Remittances from Overseas Filipino Workers (OFWs) totaled $1.1bn in February, bringing the total for the first two months of the year to $2.2bn, up 22.6% year-on-year.
In recent years, there have been improvements in the range of products and services through which the over 8m OFWs can send remittances, leading to a growth in the amount that is registered through official channels. These include the increase in the number of remittance centres and tie-ups abroad, phone banking, internet/online banking, bills payment services, as well as competitive service charges and conversion rates, reported the central bank, Bangko Sentral ng Pilipinas (BSP).
A 2004 Survey of Overseas Filipinos by the National Statistics Office revealed that 80% of remittances went through formal channels, while the remainder was brought home in person or sent with a friend or relative. The Central Bank said the level of remittances is expected to increase further as banks remain dynamic in providing innovative remittance and financial services to OFWs and introduce aggressive marketing programmes that include promotional discounts. According to the BSP, remittances sent through banks are expected to grow by 10% to $14bn in 2007.
The increasing demand for higher skilled workers has also contributed to the increase in remittances despite a fall in actual numbers of OFWs. According to the Philippine Overseas Employment Administration (POEA), total deployment fell to 170,072 in the first two months of 2007, representing a 12.1% drop year-on-year. The POEA's last 2005 annual report revealed an increase in demand for more skilled and professional workers, particularly in the medical and allied services.
The major sources of remittances, according to the BSP, are the US, Canada, the United Kingdom, Italy, Saudi Arabia, United Arab Emirates, Japan, Hong Kong and Singapore. Although 47% of remittances emanated from the US, the overwhelming majority of OFWs (80%) are employed in the Middle East and Asia. The disparity between these two factors is attributed to the fact that a large number of remittance centres send funds through their bank branches in the US.
In 2006, total remittances weighed in at $12.8bn, a 20% increase compared to 2005. According to the World Bank, they play a vital role in the balance of payments, accounting for 13% of GDP and have proven able to transform large trade deficits into current account surpluses, which in 2006 grew to over 4% of GDP.
The Philippines has experienced real GDP growth in excess of 5% for three consecutive years, for the first time since the 1970s. In 2006, GDP is estimated to have grown by 5.4%. The World Bank projects a GDP growth rate of 5.6% for 2007 and 6% for 2008. Strong growth in business process outsourcing, electronics exports and remittance-driven consumption serve as important props for higher growth, according a World Bank report on the Economic Implications of Remittances and Migration.
"However, this growth needs to be sustained and broadened to translate into more jobs. Unemployment has remained steady in excess of 10% in the Philippines and underemployment has grown to 22.7% from 17.6% two years ago," stated the report.
Joachim von Amsberg, the World Bank country director, said: "There are social costs and economic costs when people go abroad. The most important response would be to pursue economic policies that lead to investment and more jobs in the country so that Filipinos are not pushed abroad by a lack of opportunities at home but rather have the choice between attractive opportunities abroad and at home."
According to the World Bank, "It is important to combine high remittances with sustained fiscal improvements and improved investment climate. Remittances should not distract the country from its huge potential for domestic investment and growth. This potential can be unleashed through domestic policy reforms, such as a sustained effort to collect taxes equitably, transparently, and effectively and then spend them efficiently for public services," as stated in its East Asia & Pacific Update April 2007 report.