IMF Estimates Philippine Growth to Top 6% in 2016

Posted by Reading Time: 4 minutes

ManilaBy: George Llewellyn-Jones

Spurred on by domestic demand, the Philippine economy is performing the best out of the ASEAN-5, according to the IMF’s latest Regional Economic Outlook (REO). Gross Domestic Product is forecast for growth rates of 6.0 percent for 2016 and 6.2 percent for 2017. Underpinning these gains, higher public consumption and investment are pointed to as the drivers of demand as the country progresses from its rate of 5.8 percent in 2015.

Private demand is shown to be increasing as a result of low unemployment, low oil prices, and higher worker remittances. Private investment is also expected to perform well as infrastructure has developed and public-private partnership projects are on the rise. The Philippines didn’t suffer too badly from the spillover effects coming from China’s slowdown, however, the country needs to do more to catch up on regional export levels.

Professional Service_CB icons_2015RELATED: Pre Investment and Market Entry Advisory from Dezan Shira & Associates

The major success story of recent years, and a key driver of economic growth in the Philippines, has been the business process outsourcing industry. Also known as IT-BPO (Information Technology Business Process Outsourcing), the industry now employs over 1.2 million Filipinos and is expected to overtake overseas Filipino worker (OFW) remittances as the largest input to GDP, having contributed U.S. $22 million to the economy in 2015.

The industry is normally classified into the eight following sub-sectors: contact centers, back office and knowledge processing services, data transcription, animation, software development, engineering development, and game development. BPO facilities are located mainly in Metro Manila and Cebu City. However, more of such facilities are being found in the smaller cities like Iloilo and Baguio.

The rise of the popularity of the Philippines as a BPO destination owes to its large English speaking workforce who are demographically young and whose wages are competitive in the BPO market. Additionally, the Philippines boasts a large degree of economic and political stability, which compliment government sponsored economic zones offering both fiscal and non-fiscal incentives for investors.

Related-Reading-Icon-Asean Link RELATED: The Philippines: The New BPO Capitol of the World

With an upcoming election, there are still issues in the BPO sector that the incoming administration needs to address. For a start, the sector requires a robust legal framework to prevent cyber-crime and protect labor rights. A consistent effort should also be made to promote the BPO sector as one of the Philippines’ pillar industries. The public too needs to understand and support the industry by creating an environment that facilitates BPO careers for graduates.

While future challenges should not be discounted, the Philippine BPO industry benefited from better information security and the rise of cloud computing that has brought with it lower operating costs. Wells Fargo and Verizon have expressed a vote of confidence in the Philippines as a BPO destination by opening BPO units in the country. The bulk share of BPO exports come from US-based companies although the Philippines is also responsible for 27 percent of total global BPO exports. The country is still playing catch up to India, which has a much larger BPO market but growth rates for the sector are high and are projected to be between 15 and 18 percent over the next three years.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

 ‍

Related-Reading-Asean Book Title

Annual Audit and Compliance in ASEANASEAN Audit and Compliance
For the first issue of our ASEAN Briefing Magazine, we look at the different audit and compliance regulations of five of the main economies in ASEAN. We firstly focus on the accounting standards, filing processes, and requirements for Indonesia, Malaysia, Thailand and the Philippines. We then provide similar information on Singapore, and offer a closer examination of the city-state’s generous audit exemptions for small-and-medium sized enterprises.

The_Trans-Pacific_Partnership_and_its_Impact_on_Asian_MarketsThe Trans-Pacific Partnership and its Impact on Asian Markets
The United States backed Trans-Pacific Partnership Agreement (TPP) includes six Asian economies – Australia, Brunei, Japan, Malaysia, Singapore and Vietnam, while Indonesia has expressed a keen willingness to join. However, the agreement’s potential impact will affect many others, not least of all China. In this issue of Asia Briefing magazine, we examine where the TPP agreement stands right now, look at the potential impact of the participating nations, as well as examine how it will affect Asian economies that have not been included.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.