OFW households holding on to cash amid credit crunch

Published by rudy Date posted on December 13, 2008

AMID a global credit crunch, overseas Filipino worker (OFW) households are holding on to their cash rather than investing them in financial instruments, the Bangko Sentral ng Pilipinas (BSP) said.

In its Consumer Expectations Survey, the BSP said OFW households that were polled are setting aside a smaller amount of remittances for savings, particularly on bank deposit instruments, with plans of cutting investments in the fourth quarter.

Moreover, these households are spending more of their money on essentials, such as food, education, medical expenses, debt payments, but have set aside part of their income for the purchase of appliances and durable items.

Of the total respondents, about 35.8 percent said they would increase their savings in the fourth quarter from 30.4 percent in the third quarter, and 17.5 percent in the fourth quarter last year.

Only 4.7 percent of the respondents plan to set aside part of their remittances for investments in the fourth quarter, lower than the 7.4 percent in the third quarter and 4.9 percent in the fourth quarter last year.

“OFW [households] are increasing the use of remittances in savings. That’s why the number of households are not spending more on investments,” Iluminada Sicat, BSP Department of Economic Statistics director, said.

The BSP has been undertaking a financial literacy campaign among OFW communities abroad to educate them about the benefits of investments and savings.

OFW households also intend to purchase houses at 16.1 percent of them in the fourth quarter, up from 12.4 percent in the third quarter and 1.1 percent in the fourth quarter last year.

About 95.8 percent of OFW households plan to increase their food purchases in the fourth quarter from 95.6 percent in the third quarter and 97.3 percent in the fourth quarter last year.

Consumer confidence among respondents improved in the fourth quarter due to lower prices of fuel and rice, as well as their optimism about the expected business upturn during the Christmas season, and available employment opportunities both here and abroad.

The same survey showed that Filipino consumers, mostly from the low-income group, are less pessimistic in terms of consumption, financial position and perception on economic conditions. Despite this, the overall confidence index in the fourth quarter still registered a negative figure.

In the fourth quarter, the index registered a -40.3 percent from -52.3 percent in the third quarter this year and -33.6 percent in the fourth quarter last year.

The fourth quarter survey was conducted from October 1 to 15, or when the global credit crunch turned for the worse after bankruptcy filings of major Wall Street firms. The survey had a sample size of 5,448 households, of which 2,850 or 52.3 percent were from the National capital Region (NCR) and 2,598 or 47.7 percent from areas outside NCR.

The majority of the respondents or 57.1 percent was from the low-income group with less than P10,000 monthly family incomes. About 33.8 percent was from the middle-income group with P10,000 to P29,999 monthly family incomes, while 9.1 percent belonged to the high-income group with monthly family incomes of P30,000 and over. –Maricel E. Burgonio, Reporter, Manila Times

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