How Remittances to the Philippines Help Cultivate Economic Growth
Remittances sent by overseas Filipinos are among the major drivers of our country’s economic growth. As of September 2012, there is an average of 2.2 million Filipinos working abroad. In 2014, personal remittances sent through formal channels, such as banks and iRemit to the Philippines, amounted to $26.924 billion, states Bangko Sentral ng Pilipinas. A huge portion of the Philippines’ foreign currency comes from remittances.
What are the Impacts of Remittances to the Philippines’ Economy?
A Major Driver of the Country’s Consumer Spending
Remittances from Filipinos abroad provide numerous Filipino households with the ability to purchase commodities. According to Bangko Sentral ng Pilipinas, the remittances sent by overseas Filipinos are mainly used for basic necessities. Most households spend remittances on food, education, and medical expenses. Thus, remittances help increase domestic consumption. Domestic consumption is a key component of economic growth. Increased consumer spending means higher revenues for companies, which may eventually lead to the creation of more jobs.
Stronger Philippine Peso
Dollar remittances sent by Filipinos working overseas greatly contribute to a stronger Philippine peso. A stronger currency can help our government repay our country’s debts. Since majority of the Philippines’ debts is in U.S. dollars, a stronger peso can help lessen our debts.
Increased Gross International Reserves
International reserves are any kind of funds that can be transferred between central banks. Gross international reserves (GIR) are the total of all foreign exchanges. According to Investopedia, “international reserves are an acceptable form of payments” between the central banks of different countries. A country’s GIR is reflective of its capability to pay for imported services and goods, as well as its ability to service foreign debts.
Aside from the exports of local products, remittances account for most of the Philippines’ foreign exchanges. According to Bangko Sentral ng Pilipinas, the Philippines’ GIR amounted to $80.18 billion in January 2015. “At this level, reserves could adequately cover 10.3 months’ worth of imports of goods and payments of services and income,” states Bangko Sentral ng Pilipinas.
Most Filipinos who are working abroad are doing so to help improve the economic status of their families—but, unknown to them, they are doing so much more than that. For more than two decades, the remittances of Filipinos working abroad, especially those sent through formal channels, such as iRemit to the Philippines, have been helping alleviate the economic status of the Philippines. Hopefully, the remittances sent to the Philippines will pave the way to better job opportunities in our own country.