Filipino remittances strong but growth rate may fall short of 2011
Remittance flows to the Philippines may not finish ahead of previous years after all, as a new projection indicates the rate of growth will be slower in 2012 due to trying economic circumstances in Europe.
According to financial services firm DBS Group, remittances from those who send money to the Philippines will grow 5 percent, which is down from the 7.2 percent rate of growth experienced in 2011 and 8.2 percent in 2010. This latest projection conflicts with what the financial group projected earlier this year, indicating that remittances bound for the Philippines "may perform even better [than in 2011] on the back of higher economic growth in the United States this year." However, it is in line with the Bangko Sentral ng Pilipinas' projection, which recently downgraded its forecast from earlier this year.
There is some evidence to suggest that the estimation may turn out to be accurate. According to the report, so far this year, there's been a 6 percent drop in remittances being sent to the Philippines from Europe. Meanwhile, workers in the U.S. have sent more money home, with remittance flows jumping by 11 percent when contrasted to the same period of time in 2011.
"Resilient numbers from Asia and the United States helped to prop up the overall figure," DBS pointed out in a research note.
Philippines-based online news portal InterAksyon.com indicates that through the first part of the year, Filipinos and others who send money overseas have spawned a significant growth in the number of people who are spending money on various purchases in the country. Roughly two-thirds of the Philippines' gross domestic product – which is the total value of goods and services produced in a given year – emanates from consumer spending. More specifically, about 4.6 percent of the country's 6.4 percent economic growth spurt in the first quarter was due to the things Filipinos bought.
While these numbers suggest the Philippines places a great deal of reliance on remittances, it needs to rely on other means to keep its economy operating at its best, a recent report indicated.
Last month, the Business Mirror reported that because remittances are such a significant source of growth for the Philippines, the country may be putting a dependence on them, according to researchers from Oxford Business Group.
"The dependence on [overseas Filipino workers] to provide revenue and mitigate poverty leaves the Philippines open to external shocks over which the government has little control," the report noted.
OBG added that to guard against this overdependence, the country's leaders need to encourage people in the private sector to invest more in training, research and innovation, which will help serve as an additional source of economic growth for the Filipino economy.