A STRONG consumer demand pumps the Philippine economy and most of those behind this are workers in the information technology and business process outsourcing industry, who are now more than a million.
According to BDO Unibank chief investment officer Frederico Rafael D. Ocampo, the Philippines is one of the “rising stars” in Asia together with Indonesia, India, and China. What is common in these economies, he noted, is their strong consumer demand, one of the pillars of economic growth.
“(For economic growth to happen) there has to be (an increase) in consumer demand, investment, and government spending,” said Ocampo, who was in Cebu Wednesday for the Cebu ICT-BPM Conference.
Philippine household consumption expenditure data in the fourth quarter of 2014 showed highest year-on-year growth in health at 9.1 percent, alcoholic beverage at 8.7 percent and “recreation and culture” at 7.7 percent.
“Consumer demand is driven by OFW remittances at $24 billion a year. Second, is the BPM sector. These two put together has changed how retail does business. The wallet size has increased.” Ocampo said.
In 2014, Ocampo, quoting an AC Nielsen Survey, said there were 342 convenience stores that opened, 33 supermarkets and hypermarkets, and 22 “small-format” supermarkets.
In Cebu alone, it is estimated that the 100,000 workers in this industry earn a total of P19.5 billion every year, given that all earn the minimum rate of P15,000 per month, according to Jun Sa-a, executive director of Cebu Educational Development Foundation for Information Technology. This translates to better purchasing power.
Side by side with the country’s strong consumer demand, private investments are also supporting the economy.
Last year, the Philippines registered an all-time record of $6.2 billion in inflows from foreign direct investments (FDI). This accounts for a 65.9 percent increase from the $3.7 billion net inflows in 2013. Generally, FDIs are used to finance construction of new facilities, especially in manufacturing, or for the expansion of existing foreign business operations in the Philippines. They are long-term and job-generating.
In addition, Ocampo noted big firms in the country are aggressive in their investments while the Philippine Stock Exchange (PSE) closed impressively in 2014, with a main index at 7,230.57 on December 29, 22.76 percent higher than its closing level of 5,889.83 in 2013.
While consumer demand and investments in the country are healthy, “anemic” government spending could potentially threaten the country’s growth, Ocampo warned.
“Market consensus is between 6.5 and 7.5 percent growth (for this year). Today, that has been brought down to 5.3 to 6.8 percent, compared to Neda’s (National Economic and Development Authority) target of seven to eight percent,” Ocampo said.
He added, however, that public spending could possibly accelerate in the third or fourth quarter of this year.
The Philippines is expected to become the 16th largest economy in the world, fifth largest economy in Asia, and the largest economy in Southeast Asia by 2050.