Thank OFWs for PH upgrade - report
MANILA, Philippines - The real thanks for the Philippines' historic achievement of investment grade status should go to the country's army of overseas Filipino workers (OFWs), a report by FinanceAsia said on October 3.
FinanceAsia stressed this after Finance Secretary Cesar Purisima welcomed the October 3 announcement of Moody's Service's investment grade rating on the country and gave credit to the government's "sound fiscal and monetary policies."
Other government officials, including Bangko Sentral ng Pilipinas governor Amando Tetangco Jr. and Communications Secretary Ramon Carandang likewise highlighted the upgrade as "proof that the continuing fiscal reforms ... are further improving our credibility in the international community."
These policies by the Aquino government have also been cited by the international agencies, including Fitch and Standard & Poor's which have made their own upgrades on the Philippine's rating way back in March and May, respectively.
It's a sentiment shared by other sovereign credit watchers as well.
VIEW RAPPLER INFOGRAPHIC: What a credit rating upgrade means for Filipinos
FinanceAsia's Nick Ferguson, who has previously chimed in on the Philippines' bullish prospects, noted that the government of President Benigno Aquino III "has certainly been more prudent than some of his predecessors, such as Joseph Estrada and Ferdinand Macros."
But he stressed that the Aquino government "also benefits from a gift that keeps on giving: remittances from the 15 million overseas Filipino workers, who have already sent home more than $12 billion so far this year — a 5.8% rise from the same period last year."
"This windfall means that remittances are more than enough to service the government's $125 billion national debt, given ultra-low interest rates, which has allowed the government to avoid addressing much-needed tax reform," he added.
He quoted Stephen CuUnjieng, chairman of Evercore in Asia, who described the upgrade as a "tribute to many generations of hard work by successive administrations to alleviate the burden left by the Marcos legacy."
CuUnjieng added that the OFWs are the "real heroes" behind the Philippines' current account surplus, which was also cited by the credit rating agencies.
The OFWs send home about $24 billion a year. Remittances to the Philippines have stayed resilient despite the economic crises that hit host countries in the west and the security issues that hounded Middle East and North Africa.
VIEW RAPPLER INFOGRAPHIC: The overseas Filipino workers
OFW remittances fuel consumption, a major contributor to the Philippines' economic growth, which matched China's at 7.5% in the second quarter. Money sent home to loved ones also push investments in real estate, small businesses, and a key contributor to the local banking system's financial health.
Currently awash with cash, local banks have been keen on investing in capital-intensive infrastructure projects, which are needed to sustain the bullish prospects of the Philippine economy. - Rappler.com