Contribution of remittances to GNP seen shrinking

REMITTANCES SENT by Filipinos overseas, which now account for 10 percent of the gross national product, may no longer contribute as much to the economy seven years from now.

This was according to state-owned Development Bank of the Philippines, which said the economy needed to prepare itself for the time when it would no longer receive a substantial boost from the money sent by overseas Filipino workers.

“Currently, remittances are a major growth driver and it will continue to be in the next seven years. After that, however, things may change,” Reynaldo David, DBP president and chief executive officer, told reporters Thursday.

David was one of the speakers during a business forum organized by the Association of Development Financing Institutions in Asia and the Pacific [ADFIAP].

Over the medium to long term, he said, more and more OFWs and their families were expected to live permanently in their host countries. As a result, he said, remittances sent to the Philippines would likely shrink.

By the time that happens, he said , the Philippines should have already strengthened its economy and that growth would be sustained even with less money sent from abroad.

Currently, remittances contribute about 10 percent of the country’s GNP and fuel consumption, which accounts for 70 percent of the gross domestic product.

GNP is the sum of the values of goods produced and services rendered by Filipinos, both here and abroad. GDP is the sum of the values of goods produced and services rendered within the country, both by Filipinos and foreigners.

David said the Philippines had the potential of making the economy less reliant on remittances, but that these have to be maximized. He said industries like the business process outsourcing and medical tourism were some of those that could grow exponentially over the medium to long term, making up for the lost income opportunity due to the possible shrinking of remittances.

The DBP executive said a likely decline in remittances seven years from now was not a concern. He said it was actually the government’s long-term objective to encourage OFWs to return to the Philippines especially when the domestic economy was already much more developed to provide sufficient income opportunities for them.

David said DBP, which was tasked by the government to implement programs catering to the needs of OFWs, aimed to help achieve the goal of making OFWs return to the Philippines and generate higher incomes here.

“We have a constant quest for long-term solutions that will make migrant workers return to the Philippines, where they truly belong,” David said.

There are about 9 million Filipinos documented to be working abroad.

In 2008, remittances to the Philippines reached $16.4 billion. This made the Philippines the fourth largest recipient of remittances. The top 3 are China, India and Mexico.

The Bangko Sentral ng Pilipinas expects remittances to grow by 4 percent this year. DBP projects the same to rise by 3.6 percent.

The growth projections for remittances this year are much slower than the double-digit growths recorded in the past several years. Last year, the $16.4 billion in remittances received represented a 13-percent growth over the level in the previous year.

The slowdown in the growth of remittances was attributed to the contraction in the economies of the United States and European countries, where many Filipinos are based. –Michelle Remo, Philippine Daily Inquirer