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OVERSEAS Filipino remittances, and not just investments, are likely
to dwindle in the face of poor economic policies, according to a
Bangko Sentral ng Pilipinas (BSP) study.
The new study defies accepted wisdom that
Filipinos abroad would keep on sending money to their loved ones
precisely because of economic difficulties back home.
“It is worthwhile to note that [overseas
Filipinos] will react in the same way as local residents and foreign
investors to poor macroeconomic policies. They will reduce local
exposure if these policies persist,” the study titled
“Identifying the Determinants of Overseas Filipinos Remittances:
Which Exchange Rate Measure is Most Relevant,” said.
Remittances coursed through banks by overseas
Filipinos are expected to grow by 12 percent to $14.3 billion this
year. Inflows, however, are expected to slow to 10 percent next
year.
The BSP said there is a need to develop
investment programs that could induce overseas Filipinos to channel
their remittances to productive investments besides savings.
“To enhance the impact of remittances on
savings, investments, and thus economic growth, it is vital to
strengthen the incentives to bank the unbanked,” the study said.
The BSP said remittance flows can affect saving
and investment behavior and thus future growth given the significant
impact of exchange rate changes to remittances and the profit-driven
motives of overseas Filipinos.
Earlier, the BSP gave its green light to a
Department of Finance plan to sell bonds or government debt papers
to overseas Filipinos. The plan is aimed helping offset the negative
impact of a strong peso on their income.
Remittances are largely responsible for this
year’s economic growth, which at 7.1 percent in the first three
quarters is considered the fastest in more than two decades.
For next year, the economy is likely to grow at
a slower pace of between 6.3 percent and 7 percent because of
costlier crude and a stronger peso, which would dampen exports
growth, according to the Development and Budget Coordinating
Committee.
-- Maricel E. Burgonio
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