REVENUES from business process outsourcing (BPO) and tourism will buoy the country’s external trade balance this year as these industries are expected to grow by a tenth, the central bank said.
Latest estimates of the Bangko Sentral ng Pilipinas (BSP) showed that net inflows from the BPO sector will grow by 10% this 2018 to $24.4 billion. If realized, this will be faster than the 9.6% increase to $22.1 billion in 2017.
For the first, BPO revenues amounted to $5.5 billion, 7.5% more year-on-year.
The BPO sector employs about 1.15 million people and is projected to generate close to $40 billion in revenues by 2022.
However, the Information Technology and Business Process Association of the Philippines sees the sector’s expansion slowing to single digit rate over the coming years as the industry matures.
BPO industry leaders have also voiced concerns about the removal of tax perks under the second tax reform package now being discussed in Congress, even as they remain confident that Filipinos’ skills and quality of service should keep the sector competitive.
Under the proposal, economic zone locators including BPO firms will be taxed 15% of their net taxable income, compared with the current five percent tax on gross income earned. Income tax holidays will also be limited to four years with no extension, against the current regime of four years, extendable to six years.
Meanwhile, tourism sales are expected to reach a fresh high at $7.7 billion, up a tenth from $7 billion in 2017. Growth, however, will taper off from the 35.8% surge seen a year ago.
As of end-March, tourism revenues jumped 51.4% year-on-year to $2.1 billion, according to latest available central bank data.
Boracay Island, a top tourist destination, was cordoned off to tourists starting April 26 for a six-month clean-up and rehabilitation drive ordered by President Rodrigo R. Duterte.
Coupled with $29.2 billion in expected remittances from overseas Filipino workers, these inflows are expected to cushion the impact of an 11% surge in imports to $99.2 billion.
Exports are forecast at $53 billion this year.
The BSP foresees the current account — which measures fund flows in goods and services trading — to balloon to a $3.1-billion deficit, compared to a $700-million shortfall expected back in December. The current account settled at $208 million deficit in January-March, narrower than the $860-million deficit logged in 2017’s comparable three months. Economists and traders have pointed out that the reversal of the country’s current account to deficit has been the main reason for the persistent weakness of the peso, which is currently trading at a fresh 12-year low at P53 per dollar. The BSP has said that a “modest” current account gap should not be a cause of worry, as increased imports will translate to economic growth as they support infrastructure development and business expansion. — Melissa Luz T. Lopez