Protectionist economic policies of the United States could force local industries like business process outsourcing (BPO) to innovate as they expect to post declining profits similar to President Donald Trump’s first term.
Bangko Sentral ng Pilipinas Monetary Board member Romeo Bernardo shared that Philippine BPO earnings slowed to 2.5 percent in 2017 from 3.9 percent in 2018 and from 12.3 percent in 2016.
Protectionist economic policies of the United States could compel local industries, such as BPO, to innovate as they anticipate declining profits, similar to trends seen during President Donald Trump’s first term.
Bangko Sentral ng Pilipinas Monetary Board member Romeo Bernardo noted that Philippine BPO earnings growth slowed from 12.3 percent in 2016 to 3.9 percent in 2018, and further down to 2.5 percent in 2017.
“Given Trump’s protectionist bent, there appears to be plans by US firms to offshore operations closer to the US, either through reshoring or relocating to politically stable or geographically convenient countries,” he said on Friday during the induction of officers ceremony of the Institute of Corporate Directors at Dusit Thani, Makati City.
Bernardo said the Philippine BPO industry has been heavily relying on the North American market, with a 70 percent share of its total clients.
However, Bernardo said demand for BPO seems to be growing in other parts of the world as clients seek artificial intelligence or AI-backed services.
“The optimism is that the Philippines can adapt by moving up the value chain with further AI integration and catering to increasing demand,” he said.
“Expanding markets in Europe and Asia-Pacific would help in partially offsetting the possible decline in US outsourcing demand,” Bernardo continued.
IT and Business Process Association of the Philippines president Jack Madrid said the local BPO industry grew its revenues by 7 percent to $38 billion last year compared to 2023.
Globally, he said the average growth stood at 3.5 percent.
Madrid said BPO contributed 8.5 percent to the gross domestic product with 1.82 million workers. He added they account for 18 percent of the world’s BPO labor force.
Economists warn that American households and firms could slow consumption of goods and services due to possible higher inflation from retaliations against Trump’s high tariffs on goods from other countries, especially China, Mexico and Canada.
The Ministry of Commerce and China this month announced stricter export rules on metals after Trump ordered a 10 percent tariff on Chinese goods.
“At this point, nobody really knows how far the trade war goes,” Bernardo said.
“Hopefully, we have learned from the experience of previous episodes of global trade wars,” he added.
If external economic conditions remain normal, Bernardo said the Philippine economy could expand by 6 percent this year and the next from 5.6 percent in 2024.