6.9 percent.

As a result of sustained economic performance, poverty levels in the Philippines are expected to decline by nearly a third to 10.9 percent by 2017 from 2012’s 15.4 percent.

People who earn less than $1.25 a day are considered poor by the World Bank.

Philippine Daily Inquirer

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Bloomberg Says Philippines Will Be the Second Fastest Growing Economy in the World

A recent survey of economists by Bloomberg shows the Philippines will be the second fastest-growing economy in the world this year, second only to China.

Bloomberg's survey says the Philippines and China will be the only two economies out of 57 included in the report that will grow 6 percent or more this year.

The report is based on average economists' estimates.

"The world is expected to grow 3.2 percent in 2015 and 3.7 percent next year after expanding 3.3 percent in each of the past two years, according to a Bloomberg survey of economists. China, the Philippines, Kenya, India and Indonesia, which together make up about 16 percent of global gross domestic product, are all forecast to grow more than 5 percent in 2015," Bloomberg said.

Also in the top 5 are Kenya and Nigeria. Many economists are pointing to Africa as the next fast-growth region after Asia.

Source: Bloomberg Business

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Philippines No Longer 'Sick Man of Asia'

Philippines Socio-Economic Planning Secretary Arsenio Balisacan says the country no longer deserves to be branded the "sick man of Asia" after its economy grew more than 6 percent for a third consecutive year.

Hindered by natural disasters, growth of the $300 billion economy slowed to 6.1 percent in 2014, but still outpaced most other countries in Asia, officials said Thursday.

The 2014 performance ranks the Philippines as the second fastest growing Asian country behind China, which posted 7.3 percent growth, and ahead of Vietnam's 6.0 percent growth, Balisacan said. The Philippine economy grew 7.2 percent in 2013.

"Our economic growth is becoming more competitive with our East and Southeast Asian neighbors," Balisacan said.

"The numbers tell us that we are moving in the right direction," Baliscan said. "Clearly the economic policies and strategies we are implementing to achieve sustained and inclusive growth are bearing fruit," he said.

National Statistician Lisa Bersales said the "robust performance" of industry, particularly manufacturing and construction, lifted growth in the fourth quarter to 6.9 percent from 6.3 percent a year earlier.

She said services contributed 3.4 percentage points, industry 2.5 percentage points and agriculture 0.2 percentage points to the 2014 GDP growth of 6.1 percent.

Business process outsourcing was one of the contributors to the expansion of services, according to Balisacan. Outsourcing currently employs 1.052 million Filipinos and the 

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