Philippine government steps up infrastructure investment

Additional infrastructure will further boost the Philippine BPO industry which already edged out India as the largest provider of call centre services.

Higher government spending lifted first quarter GDP growth to 4.8%, offsetting weakness in global demand and the remittances received from Filipinos working abroad. Meanwhile, the BPO industry could improve employment opportunities at home and the next focus is on providing higher-value-added processes such as legal and accounting services. Moody's Analytics forecasts government spending will continue to add to growth up to 2013, leading to the 2013 national elections in May.

Here's more from Moody's Analytics:

Increased government spending is expected to have lifted first quarter GDP growth in the Philippines to 4.8% y/y, from 3.7% in the December quarter. The government has stepped up spending to offset weakness in global demand. While exports improved in the first quarter, they remain weak, and remittances from Filipinos working abroad—a key driver of private consumption—lost some steam.

Encouragingly, the government has increased infrastructure investment, potentially good news for growth in the business process outsourcing industry. Improving infrastructure makes the Philippines a more attractive destination for foreign investment. The Philippines has already overtaken India as the largest provider of call centre services, and the next focus is on higher-value-added processes such as legal and accounting services, which are less responsive to labour costs and could improve employment opportunities at home.

Moody's expects government spending will continue to add to growth into 2013, particularly in the lead-up to next year's national elections in May. Assuming global demand gathers steam over 2012, helping lift exports and private consumption, higher government spending adds upside risk to the 4% 2012 growth forecast. Some of the higher spending has been funded through increased revenue, a consequence of tightening compliance measures to avoid evasion.