Service export receipts seen exceeding remittances

The Philippines’ income from the export of services may exceed the inflow of remittances from overseas Filipinos this year, according to British banking giant Standard Chartered Bank (Stanchart).

Chidu Narayanan, economist at Stanchart, said the growth in remittances would likely stabilize in the low single digits in the medium term.

“Services exports are likely to overtake remittances in 2018. We see this as a structural change as growth overseas Filipino workers decelerate,” he said.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed cash remittances coursed through banks climbed four percent to $25.32 billion from January to November last year compared to $24.34 billion in the same period in 2016.

On the other hand, personal remittances including house-to-household as well as capital transfers rose 5.1 percent to $28.24 billion from $26.88 billion.

Socioeconomic Planning Secretary Ernesto Pernia earlier stressed the need to develop more skills to move up the value chain as the country’s business processing industry (BPO) is “plateauing.”

The BPO sector grew 12.3 percent last year but the Information Technology and Business Process Association of the Philippines sees the revenue growth of the BPO sector booking single digits until 2022 due to maturation and artificial intelligence.

Narayanan said the growth in remittances would remain steady at about four to six percent this year.

He pointed out the amount of money sent home by Filipinos abroad would continue to add more than six percentage points to the current account (CA) surplus.

On the other hand, he said tourism potential would remain undertapped in the near term contributing only two percent of gross domestic product (GDP).

Narayanan said the Philippines would continue to post a CA surplus equivalent to 0.2 percent of GDP this year and 0.6 percent of GDP next year amid the country’s growing imports.

“The CA is likely to remain under pressure in the first half on a still-wide trade deficit and slower remittance growth, although we expect an improvement in the second half on a narrowing trade deficit and idiosyncratic factors,” he said.

Stanchart expects the country’s trade balance to remain in deficit this year with exports growing faster at 12 percent, while imports expand at 10 percent.

It said the country’s GDP expansion would remain steady at 6.7 percent this year, fuelled by robust domestic demand.