CITIGROUP, INC. (Citi) is waiting Philippine economy exincreased by about 6% this year, a segment driven by continued growth in the business process outsourcing (BPO) sector.
“We expect growth in 2025 to remain at 6%,” Citi Asia South CEO Amol Gupte said at a press conference on Monday.
Citi’s forecast will be at the lower end of the government’s target of 6-8% for the year.
“The Philippines will continue to benefit from it [the BPO industry] and will create more jobs. In moving up the value chain to global talent centers, countries like the Philippines will play a very big role along with India,” said Mr. Gupta.
The information technology and business process management (IT-BPM) industry ended in 2024 with $38 billion in export revenue, and 1.82 million full-time employees.
Under the Philippine IT-BPM Industry Roadmap, the target is to grow into a $59 billion industry and increase the number of full-time employees to 2.5 million by 2028.
“Therefore, I think it is very important that the Philippines, as it thinks about the BPO industry, move up the value chain to maintain and bring more mid-level jobs beyond the voice jobs that are in the tens of thousands,” said Mr. Gupte.
However, the rise of artificial intelligence (AI) could pose a threat to the IT-BPM sector in the Philippines.
“There is also a risk in that in terms of what AI will do to that industry and whether that will reduce job opportunities,” said Mr Gupte.
Meanwhile, Citi South Asia Corporate Banking Head K Balasubramanian said the continued economic growth ensures that Philippine banks are in a good position to continue making profits.
“I think the financial profile of Philippine banks continues to be very strong, and with it growing at 6% I think it’s a good use to look at opportunities are coming,” he said.
As of the end of September 2023, the net income of the Philippine banking system increased by 6.4% to P290 billion as both interest and non-interest income increased.
“We have just seen the improved Philippine royalty rate that happened in the fourth quarter of last year. And if you look at the impact of that on the Republic of the Philippines, and the Philippine government banks, I think that will be very good because now we are above BBB+,” said Mr. Balasubramanian.
“(This) means that the ability to get international funding will be better and the cost of access will be better than what it was before.”
In November, S&P Global Ratings affirmed the Philippines’ investment grade and raised its outlook to “positive” from “stable” to reflect strong economic growth potential amid improved institutional capacity after “effective policymaking.”
The credit watchdog affirmed its long-term “BBB+” rating, which is a notch below the government’s target of “A” rating.
The positive outlook means that the Philippines’ credit rating could be raised in the next two years if the improvement continues.
Mr. Gupte also pointed out that the financial performance of the banking sector this year will depend on the interest rate situation.
“In terms of profitability of Philippine banks, I think they are all extremely strong. They have strong balance sheets; they have low non-performing loans. But I think the overall benefit will depend on how the local rate goes around the world and how that affects the Philippines given the large portion of income that Philippine banks depend on,” he said.
The Monetary Board has cut benchmark borrowing costs by 75 basis points since it began its easing cycle in August, bringing its policy rate to 5.75%.
Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. this month he said they still have room to continue reducing interest rates as inflation is in line with its annual target.
The Monetary Board will hold its first rate-setting meeting of the year in February. 20. — AMC Sy
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