Outsourcing in the Philippines, Slow Inflation to Drive Growth

According to a new report by the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP), the Philippine economy could grow by 6.15 percent in 2015, slightly faster than the 6.4 percent projection at the beginning of the year. The faster expansion will be driven by slow inflation, higher government spending and a strong services sector, which includes outsourcing in the Philippines. 

ESCAP expects economic growth to slow down to 6.4 percent in 2016. “With the rebound in government spending and lower inflation, thanks to the drop in global oil prices, higher growth of 6.5% and 6.4% is projected for 2015 and 2016 respectively,” the agency said in its Economic and Social Survey of Asia and the Pacific 2015 report.

The new forecasts still fall far below the 7 to 8 percent target set by the government for 2015 and 2016, although the new figures are better than average estimates for Southeast Asia within the same period. The Philippines continues to lead many of its peers in the Association of Southeast Asian Nations (ASEAN) in terms of economic growth. The UN agency predicts that the entire region will grow only by 4.9 percent this year and 5.1 percent next year.

ESCAP expects the government to ramp up infrastructure spending before the May 2016 elections. It added that increased spending and strong performance by Philippines BPO (business process outsourcing) will continue to drive growth. The Philippine BPO sector is expected to generate $25 billion in revenues in 2016, making up 10 percent of the economy.

However, ESCAP cautioned that the slow recovery of the country’s trading partners and potential slowdown in remittances from overseas Filipino workers pose threats to growth. The agency advised increased public spending and regulatory reforms to encourage investments.