OFW SAVINGS, INVESTMENTS DOUBLE IN Q1
MANILA, JUNE 15, 2008 (STAR) By Des Ferriols - Households supported by remittances from overseas Filipinos (OF) spend their budget primarily on food and education, but central bank officials now indicate families are setting aside more money for savings.
The Bangko Sentral ng Pilipinas (BSP) said financial investments by OF households doubled in the first quarter of the year from 21.9 percent in 2007 to 48.6 percent.
According to the BSP, the rise was likely the result of growing pessimism over the country’s economic prospects which compelled families to save rather than spend on consumables.
The BSP said most OF households spent their remittances primarily on food and other household needs such as education, medical expenses, debt payments and savings.
Based on the results of the latest Consumer Expectations Survey (CES) of the BSP, officials said the number of households who indicated that they allot part of their remittances for various types of financial investments had doubled in the first quarter.
These financial investments include savings, other financial investments and home purchases usually the first investment made by OF families once a household member starts working abroad.
The BSP said financial investments were higher by 26.7 percentage points than those in the previous year’s survey and the ratio more than doubled to 48.6 percent of all OF households from 21.9 percent.
According to the BSP’s first quarter CES, the utilization pattern of OF remittances was similar for households in the National Capital Region and areas outside the capital.
Remittances have been coming into the country at record levels, reaching a monthly average of over $1 billion. In the first four months of the year alone, inflows totalled $5.4 billion.
The massive inflows of remittances from overseas Filipino workers should be mobilized for investments but the BSP bucked the idea of creating specialized investment instruments with special tax perks.
OF remittances have been fueling the country’s economic growth and heavily financing the government’s domestic borrowing but monetary officials said OFs and their families should be encouraged to invest their money.
The BSP had initially considered supporting programs aimed specifically at mobilizing OFW remittances but officials said this might actually create more problems than it will solve.
The Philippines is now the third biggest recipient of workers’ remittances and OFW remittances are now equivalent to over 11 percent of gross domestic product.
“It’s an offshoot of the combination of two factors: the lack of opportunities at home and the demand for labor offshore,” the BSP said. “Remittances are likely to remain strong due to the continued expansion in the global economy and the aging population in some advanced nations.”
So far, however, the BSP said OF investments have focused on housing development because homeownership is usually the first objective of OFs and their families.
After acquiring a house, however, the BSP said longer term investment options should be made available to OFWs who would continue generating income from abroad.
However, monetary officials said offering specialized instruments directed mainly at OFs would only create distortions in the financial and equities market at a time when regulators are trying to homogenize the taxation of all financial instruments to remove distortions.
Eventually, the BSP said it expects to see a gradual increase in investments in such instruments as trust funds, mutual funds and other financial instruments.
Chief News Editor: Sol Jose Vanzi
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