Oil price drop to fuel retail industry growth

CEBU, Philippines - The plunging oil price in the world market is seen to fuel growth in the retail sector as this development will benefit both the consumers and businesses.

Market analysts Jed Frederick Pilarca and Garie Ouano of COL Financials both said that the healthy remittance figures from overseas workers gave boost to the spending trend in the country.

From the peak of US$107.73 per barrel in June last year, the price of crude oil fell by 50.6 percent to US$53.27 per barrel by end of 2014.

“Consumers are already feeling the benefits of lower global oil prices,” the analysts said in their latest market forecast.

 According to the National Economic and Development Authority, the decline in global oil prices has led to reductions in domestic unleaded gasoline (-19 percent), diesel (-26 percent), kerosene (-23 percent), and liquefied petroleum gas (-32 percent) . Along with an already low inflation rate of 4.1 percent in 2014, lower oil prices will boost purchasing power among consumers and support corporate revenue growth.

 COL Financial analysis emphasized on the sustained or stronger domestic consumption this year, driven mainly by resilient OFW remittances and the growing BPO sector.

The Bangko Sentral ng Pilipinas expects OFW remittances to grow by 5.5 percent to US$24 billion in 2014 from US$22.8 billion in 2013.

 The IT-BPAP or the Information Technology-Business Process Association of the Philippines expects BPO industry to generate revenues Of US$18 billion in 2014, higher by 16 percent from US$15.5 billion in 2013.

   Moreover, revenues are expected to reach US$25 billion by 2016, owing to the huge space for growth in back office, finance, accounting, and healthcare services.

“With OFW remittances and BPO revenues each equivalent to nearly 10 percent of GDP, the spending power of consumers is expected to remain robust” said Pilarca.

 The United Nations projected that the Philippines will enter the demographic window this year.   The demographic window is defined as a period of high economic growth brought about by growing number of people entering the productive ages of 15 to 64.

Based on history, the countries that had entered the demographic window in the past grew an average of 7.3 percent in the first decade alone.

In the Philippines, the demographic window is expected to open in 2015 and will last until 2050 as the size of working population expands 63 percent to 69 percent of the population. (FREEMAN)