World Bank sees robust growth in remittances

THE WORLD BANK HAS EXPRESSED confidence that the growth in foreign exchange remittances to the Philippines will remain robust despite the debt crisis in the Eurozone.

It, however, cautioned the country against the ill-effects of a strong peso on consumption of households supported by the migrant workers.

In a video conference on the World Bank’s latest outlook for economies across the globe, Andrew Burns, World Bank senior economist and lead author of the report, said remittances were seen to sustain a healthy pace of growth this year. He cited the healthy growth of remittances from Filipinos overseas last year even at the height of the global economic crisis.

“Thanks to the diversification of skills of the migrant workers and of the labor market. We are going to see remittances to continue growing at a robust pace,” Burns said.

Remittances are a closely watched indicator given the boost they give to household consumption, which is one of the key growth drivers of the economy.

Last year, remittances grew by 5.6 percent to $17.3 billion despite recession in the United States and industrialized countries in Europe.

Given that the crisis in the Eurozone is seen to be less worse than the latest global economic turmoil, Burn said there was no reason to expect a drop in remittances to the Philippines this year.

However, another World Bank official said that there would be growth in dollar terms this year, remittances might drop in peso terms due to the appreciation of the local currency.

Should this happen, World Bank senior economist in the Philippines Eric le Borgne said consumption growth might be pulled down to the disadvantage of the economy.

The World Bank expects the Philippines to grow by 4.4 percent this year and by 4 percent in 2011 and 2012.

“The downside risk (to the growth forecasts) has to do with remittances and consumption. If foreign capital inflows increase further, resulting in a contraction in the peso value of remittances, then that could bring down consumption,” Le Borgne said.

Nonetheless, Le Borgne said economic growth might be faster than the World Bank’s estimates should the entry of the new administration indeed be favorable for investors. –Michelle Remo, Philippine Daily Inquirer