MANILA - The Philippines should reduce its heavy reliance on remittances and business- process outsourcing (BPO) receipts as major growth drivers of local growth and, instead, shift its attention to diversifying growth pockets to defend the economy from risks emanating on the global front, economists said.
In a discussion with the Business Mirror, analysts from the Eagle Watch—the macroeconomic research and forecasting unit of the Ateneo de Manila University Economics Department—said the country’s economy should find “other legs to run with” to keep the current growth pace of the economy.
“There is momentum. Currently, those are the two legs—the BPO and the remittances. What we really need to do is to work on other legs that the economy can rely on in sustaining the high growth,” Eagle Watch Senior Fellow Fernando Aldaba said.
The Philippine economy posted a growth of 7.2 percent in 2013 and 5.7 percent in the first quarter of 2014. The robust growth of the economy has been largely attributed to the strong private consumption in the country, with the cash inflow from remittances and BPO receipts as major consumption fuels.
Remittances and BPO receipts likewise keep the country’s current accounts afloat, a major component of the balance of payments (BOP) position of the country. The BOP is the summary of all economic transactions of the country with the entire world.
Aldaba further said the large pitfalls that are to be faced by the Philippines can have a reduced impact on the domestic economy if these growth drivers are spread and diversified.
Among the pitfalls that Fellow Eagle Watch analyst Alvin Ang mentioned is the possible policy changes in other countries—particularly in the Middle East—which could affect the flow of remittances into the country.
Ang specifically noted Saudi Arabia’s policy of promoting local employment, or more popularly known as “Saudization.” Although a major crackdown of versus overseas Filipino workers has been avoided, fears that other major countries in the Middle East will follow the policy are still there.
The Bangko Sentral ng Pilipinas noted in its most recent data release on remittances that Saudi Arabia and the United Arab Emirates are two of the largest country-source of remittances this year. The central bank also said most of the approved job orders this year were for service, production, professional, technical and related workers for Saudi Arabia, United Arab Emirates, Kuwait and Qatar.
Aldaba particularly cited the revival of the manufacturing sector as a possible industry to develop, as it has the potential to be another growth driver of the country, as well as to provide better quality jobs that could alleviate poverty in the country.
If given the proper government attention, the analysts said the manufacturing sector could also be the country’s edge in the upcoming regional integration as there are many skilled workers in the country.