Philippine economy now less dependent on remittances-A A +A
Monday, September 10, 2012
THE Philippine economy has become less dependent on remittances from overseas Filipinos in the last three years, the National Economic and Development Authority (Neda) said Monday.
However, the country will not be totally independent from money sent from abroad, as remittances continue to be a significant source of investments, said Dr. Rosemarie Edillon of the Neda-National Planning and Policy Staff (NPPS).
She noted that growth in the country's net primary income, or the difference between money received abroad from money paid abroad, has been declining as reflected in the gross national income (GNI).
She said two measures are used to report the country's economic performance, namely, the gross domestic product (GDP) and GNI. The former measures the value of goods and services within the country, while the latter incorporates net primary income from abroad 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.
According to the National Statistical Coordination Board, GDP grew 7.6 percent in 2010 while our net primary income grew 10 percent.
However, Edillon noted that the pattern started to reverse in 2011, with net primary income growing by only one percent compared to GDP growth of 3.9 percent.
"For the first quarter this year, GDP grew 6.3 percent, while net primary income only grew 1.7 percent. While net primary income rebounded to 4.5 percent in the second quarter, it is still lower than the 5.9 percent GDP growth for the said period. In the economic profile, we are seeing the case where our GNI growth is actually less than our GDP growth, which is a good thing," Edillon said.
The Neda-NPPS official said that migration is a global issue of demand and supply among countries with different levels of development.
"While the Philippine economy is still considered as developing, it is already in a high stage of human capital development. On the other hand, there are developed countries that require a certain level of human capital, which the Philippines has been able to supply. I think the global demand would always be there. 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," said Edillon.
She added, "What we want to happen is that economic development in the country will be inclusive, where all segments of our society especially the poor benefit."
Edillon said the government recognizes the important role of overseas Filipinos in attaining inclusive growth, since their remittances are also a significant source of human capital development.
"At the household level, remittances are used to finance human capital investments. A portion goes to the education of family members. Returning Filipinos from abroad also bring into our country a new breed of entrepreneurs. They are a source of technology transfers as well," said Edillon.
She added that the government, through the Bangko Sentral ng Pilipinas, has been extending financial literacy programs to overseas Filipinos and their families, so that remittances are channeled to the right investments and not to conspicuous consumption.
"The inflow of remittances is about 30 percent 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. This is why we have to protect our remittances, which are hard earned by our countrymen abroad," said Edillon. (SDR/Sunnex)