MANILA, Philippines — It will still take more time for the business process outsourcing (BPO) sector to surpass the remittances from overseas Filipino workers (OFWs) as the country’s major source of dollars, according to the Bangko Sentral ng Pilipinas.
Dennis Lapid, director of the BSP’s Department of Economic Research, said conditions have changed since the pronouncement that BPO earnings would overtake the amount of money sent home by OFWs to their families in the Philippines.
“The conditions when those pronouncements were made are a little slightly different compared to what we are looking at now,” Lapid said in a press briefing.
As a general rule, he explained the central bank uses additional information and developments to update their projections.
“Much of the downside risk due to global economic activity has already materialized,” he said.
According to Lapid, global gross domestic product (GDP) growth has slowed down prompting multilateral agencies led by the International Monetary Fund (IMF) to lower their growth forecasts.
“We are feeling it in terms of more subdued growth in our exports and that also has an impact on foreign investments as well. And also that has cascading impact on demand for services,” Lapid said.
Latest data from the central bank showed cash remittances coursed through banks increased by 4.2 percent to $22.19 billion from January to September, while estimated earnings from BPO services went up by six percent to $16.4 billion.
Lapid said the BSP is in touch with the BPO industry to address key concerns by diversifying to other key markets and increasing automation.
“Based on our earlier discussions with the industry, they are willing to search for new markets and they are also looking through diversifying to higher value added services,” he said.
Based on its latest assessment, the BSP expects the earnings of the BPO sector to grow by five percent for 2019 and 2020. Last year, the industry booked a 2.9 percent increase in earnings.
On the other hand, the central bank expects cash remittances to increase by three percent this year and next year after growing by 3.1 percent last year.
Lapid said tourism receipts would take up the slack, posting a double-digit growth of 12 percent for both 2019 and 2020 especially after the hosting of the 30th Southeast Asian Games this month.
However, the BSP expects imports to rebound and grow faster at eight percent in 2020 from two percent in 2019, while exports are expected to expand by four percent from only one percent this year.
As a result, more dollars are expected to flow out of the Philippines with a current account (CA) deficit projected to reach $8.4 billion next year from the projected $5.6 billion this year.