MANILA, Philippines - Foreign inflows, particularly those remitted by millions of overseas Filipino workers (OFWs), have provided the Philippines with a measure of relief or shelter from changing financial fortunes that befell some of the wealthiest and most disciplined economies as Japan, China or the United States, the top official of the Bank of the Philippine Islands (BPI) said on Thursday.
BPI president Aurelio R. Montinola III said while such inflows provide temporary relief, their beneficial economic impact should eventually fade at some point.
Already, he told financial reporters at the sidelines of BPI’s annual stockholders’ meeting held at the Manila InterContinental Hotel, OFW flows have started to plateau.
Among economists and market watchers, Montinola was saying the Philippines has to rely more on home-grown funds over foreign capital going forward to finance the country’s growth requirements.
For now, Montinola said the OFW flows helped push the economy forward as the remittances account for some 10 percent of last year’s local output measured as the gross domestic product.
He noted last year’s remittances of $18.76 billion grew by 8.9 percent, but had not been seen to expand beyond this level this year.
In fact, Bangko Sentral ng Pilipinas Gov. Amando M. Tetangco said the remittances should not grow more than 8 percent this time around.
“At some point, there will be a plateauing in the remittance flows,” Montinola acknowledged.
This was also why he believes the greatest risk the Philippines faces this year is the risk of the external sector proving weaker than it had in prior years when portfolio flows, loan proceeds, foreign-direct investments, tourist receipts and similar sources of foreign funds were at record levels.
“So we’re in a cocoon. But I think at some point the [foreign fund flows] are going to affect us externally. We will still have growth this year but it is not going to be as strong as in 2010,” Montinola said.
According to him, it was providential that remittance flows from politically troubled Libya, Tunisia and Egypt was next to nothing.
Very little remittance flows have originated from Japan as well, he added.
So in summary, he said, the greatest risk the economy faces going forward should come from the external sector as the fund flows have already started to moderate and eventually become static.