Philippine economy can't do without OFW remittances - Neda
MANILA, Philippines - The Philippine economy can only become less dependent on Overseas Fillipino Workers (OFWs) remittances but not completely independent from it.
In a statement on Monday, September 10, the National Economic and Development Authority (Neda) has become less dependent on remittances from overseas Filipinos in the last 3 years.
Neda National Planning and Policy Staff (NPPS) Director Rosemarie Edillon said OFW remittances will remain an important source of investments in the country.
"Zero dependence on remittances is probably very ambitious. In reality, overseas remittances are a significant part of a country’s economy, whether developed, developing or at any stage of economic development," Edillon said.
Source of inclusive growth
One of the biggest reasons why the country cannot do without OFW remittances is its important role of promoting inclusive growth or economic growth that trickles down to the masses.
Edillon said the government considers OFW remittances a significant source of human capital development since remittances gows straight to households.
These remittance inflows are used to address various household needs such as food, shelter, and education.
In some households, remittances are also used as investments in entrepreneurial pursuits and technology transfers.
She said this is the reason why the Bangko Sentral ng Pilipinas (BSP) has extended financial literacy programs to OFWs and their families, so that remittances are channeled to the right investments and not to conspicuous consumption.
"The inflow of remittances is about 30% the earnings of our exports sector, in nominal terms. In fact, it is even higher than the foreign direct investments that we are getting. Because of remittances, our country’s international reserves have been at comfortable levels, and this implies less vulnerability of the country to external shocks, lesser reliance on foreign savings, and availability of more currency that will help our country service its debts and pay its imports,” said Edillon.
Less dependence on remittance
Edillon explained that the country’s net primary income from abroad (NFIA) has been on the decline, as reflected in the country's Gross National Incom (GNI).
She explained that two measures are used to report the country’s economic performance, namely, the gross domestic product (GDP) and GNI.
GDP measures the value of goods and services produced within the country's borders while the GNI incorporates NFIA that includes remittances.
"Whenever our growth in net primary income is higher than GDP, it means that we are heavily relying on remittances. But in the past few years, the Philippines’ GDP growth has been higher than its net primary income from abroad," said Edillon.
Edillon noted that the decrease in the economy's dependence on remittances began in 2011. She noteed that in that year, net primary income posted a growth of only 1% while GDP growth was at 3.9%.
Prior to 2011, Edillon noted that National Statistical Coordination Board data showed GDP growing at 7.6% in 2010 while net primary income grew 10%. - Rappler.com