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BPO taking bigger role in prodding economic growth as remittances slow

Posted on December 01, 2015

SLOWING GROWTH of remittances from Filipinos working abroad -- long an anchor of household consumption that contributes more than 60% to economic output -- should not be a worry since such inflows are “still very large” and are increasingly complemented by earnings of business process outsourcing (BPO) operations, an analyst of credit rater Moody’s Investors Service assured recently.

A computer programmer attends to a customer at a US company’s 42-seat call center at the Mindanao State University campus in Iligan City in this May 28, 2009 photo. -- AFP
Christian De Guzman, senior analyst and vice-president at Moody’s Sovereign Risk Group, said the possibility of BPO receipts overtaking remittances as a key driver of growth should be viewed as a boon for the economy.

“You should see it as a source of strength rather than a source of concern,” Mr. De Guzman said in an interview late last month in Makati City.

“Basically, what we are saying is that you now have two equally strong engines of growth,” he noted.

“Yes, there has been some cyclical weakness in remittances, but the remittances by themselves are actually still very large.”

Cash remittances sent home by overseas Filipino workers (OFWs) totaled $18.408 billion as of September, 4.1% more than the $17.682 billion recorded in 2014’s comparable nine months.

Remittances reached a record-high $24.348 billion in 2014, up 5.8% annually, topping the 5.5% revised goal set by the Bangko Sentral ng Pilipinas (BSP) in November last year. BSP said 2014 cash remittances were equivalent to 8.5% of gross domestic product.

In a Nov. 9 research note, economists at the Hong Kong and Shanghai Banking Corp. Ltd. said that growth in cash remittances may “soften” in the long term, since demand for OFWs appears to have peaked in 2014.

“I don’t think the data is showing that remittances are going to be disappearing,” Mr. De Guzman of Moody’s said.

“It’s that BPO receipts are just growing at such a strong pace that they will outpace remittances,” he explained.

“It’s a source of strength now that you have two very strong sources of foreign revenue. BPO receipts also mean that the domestic sources of demand for things like jobs are also stronger.”

In March, Information Technology and Business Process Association of the Philippines Chairman Danilo Sebastian L. Reyes estimated that his sector’s revenues grew 16% annually to $18.1-18.4 billion, “mainly driven by the HIM (health care information management) sector.”

The Philippines currently holds a “Baa2” rating from Moody’s with a stable outlook, a notch above the lowest investment grade on the debt watcher’s scale. -- Melissa Luz T. Lopez