By Bernie Cahiles-Magkilat
The growth of the Philippine economy will continue to be consumer-driven with expected sustained big uptick on consumption of durable goods and automobiles that even the impact in the imminent increase in excise tax is expected to be short-term.
Emmanuel P. Bonoan, vice-chairman and chief operating officer of KPMG R.G. Manabat & Co., said at the launch of its Philippine Consumer Market Report there is no let up in the growth of consumption that is fueling the growth of the domestic economy.
“We’re very optimistic about robust growth across all classes of consumption whether household or automobiles,” said Bonoan although he said that government regulations such as amendments to the value added tax could temper consumer appetite.
“If we pass the pass excise tax, the impact might be a short-term dip,” said Bonoan stressing that when there is tightening in consumption there could be a shifting of consumer behavior.
But Bonoan also said that what could really temper or shake consumer confidence is a slowdown of remittances, which have shielded the country from economic crisis. Remittances will only slowdown if there is a slowdown in the hiring of Filipino workers for overseas jobs.
“That’s why we are closely watching on that,” he said.
Another factor is the macro economic policy which could mean higher interest rate.
“What propels consumption is that it is cheap to borrow money,” he said citing the role of the bank in keeping the interest rates at manageable levels. Interest rate is at a low of 5 to 6 percent enabling Filipinos to buy items and manage their cash flow.
KPMG Chairman and CEO Roberto G. Manabat added that also fueling consumption is the sustained growth of the BPO sector even as he dismissed the possibility of US companies ending their operations in the country because the new American President is bent to stop offshoring of American jobs.
“Company operates on what is profitable,” he stressed. In the case of the Philippines, its offers a low cost location for BPO operations and at their desired quality.
As one of the country’s leading accountancy and consultancy firm, KPMG has over 3,000 clients, including 15 BPOs.
Henry Antonio, KPMG vice chairman and advisory head, said they still have to see the US policy translate to the pulling out of their existing operations in the country.
Antonio explained that the concern of the US has been on cheap labor that have gone to low cost producing countries, but the Philippines is not into manufacturing jobs but is more focused on services.
“We have lots of BPOs and the Philippines is their first choice,” he said.
In terms of actual decline or drop in operations here, Antonio said “We haven’t seen that and we don’t see it happening soon. At the minimum they’ve held off some investments they’re planning to make in the short term. It’s a big thing to transfer investment even for multinationals. That’s an investment they made and they continue to make that processes here in the Philippines.”
Sharon G. Dayoan, KPMG vice chairman and head of audit, said the “fear and scare” is unheard of in the BPO sector, which continues to grow.
While Dayoan said that while the threat by President Trump to pass the “End of Offshoring Act” maybe hanging and worrying American firms but not hurting them. If at all, Dayoan said the expansion projects maybe put on hold in the meantime.
Overall, she said, consumer growth will be more robust this year citing huge consumer spending on durable goods and automobiles as good indicator.