IMF cites importance of OFW inflows

MANILA, Philippines – The International Monetary Fund (IMF) cited the crucial role played by remittances in helping the Philippines stay afloat despite the full impact of the global financial crisis last year.

In report, the IMF said remittances from overseas Filipino workers (OFWs) and the lack of prior overheating helped the Philippines weather the crisis last year.

“Remittances and lack of prior overheating also helped the Philippines weather the crisis. At around 11 percent of GDP in 2009, remittances are an important component of the overall external position and a key driver of domestic demand. Contrary to prior expectations, remittances held up during the crisis,” IMF stated in the 47-page report.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that OFW remittances grew by 5.6 percent to a new record level of $17.35 billion last year from $16.43 billion in 2008. Originally, the BSP projected a zero growth in the amount of money sent home by Filipinos abroad but later upgraded its forecast to four percent.

This year, the BSP has decided to raise upwards its growth forecast for OFW remittances to eight percent instead of six percent due to the continued strong demand for professional and skilled Filipino workers abroad.

So far, OFW remittances went up by 6.6 percent to $5.87 billion from January to April this year compared to $5.498 billion in the same period last year.

IMF also stated in the report that the Philippines did not experience the kind of overheating some other emerging markets experienced in the run up to the crisis resulting to fewer pre-crisis excesses and a smaller economic bust.

“The Philippines weathered the crisis well owing to past reforms. The significant progress made in recent years on fiscal consolidation and financial sector reforms contributed to a marked turnaround in investor sentiment,” the lender explained.

It pointed out that monetary and fiscal authorities authorities used the opportunity of increased inflows to build reserve buffers while also allowing exchange rate flexibility.

The BSP sees the country’s gross international reserves (GIR) — the sum of all foreign exchange flowing into the country — increasing to $48 billion and $49 billion this year from a record level of $44.25 billion last year. It also expects its balance of payments (BOP) position posting a surplus of $3.7 billion this year from a year-ago level of $5.3 billion.

“Thus the Philippines entered the crisis on the back of significant improvement in external vulnerabilities that afforded a relatively smaller output impact,” the IMF said.

The multilateral lender also cited the improved fiscal fundamentals of the Philippines that enabled it to undertake a stimulus program to cushion the impact of the global financial crisis on the domestic economy. –Lawrence Agcaoili (The Philippine Star)