The Philippine labor market and services exports are highly exposed to artificial intelligence (AI), but both remain largely resilient, with the technology so far transforming jobs rather than eliminating them, ING Bank N.V. said.

"While the Philippines is among the economies most exposed to AI-driven change, the evidence so far points to job transformation rather than job destruction," Deepali Bhargava, ING's regional head of research for Asia-Pacific, said in a report on Wednesday.

Citing a study published in July by the International Labour Organization (ILO), Ms. Bhargava noted that the Philippines ranks second in exposure to generative AI among Association of Southeast Asian Nations (ASEAN) economies. The ILO found that 28.1% of workers in the Philippines face at least minimal exposure to generative AI, trailing only Singapore's 42.2% share.

At the same time, she cautioned against equating exposure with job losses. "Exposure does not necessarily imply displacement," Ms. Bhargava said. "Only a small fraction of jobs, estimated at around 4%, fall into the highest-risk category for automation. The vast majority are more likely to experience productivity gains than outright replacement."

While AI-powered automation is replacing repetitive tasks, she said it is also accelerating the business process outsourcing (BPO) industry's transition toward higher-value services such as analytics and complex software development.

Services exports hold up

The report also pointed to continued expansion in services exports.

"As firms shift from traditional back-office outsourcing toward more knowledge-intensive work, demand for these services is holding up strongly despite rapid advances in AI," Ms. Bhargava said. "In the Philippines, this resilience has been notable, though growth has been more modest than in India."

"Even so, little evidence suggests AI has materially weakened external demand for Philippine services exports," she added.

The Philippine Statistics Authority reported that services exports rose 6.9% year on year in the second quarter, outpacing the 2.6% growth posted in the first quarter. This exceeded the Bangko Sentral ng Pilipinas' (BSP) full-year growth forecast of 3%, to $53 billion, with BPO revenue projected to increase 2.5% to $34.3 billion this year. That would put BPO receipts at roughly two-thirds of the projected services export total, a gauge of how central the industry remains to the country's external sales.

According to ING, the Philippines accounts for about 15%-17% of the global BPO industry, generating over $40 billion in revenue annually and supporting around 1.9 million workers. The bank added that services exports have been driven largely by telecommunications and computer services, as business services eased following the post-pandemic surge in outsourcing demand.

Anchor of external stability

"The sector's resilience matters because services exports play a critical role in financing persistent current account deficits of both economies," Ms. Bhargava noted.

"In the Philippines, telecom and business services exports amounted to around 7% of GDP (gross domestic product) in 2025, more than offsetting the current account deficit of 3.5% of GDP," she added.

Bangko Sentral data showed the current account deficit rising sharply to $8.968 billion, equivalent to 7.3% of GDP, in the second quarter from $5.581 billion, or 4.5%, a year earlier. The gap between the two readings reflects different reporting periods.

"Services exports are more than just a source of growth and employment," Ms. Bhargava said. "They're a key pillar of external stability, providing an important buffer for the balance of payments and serving as a crucial source of support for the peso."

A shifting export mix

The AI boom has also prompted the Philippines to recalibrate the composition of its services exports, the bank said. ING noted that the Philippines' share of the global market for digitally delivered services (DDS) remains unchanged, but its total DDS exports have grown 24% since 2022.

Ms. Bhargava said Philippine DDS export growth is no longer reliant on traditional business services, driven instead by a 25% annual expansion in financial services and steady growth in computer services.

"In other words, while India is gaining share through its strength in business services and GCC (Global Capability Centers)-driven activities, the Philippines appears to be adjusting by increasing its exposure to faster-growing segments such as financial and computer services," she noted.

This shift has so far allowed the Philippines to adapt to AI-driven changes without suffering an outright contraction in export revenue, she added. Quarterly services trade and balance-of-payments releases from the Philippine Statistics Authority and Bangko Sentral will provide the next readings on whether those patterns hold.

"The evidence so far suggests that AI is reshaping the composition of services exports and employment in India and the Philippines, but not yet causing a broad-based decline in exports or jobs," Ms. Bhargava said. "The bigger story is one of upgrading, with growth increasingly concentrated in higher-skilled, more technology-intensive activities."

— Katherine K. Chan