MANILA, Philippines - The Philippine economy has become less dependent on remittances from overseas Filipinos in the last three years, the National Economic and Development Authority (NEDA) said.
But the Philippines will not be totally indepedent of overseas remittances as NEDA said remittances will continue to be a significant source of investments.
NEDA-National Planning Policy Staff's Dr. Rosemarie Edillon said there has been a decline in the growth of net primary income, or the difference between money received abroad and money paid abroad, as reflected in the gross national income (GNI). GNI, a measure of economic growth, incorporates net primary income from abroad that includes remittances.
"Whenever our growth in net primary income is higher than GDP, it means that we are heavily relying on remittances. But in the past few years, the Philippines’ GDP growth has been higher than its net primary income from abroad," Edillon said.
The National Statistical Coordination Board said GDP grew 7.6% in 2010 while net primary income grew 10%. But Edillon noted that the pattern started to reverse in 2011, with net primary income growing by only 1% versus GDP growth of 3.9%.
"For the first quarter this year, GDP grew 6.3 percent, while net primary income only grew 1.7 percent. While net primary income rebounded to 4.5 percent in the second quarter, it is still lower than the 5.9 percent GDP growth for the said period. In the economic profile, we are seeing the case where our GNI growth is actually less than our GDP growth, which is a good thing,” Edillon said.
While the Philippine economy is still considered as developing, Edillion said it is already in a high stage of human capital development.
"On the other hand, there are developed countries that require a certain level of human capital, which the Philippines has been able to supply. I think the global demand would always be there. Zero dependence on remittances is probably very ambitious. In reality, overseas remittances are a significant part of a country’s economy, whether developed, developing or at any stage of economic development," she said.
The government already recognizes the role of overseas Filipinos in helping attain inclusive growth.
"At the household level, remittances are used to finance human capital investments. A portion goes to the education of family members. Returning Filipinos from abroad also bring into our country a new breed of entrepreneurs. They are a source of technology transfers as well," she said.
The government, through the Bangko Sentral ng Pilipinas, has been extending financial literacy programs to overseas Filipinos and their families, so they can make smart investments.
"The inflow of remittances is about 30 percent the earnings of our exports sector, in nominal terms. In fact, it is even higher than the foreign direct investments that we are getting. Because of remittances, our country’s international reserves have been at comfortable levels, and this implies less vulnerability of the country to external shocks, lesser reliance on foreign savings, and availability of more currency that will help our country service its debts and pay its imports. This is why we have to protect our remittances, which are hard earned by our countrymen abroad," she said.