Philippine economy thrives as young workers stay in the country

Where many of his friends and relatives have opted to move to North America to find a good job, the 38-year-old’s preference has always been to remain at home with his wife and four children.

“I can easily go overseas if I wanted to . . . but I have my family here,” says Mr Dela Santa, who is employed by a US outsourcing company. “There is still a chance to prosper” at home, he adds.

The Philippine economy has traditionally been propped up by remittances from the country’s diaspora, many of whom are employed in menial jobs in the US, Middle East and other parts of Asia. The $24.3bn sent home by more than 10m overseas workers last year accounted for 8.5 per cent of the country’s gross domestic product, according to official data.

However, more than 16 years of economic growth and improving employment prospects at home are changing the outlook for a generation of Filipinos.

“People are slowly starting to find work here,” says Edwin Lacierda, spokesman for Benigno Aquino, Philippine president. “We want Filipinos to go abroad because they want to — not because they need to.”

Inflows of remittances have given the Philippines a current account surplus that makes its economy more resilient than some emerging markets to external shocks, such as a possible US interest rate rise.

Ordinarily, a 0.6 per cent fall in remittances in the year to August — the first such drop since 2003 — would be a cause for alarm in Manila. However, policymakers now view a slowdown in the amount of cash being sent home with optimism.

The data may be skewed by currency weakness in Malaysia and Singapore, where much of the diaspora works and which may have encouraged workers to hold off from sending money home. But economists say the Philippines is on the brink of a more radical shift.

While uncertainty over a Chinese slowdown and a US rate rise weigh on other emerging markets, the Philippines has posted 66 consecutive quarters of economic expansion.

After decades under errant dictators and corrupt bureaucrats, government debt as a share of GDP is predicted to fall for a fifth consecutive year in 2015. Ahead of next year’s election, Mr Aquino says he has put the country on the “straight path” of good governance.

Growth has risen to an average of 6 per cent per annum under the current administration, with inflation lower at 3.7 per cent, according to Barclays, and economists no longer brand the country the “sick man of Asia”.

“If this growth is sustained, the Philippines could attract more investments,” says Diana Del Rosario, economist with Deutsche Bank in Manila. “Remittances could slow down as more quality jobs will be available in the country.”

In particular, the IT services industry has expanded rapidly, with revenues growing at a compound annual rate of 25 per cent between 2007 and 2012, according to central bank data.

The sector employs more than 1m people in the Philippines, many of them young, English-speaking staff who are willing to work shifts during the day and overnight.

The most recent data from the Commission on Filipinos Overseas suggests there were 10.2m Filipinos working abroad in 2013, although Mr Lacierda believes the diaspora has now dropped below the 10m mark. Commentators now await the tipping point, where the $15.3bn revenues generated by the IT services industry overtake the sum from remittances.

Though remittances are an important source of foreign exchange, officials increasingly view returning workers as an economic bonus that helps support domestic industry.

“In effect, living abroad becomes like an internship programme where they learn new skills, they become more confident, they are exposed to new cultures,” says Cesar Purisima, Philippine finance secretary.

Yet some analysts are sceptical. Jobs in the IT services mostly draw skilled workers, and the labour-intensive manufacturing industry, which could provide jobs for the poorly educated masses, remains small.

Manila is making attempts both to draw investment into manufacturing and improve education, with plans to raise infrastructure spending to 5 per cent of GDP by next year and extend the basic education system by two years.

The Philippines is one of the youngest countries in Asia with a population expected to reach 142m in 2045 compared with 92m in 2010. If future administrations cannot create jobs for these people, families such as the Dela Santa’s may be forced to look overseas for work once again.

“I have friends who found work overseas but came back — they were lonely,” says Mr Dela Santa. “There’s no place like home.” –http://www.ft.com/intl/cms/s/0/6ef334c8-83d6-11e5-8095-ed1a37d1e096.html#axzz3rApffskZ