Remittances from Filipinos working overseas reached $9.3bn in the first eight months of this year, a year-on-year increase of 15.3%.
This marked 16 straight months of remittances that have exceeded a billion dollars. According to the central bank, Bangko Sentral ng Pilipinas (BSP), total inflows are expected to reach $14.7bn this year, after inflows totalled a record $13.5bn last year.
In a statement made earlier this week BSP Governor Amando M Tetangco Jr explained the phenomenon, saying, "The sustained growth in remittances [was due to] advanced economies, geographical and skill diversification of Filipinos abroad and the efforts of banks and remittance agents to provide OFWs [overseas foreign workers], including their beneficiaries, enhanced money transfer services and easier access to financial products through the expansion in the number of remittance centres abroad and tie-ups with foreign financial institutions."
Tetangco added that banks "continue to facilitate faster, cheaper and more efficient fund transfer services. [...] There are also plans to convert remittance centres into banks offering expanded services next year." These developments are expected to further encourage the money to flow into the banking system and support high levels of remittances in the medium term.
The bulk of overseas inflows came from the US, the UK, Italy, the United Arab Emirates, Saudi Arabia, Canada, Singapore, Japan and Hong Kong, the BSP said.
Although remittances have been increasing at a significant rate, according to HSBC economist Steve Neumann, the figures may be misleading.
"The extraordinary boom of remittances over the last two years was always a bit of a mirage," he told local media, explaining the jump was partly due to the formalisation of channels for sending money back to the Philippines.
He further explained, "It is likely that while remittances have grown rapidly in recent years, their sudden acceleration was merely a statistical illusion."
He said that once the formalisation process has been established, the growth rate of money being sent back to the Philippines would slow.
There has been some concern that such growth will also slow due to the rising value of the peso and the slowing down of the US economy.
Data from the Philippine Overseas Employment Administration (POEA) showed that the number of Filipinos seeking work abroad has slowed to 726,620 workers from January to August, down 3.7% year-on-year.
However, Neumann said he is not concerned.
"Global demographics will continue to fuel labour outflow to developed economies where the population is growing steadily older and economic activities require an increasing number of qualified skilled workers," he said.
Moreover, Filipino workers are spread across the globe and their capacity to earn is not affected by a single country's economic woes. Statistics for 2006 provided by the POEA indicate that while Saudi Arabia employed 28% of the 788,070 workers who left the country that year, the balance was spread out across Asia, Europe and the Middle East.
Filipinos tend to engage in jobs that are primarily service oriented and which are less cyclically sensitive. Household and associated workers, medical-related workers, hotel and restaurant workers, caregivers, building caretakers, engineers and performing artists represent nearly 72% of OFW occupations.
Taking these many factors into account it appears that the financial success of OFWs will continue to play a major role in fuelling the resurgence of a middle class for years to come and everyone stands to benefit. According to market watchers, have become more sophisticated and are less likely to spend their money on consumer goods, which would have little impact on the overall economy. According to industry leaders in the real estate, insurance and capital markets sectors, people are now looking for sound investments and they have attributed much of the recent growth to OFWs.
Meanwhile, the balance of payments (BOP) in the second quarter of 2007 reversed to a surplus of $1.8bn from a deficit of $81m last year, bringing the first-semester BOP to a surplus of $3.2bn, up by 56.8% as against the $2bn a year ago.
BSP attributes the surplus mainly to increased remittances of OFWs and to a lesser extent on increased tourism revenue and export dollars coming into the country.
However, the BSP has warned against over-reliance on money from Filipinos working abroad to support the economy.
"Remitters are influenced by investment opportunities even more so than altruistic considerations," it stated in a recent study.
"Policymakers should therefore not be drawn into complacency that remittances can comfortably help the economy weather economic downturns. There is no substitute for prudent macroeconomic policies."
The central bank is concerned that remittances in the Philippines could be "pro-cyclical" - tending to rise when economic activity improves and decline when it weakens.
A strengthening economy would lead to a rise in the value of the peso, requiring workers to send more money home and the opposite would occur in a weakening economy.