Remittances idle in banks

About P80 billion worth of funds lay idle in the banks in the first quarter of 2009, as news of global economic recession forced families of migrant Filipino workers to save their money instead of spend them, resulting in a dismal 0.4-percent growth in gross domestic product during the period. 

Economic Planning Secretary Ralph Recto yesterday attributed the large 4-percentage-point difference between the 0.4-percent GDP growth and the 4.4-percent expansion of the gross national product to the huge savings in the country’s banking system.

Personal consumption expenditure rose by only 0.8 percent in the first quarter, the lowest in two decades, as household spending for clothing and footwear fell 24.8 percent.

“The fact that the GNP grew 4.4 percent in the first quarter explains why the stocks rose last week. Businessmen expect people to spend in the coming quarters,” Recto told reporters.

Three of the largest banks in the country confirmed that bank deposits grew by 9 to 12 percent in the first quarter from a year ago. Together, their deposits grew by P120 billion during the period.

Recto said the GNP, which includes net inflows from abroad, amounted to about P2 trillion in the first quarter at current prices. He said this meant that 4 percent of P2 trillion, or about P80 billion, was not spent, and was not reflected in the GDP during the period.

“This is why our savings rate has been increasing in recent years, to about 27 percent of GDP according to the latest data,” he said.

Data from the national income accounts released by the National Statistical Coordination Board showed that the GNP reached P2 trillion at current prices in the first quarter while the GDP hit P1.74 trillion. The difference of P258 billion represented the net factor income from the rest of the world.

Compensation income, or mainly remittances from migrant Filipino workers, amounted to P302 billion in the first quarter, although this was partially offset by outflows such as property expenses.

The Metropolitan Bank and Trust Co. reported that its consolidated deposits rose 12.3 percent to P554.39 billion in the first quarter while Bank of the Philippine Islands said its total deposits expanded 9 percent to P517.1 billion.

Philippine National Bank said total deposits went up by 11 percent to P200 billion.

Recto said it was important that both the Filipino consumers and the government increase their expenditures to boost the GDP this year.

He said the government’s economic resiliency plan should continue through 2010, with the government allowing a deficit spending of about 3 percent of the gross domestic product. –Roderick T. dela Cruz, Manila Standard Today