REMITTANCES from Filipinos overseas which help drive consumer spending will likely continue growing by single-digit rates unless new markets are found and new skills are developed that are needed abroad, the Bangko Sentral ng Pilipinas (BSP) said.
That is the only way for the country to see again the double-digit growth rates in remittances recorded since at least 2004, with the exception of last year, Diwa C. Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas, said.
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“We are now in the situation where we are seeing the stabilization of flows at mid-single-digit level of between 5%-6%,” Mr. Guinigundo told reporters on Friday last week. “I think we have reached some critical number where we will have some plateauing or flattening of the growth of remittances,” he added.
“Flattening, because markets may be maturing. The base has become large. Thus, we would be seeing single-digit growth of remittances.”
Money sent home by Filipinos working abroad grew 6.56% year on year to $5.86 billion in the four months to April, BSP data show. Remittances posted full-year growth of 5.6% to $17.3 billion in 2009. The government had initially projected these inflows to remain at the $16.427 billion recorded the preceding year, expecting the global economic crisis to reduce demand for migrant workers.
But growth was still faster at 13.68% in 2008, 13.23% in 2007, 19.39% in 2006, 25.01% in 2005 and 12.82% in 2004. Remittances have been cited by both government and private analysts as a key driver of domestic consumer spending that helped the economy ride out the global slowdown last year. The BSP expects remittances to grow 8% this year. Sought for further comment, Mr. Guinigundo said that hitting double-digit growth rates in remittances will be contingent on new markets and new skills of Filipino migrant workers.
“[It] may be difficult [for remittances to resume growing by double-digit rates,] but possible if new markets and skills are tapped and required,” Mr. Guinigundo said via text yesterday.
Aside from new markets and new skills, remittance growth could also “accelerate with strong global recovery,” he added.
But these fund inflows are expected to remain an anchor of the economy even if growth stays at single-digit rates, he said. “In absolute terms, [the] amount remains undeniably large… Remittances will continue to support consumption and, therefore, growth. It will also be a stable factor of the exchange rate.”
University of the Philippines economist Benjamin E. Diokno said that the expected modest gains in remittances may spur the new administration to focus on domestic job creation. “The good news is, finally, government authorities will recognize the need to address the problem of joblessness once and for all. They tend to ignore the unemployment problem for as long as the international jobs market looks lucrative. This is likely to change,” Mr. Diokno said via e-mail. “We need to create more jobs at home and prepare for the return of some of the OFWs (overseas Filipino workers). That’s a major challenge for the new administration.”
Source: Business World
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