PHL mostly ‘untouched’ by main global risk factors due to remittances, BPO earnings, economist says

THE PHILIPPINES is “pretty untouched” in terms of risks posed by China’s economic slowdown, declining oil prices, and an expected Federal Reserve interest rate hike, a visiting European economist said.

Pedro Videla, economist and professor at IESE (Instituto de Estudios Superiores de la Empresa) Business School at the University of Navarra, said that the Philippines is “pretty untouched by all these effects,” and identified as the source of its relative immunity “the Philippines (having) more sources of dollars from overseas.”

“The income in dollars is unrelated to these [risks]. There are two main sources of income in dollars; overseas remittances and BPO (business process outsourcing),” he said at a seminar yesterday held in Makati City.

Preliminary data from the Bangko Sentral ng Pilipinas show that remittances from Filipinos working overseas grew 5.6% during in the first half of this year.

Cash remittances amounted to $12.08 billion in the six months to June, compared with $11.45 billion a year earlier.

On the other hand, the BPO sector, which is expected to overtake remittances in terms of contribution to the economy by 2020, posted $18.99 billion in revenue last year, up roughly 16%. The industry accounted for 1.07 million jobs in 2014, making it the largest private-sector employer.

Mr. Videla also noted that the Philippines has seen a “substantial decline in poverty” since 2004.

He pointed out that export-driven economies such as South Korea, Taiwan, and Thailand, which have “close links” with China are the ones that will be affected by the latter’s slowdown.

Coupled with the yuan’s devaluation in August, China’s poor trade performance has rattled global economies.

Imports fell for the 10th straight month in August, by 13.8% year on year, raising concerns among global investors that China may be slowing more sharply than earlier expected. Exports also dropped by 5.5% in August from year-earlier levels.

Recent employment data from the US showed that US employers generated 173,000 jobs in August, which came in less than forecast, but the gains were enough to pull the unemployment rate to 5.1%, the lowest since April 2008.

This jobs report was the latest major piece of economic data before the Sept. 16-17 Federal Open Market Committee meeting, which was long expected to produce a rate hike, though recent market turbulence has introduced doubts as to whether the Fed will act.

Other countries expected to be vulnerable to the macroeconomic risks cited by Mr. Videla are Brazil, Turkey, South Africa, India, South Korea, Taiwan, Thailand, Indonesia, Mexico, Russia, Peru, Colombia, Malaysia and Chile.

source:  Businessworld