OFW families are saving more, survey shows

MANILA, Philippines – Families of overseas Filipino workers (OFWs) are saving more of their family income as consumers brace against the full impact of the economic slowdown.

The Bangko Sentral ng Pilipinas (BSP) said the latest survey of OFW families shows that food continues to account for the bulk of total household expenditures funded by remittances.

But the BSP said the percentage of households that allotted portions of remittances to savings increased to 40 percent in the first quarter of the year, compared with only 35.8 percent in the fourth quarter 2008 survey.

In the first quarter survey, the BSP said 94.7 percent of OFW households spent their remittances primarily on food and other household needs while 69.8 percent of the survey group spent their remittances on education.

The BSP reported that households that spent on medical expenses accounted for 55.2 percent while OFW households that spent on debt payments represented 48.5 percent.

The increase in OFW households that set aside money for savings was significant, however. There was also a slight increase in the number of OFW families that set aside money for investments from 4.7 percent in the previous quarter to 5.9 percent.

“In a sense, the greater proportion of remittances recipients saving and investing is good for the economy because the multiplier effects can be significant in the future,” said BSP Deputy Governor Diwa Guinigundo.

Guinigundo explained that savings and investments increase the pool of resources available to both households and corporate borrowers for their credit needs. “That helps sustain economic activity,” he said.

Guinigundo pointed out that the country’s savings rate was much lower compared to other countries in the region.

“Public savings in turn depend on the government’s ability to collect taxes and improve its fiscal position,” Guinigundo said. “All other things considered, there is further scope for higher level of savings.”

The BSP, however, is wary of encouraging savings at a time when the economy would need a sustained increase in spending to support economic activities that would cushion the impact of the global slowdown.

(Having the scope for higher savings) does not mean of course that we should discourage consumption expenditure in the economy,” Guinigundo said. “Consumption sustains higher level of economic activity.”

On the other hand, Guinigundo said consumption expenditure could also be supported by higher level of savings and investment that in the future would give the consumer more and higher stream of future income.

According to the BSP, the shift was likely the result of growing pessimism over the country’s economic prospects which compelled families to save and invest rather than spend on consumables.

The BSP said most OFW households spent their remittances primarily on food and other household needs, education, medical expenses, debt payments, and savings.

According to the BSP’s survey, the utilization pattern of OFW remittances was similar for households in the National Capital Region and areas outside the capital.

Remittances have been coming into the country at record levels, reaching a monthly average of over $1 billion in 2008 for a whole-year total of $16.8 billion last year.

This year, however, the BSP is projecting a zero growth rate in remittance inflows because of the effects of the slowdown in the country’s traditional labor markets.

OFW remittances have been fueling the country’s economic growth and heavily financing the government’s domestic borrowing but monetary officials said OFs and their families should be encouraged to invest their money.

The Philippines is now the third biggest recipient of workers’ remittances and OFW remittances are now equivalent to over 11 percent of gross domestic product.- Des Ferriols, Philippine Star