Tuesday, 11 September 2012

Dependence on Remittances Eased Last Year - NEDA

MANILA – The National Economic and Development Authority on Monday said the Philippine economy's dependence on money sent home abroad is easing.

Dr. Rosemarie Edillon of the NEDA-National Planning and Policy Staff said the growth in the country's net primary income – which is the difference between money received abroad and money spent abroad - has been declining, as reflected in the gross national income.

While gross domestic product measures the value of goods and services produced in the country, GNI incorporates net primary income from abroad, including 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," Edillon said.

According to the National Statistical Coordination Board, GDP grew 7.6 percent in 2010 while net primary income was up 10 percent. Edillon said the pattern started to reverse in 2011, with net primary income growing by only one percent compared with GDP expansion 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.

She said zero dependence on remittances is "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," Edillon said.

"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," she said.

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.

"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," the NEDA official said.

In the first half of the year, the BSP reported that remittances reached $11.3 billion, higher by 5.3 percent than a year ago. In June alone, remittances amounted to $2 billion, rising by 4.2 percent from a year ago.