Philippine jobs ‘exposed’ to AI risks estimated at 35-37%

Between 35% and 37% of Philippine jobs are at risk of displacement to artificial intelligence (AI), the World Bank said.

“About 35% to 37% are exposed” to AI risks, World Bank Group Lead Economist and Program Leader for the Prosperity Unit for Brunei, Malaysia and the Philippines, Gonzalo Varela told a panel.

He also noted the high adoption of generative AI in the operations of the Information Technology Business Process Management industry.

The IT and Business Process Association of the Philippines in December reported that 67% of its surveyed members are already using AI in customer service, data entry, and quality assurance, though challenges persist.

However, 8% of its members surveyed reduced their workforce because of AI.

In a separate report in August, the bank said the Philippines ranked fourth in ChatGPT traffic as of March 2024.

The World Bank noted that five middle-income countries — Brazil, India, Indonesia, Mexico and the Philippines — showed “generative AI traffic levels significantly higher relative to the US than their other metrics would suggest.”

Bilal Khan Muhammad, social sector economist at the Asian Development Bank, noted that AI advancements are now impacting white-collar jobs, with many tasks being performed by AI tools.

“But then with the recent advancements in AI, we also see white-collar jobs have also been replaced by these AI tools where we are seeing a lot of tasks now can be performed by the AI itself.

You just ask the AI to help you with the representation or format a document or help you prepare a draft,” he said.

Mr. Varela said AI could be a “productivity shock” and provide opportunities for workers in the Philippines.

The government’s Trabaho Para Sa Bayan plan needs to explore how “to take advantage of the technological changes that are going to affect job creation,” he added.

At the same event, the departments of Economy, Planning, and Development (DEPDev), Trade and Industry and Labor and Employment, launched the Trabaho Para sa Bayan Plan 2025-2034.

The 10-year plan aims to strengthen and future-proof the workforce.

The plan includes a research agenda to gauge the impact of AI on labor demand across various industries, job roles, and skill levels, and identify vulnerable occupations.

Labor Secretary Bienvenido E. Laguesma said the government has yet to firm up a national policy on AI.

“We believe that AI can supplement, can complement, but cannot replace,” he told reporters. 

Mr. Laguesma noted that the National Innovation Council, chaired by President Ferdinand R. Marcos, Jr., approved the creation of a think tank which will create a roadmap for AI use.

The think tank, whose lead agency will be the Department of Science and Technology, will guide the drafting of AI policy.

“Protection does not mean retention. It could mean upgrading, looking for another job, facilitating their employment, and the provision of social safety nets. That’s where we are,” Mr. Laguesma said.

Meanwhile, DEPDev Undersecretary Rosemarie G. Edillon noted that the low exposure of AI stems from the overall low level of technology adoption in the Philippines.

“Underlying all this, especially on the part of data and then creating models, this is really where you will need this policy on ethics, on the use of AI,” she added.

Source: Business World

World Bank: PHL needs reforms in education, health

The Philippines should focus on reforms that will improve learning and health outcomes, as well as boost private sector competitiveness to sustain economic growth, a World Bank official said.

“I see the Philippines has good opportunities. But of course, [it] will also need to invest in reform efforts and continue boosting with reforms and opening up its market,” World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said.

He said these reforms are needed for the Philippines to sustain growth amid global uncertainty.

He pointed to reforms that would improve health and learning outcomes, enhance competitiveness of the private sector, boost community resilience and address gaps in infrastructure.

The Philippines has seen low learning outcomes, especially after the strict lockdowns during the coronavirus disease 2019 pandemic.

“We see that at the age of 10… Almost 90% of them are having difficulty in comprehending what they read. This, of course, is an area that we are focusing very much on improving educational outcomes,” Mr. Mustafaoğlu said.

A World Bank report previously showed that around 91% of 10-year-olds in the Philippines cannot read and understand an age-appropriate text, which is known as “learning poverty.”

Mr. Mustafaoğlu also noted that a child born in the Philippines today will be able to achieve only around 52% of their productive potential by age 18 due to the lack of education and adequate health services.

The Philippines is seeking a $600-million loan from the World Bank to fund a project aimed at improving learning outcomes in public schools.

“We are focusing on improving regulatory business environments, its implementation, deepening financial markets that both provide access to finance but also stability, and also firm entry into the markets to create more product firms and help them grow,” Mr. Mustafaoğlu said.

He said the World Bank is also prioritizing funding projects that will support resilient communities amid climate risks, as well as projects that will address infrastructure gaps.

“We all know that the Philippines suffers from infrastructure gaps, both in terms of physical renewable energy and digital transformation,” Mr. Mustafaoğlu said.

Asked about the possible impact of the global trade war on the Philippines, he said the economy is still expected to be one of the top performers in the region.

“If you look at its growth performance over the past decade, it did very well and also it created jobs. It is a good opportunity for its future. It is a young population… We expect the Philippines to continue growing in the next years,” Mr. Mustafaoğlu said

“And in that sense, it is likely to achieve its upper middle-income status by 2026.”

The World Bank expects the Philippines to be the second-fastest growing economy in the Southeast Asian region until 2026.

The Philippines is expected to grow 6.1% this year, just behind Vietnam at 6.6% and ahead of Cambodia (5.5%), Indonesia (5.1%), Malaysia (4.5%), Laos (3.7%), Thailand (2.9%), and Myanmar (2%).

Source: Business World

Philippines unlikely to hit yearly GDP target for the second time in a row

The Philippines may have difficulty achieving the upper end of the government’s 6-8% gross domestic product (GDP) growth target amid heightened global uncertainties this year.

"The country could hit 8% growth this year", Finance Secretary Ralph G. Recto

said, “6-6.5% [growth] is doable for 2025.”

Mr. Recto, however, said the outlook will depend on “inflation, interest rates, and strength of US dollar.”

The Philippine economy expanded by 5.6% last year, slightly faster than 5.5% in 2023 but fell short of the government’s revised 6-6.5% target.

The National Economic and Development Authority earlier said the GDP growth was hampered by extreme weather events, geopolitical tensions, and subdued global demand — which is now considered as the “new normal.”

Multilateral lenders World Bank and the Asian Development Bank project the Philippines to grow by 6.1% and 6.2% in 2025.

Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño said the Philippines will “face difficulty” meeting the 8% growth target.   

“It was relatively easy to achieve a 7% to 8% growth in the 2022-2023 period as we have been coming from a low-income base during the pandemic,” Mr. Tuaño said.   

“Even then, 5% to 6%, while a respectable rate of growth, would make it difficult to achieve significant growth in income among the middle class and vulnerable in the next few years,” he added. 

HSBC economist for ASEAN Aris D. Dacanay said that achieving an 8% growth rate is possible, but “a tall order.”

He cited global and domestic headwinds, including a sluggish Chinese economy, tariff risks, and climate-related impacts on the agricultural sector.

“This isn’t to say the Philippines won’t grow. Growing by 6.3%, we expect it to be one of Asia’s top performers in 2025 with the business process outsourcing sector (BPO), digitalization, and household consumption — sectors of the economy that are not subject to tariff risks — leading the charge,” he said.

In a note, Citi downgraded its 2025 GDP forecast to 5.9%, from 6% previously, after the weaker-than-expected growth momentum in 2024.

“Still, recent activity data such as income remittances  continue to suggest that domestic demand would remain well-supported. Commercial bank loans rose 11.1% year on year in November 2024 suggesting robust business activities and consumption growth…

Furthermore, continued monetary easing and more moderate inflation are also expected to support domestic demand expansion in 2025,” Citi said.

MORE INVESTMENTS NEEDED

Mr. Recto said the upper end of the government’s target “can only be achieved if private investments double or triple.”

Department of Budget and Management (DBM) Principal Economist Joselito “Jojit” R. Basilio said the economy is likely to post 6-7% growth this year, although the upper end of the target “remains doable under certain circumstances.”

“Aside from the government’s continued ramping up of spending on public construction, recently approved PPPs (public-private partnership) projects should complement the aggressive ‘Build Better More’ program,” he said.

“But there are conditions that can push the economy to do more and grow by 7% to 8% in 2025,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said hitting the upper end of the 2025 goal is a “long shot, realistically.”

“This would require more foreign and local investments, more tourists especially foreign, more merchandise exports that all generate more jobs and other economic opportunities that lead to higher per capita income,” he said.

To drive faster growth this year, Mr. Tuaño said the government should accelerate infrastructure projects and push regulatory reforms to boost investments, especially outside of the main urban centers.

The government should also invest in human resource development via education, healthcare, technological upgrading, and boost small businesses to drive growth, he said.

“Some potential opportunities for growth include stronger consumption driven by remittance growth and continuous expansion of services, and also the rebound of tourism,” Mr. Tuaño said.

Citi said continued policy easing by the Bangko Sentral ng Pilipinas will support GDP growth this year. It maintained its expectation for a 25-basis-point (bp) rate cut this month.

“We expect the BSP to cut again in June and August, skipping April, partly to ascertain a few outcomes, including the potential increase of US tariffs and possible impact on global trade and US dollar-Philippine peso, the Fed’s rate cut decisions, the Philippines’ midterm election campaigning’s potential positive impact on domestic demand (although investment may see some delays from the 45-day pre-election ban on project disbursement) etc,” Citi said.

The Monetary Board has cut benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August 2024, bringing its key rate to 5.75%.

Mr. Basilio said private consumption is expected to recover strongly, increasing by 6% in 2025 due to stabilized inflation and lower interest rates.

“The domestic demand is also anticipated to shift from ‘being subdued’ to one of gaining its momentum,” he said.

Mr. Basilio also noted that agricultural output is anticipated to make “a strong rebound” this year.

However, Mr. Dacanay said relying on fiscal and monetary policy to boost growth will be difficult.

“The government is in the midst of consolidating its fiscal resources from the pandemic, while the Federal Reserve puts a floor under how much the Bangko Sentral ng Pilipinas can cut policy rates to boost growth,” Mr. Dacanay said.

RISKS TO THE OUTLOOK

Analysts cited geopolitical tensions and uncertainty as one of the downside risks to the Philippines’ economic outlook.

“Downside risks include geopolitical risks and uncertainties in global trade markets, considering further that goods export sector performance has been relatively anemic,” DBM’s Mr. Basilio said.

Mr. Tuaño said other downside risks include slower export growth due to “tariff escalation in the developed world… and natural disasters taking a toll on productive labor and capital.”

On the other hand, key upside risks include improved labor market conditions and election spending.

“For the current year, election spending is expected to result in increased economic activities, including advertising and campaign-related expenses in transport, hospitality, retail trade and others,” DBM’s Mr. Basilio said.

Source: Business World