BANGKO Sentral’s report shows personal remittances in 2017 overshot growth projection of 4 percent and reached US$31.1 billion; remittances represented 10 percent of the gross domestic product and 8.3 percent of gross national income
Personal remittances from overseas Filipinos (OFs) reached US$3.0 billion in December 2017, a record high that was nearly eight percent more than the remittances sent in December 2016.
The Bangko Sentral ng Pilipinas (BSP) reported last week that total personal remittances from January to December 2017 amounted to $31.3 billion. This was 5.3 percent higher than the December 2016 figure and exceeded the BSP’s projection of a four percent increase for the year.
BSP Gov. Nestor A. Espenilla Jr. attributed sustained growth in personal remittances in 2017 to the increase in remittances from land-based workers with work contracts of one year or more (which increased by 4.1 percent) and from sea-based and landbased workers with work contracts of less than one year (up by 5.3 percent).
“The growth in overseas Filipinos’ remittances continued to provide support to the country’s economy as a major driver of domestic demand. The 2017 level of personal remittances accounted for 10.0 percent of gross domestic product (GDP) and 8.3 percent of gross national income (GNI),” the BSP report said.
All-time highs
Since the BSP began tracking overseas Filipinos’ remittances in 2012, both personal and cash remittances have increased each December.
In 2017, personal remittances were higher than those in the month before for 10 months. It was only in April (down by 5.2 percent) and September (down by seven percent) that remittances dipped compared with the month before.
Overseas Filipinos’ cash remittances sent through banks also reached an all-time high of $2.7 billion in December 2017. This was 7.1 percent higher than the cash remittances in December 2016. For the whole year, cash remittances reached $28.1 billion, 4.3 percent higher than the $26.9 billion recorded in 2016.
“Notwithstanding pockets of political uncertainties across the globe, cash remittances in 2017 remained resilient. Remittances from the Middle East increased by 3.4 percent, driven by growth in remittances from the United Arab Emirates (UAE), Qatar, and Bahrain. Overseas Filipinos’ remittances from Asia rose by 7.3 percent, boosted by transfers originating from Singapore, Japan, and Taiwan,” the BSP also said.
Remittances from the United States went up by 5.5 percent, while those from Europe increase by 1.5 percent, despite a decrease recorded in remittances from Filipinos in the United Kingdom.
Combined remittances from the United States, UAE, Saudi Arabia, Singapore, Japan, United Kingdom, Qatar, Kuwait, Germany, and Hong Kong made up 80.1 percent of total cash remittances.
Personal remittances, according to the BSP, include the net compensation of overseas Filipinos, after taxes, social security contributions, and travel expenses in the countries where they live and work. These also include personal transfers from overseas Filipinos to their families in the Philippines and capital transfers, such as money sent back home to build houses.
In a 2014 paper made available by the BSP, economist Cayetano Paderanga Jr. explained how remittances affect the economy. First, remittances “have greatly explanded the resources available to the economy,” both in terms of pushing up the demand for goods and services, and in savings by both workers and corporations “experiencing larger profits due to the higher effective demand for their products.”
But remittances also have a “Dutch disease” effect, Paderanga explained. “As the domestic economy strengthened, the competitive position of domestic production in the Philippines suffered. Producing goods outside the country has become more attractive compared to local production, even if labor has to be shipped overseas.”
“While the easier flow of remittances has led to growth and a benign financial environment, it also spawned an economic environment that is difficult for export competitiveness and employment,” Paderanga pointed out.
The challenge, he said, was to fix the bottlenecks that increase the cost of doing business in the Philippines, while encouraging the use of remittances to pay for better education and physical facilities that will buoy up the economy. (IDA, WITH A BSP REPORT)