The significance of remittances in growing the Philippine economy will wane as the years go by, with the slowdown in money transfers already evident last year.
“Remittance growth has been remarkably resilient over the years, shrugging off both financial crises and economic slowdowns alike… until 2015,” the think tank HSBC Global said in the report “How resilient: Remittances to remain a driver of Philippine growth.”
The report noted the Bangko Sentral ng Pilipinas has revised down its 2016 forecast on remittance growth from 5 percent to 4 percent. The think tank expects “… growth to naturally moderate from there due to base effects.”
HSBC economist Joseph Incalcaterra said that the economy expands alongside an infrastructure build up, the effect of remittances on growth and the current account will wane over time.”
Remittances have traditionally been a firm “certainty” in an economy that has seen its fair share of volatile data, according to HSBC Global.
However, the deceleration since July 2015 has thrown that hypothesis into question.
“A closer look suggests that much of the drag in recent months can be attributed to remittances from the US, while transfers from other key geographies have been more stable – albeit there has been some moderation across the board,” the report read.
“Services exports from ‘business processing outsourcing’ (BPO) and related sectors will partly offset the relative decline of foreign currency earnings from remittances, but the current account surplus may nonetheless weaken by 2017, unless the trade deficit sees a sustained improvement, which is unlikely,” it noted.
Still, remittances will serve as one of the main drivers of the economy.
“We have a culture of migration and I do not see it waning, together with remittances, in the short to medium run,” economic consultant John Paolo Rivera said in a text message to GMA News Online on Tuesday.
“Remittances will continue to be one of the major drivers of the economy,” added Rivera, who is also a program manager at the Asian Institute of Management.
According to HSBC, remittances drive private consumption which accounts for almost 75 percent of the Philippine gross domestic product (GDP).
Medium-term, HSBC sees the Philippines registering a surplus of workers over the next few years – but is expected to “naturally moderate.”
It said “… the demand for Filipino OFWs, or overseas Filipino Workers, should remain strong, especially from the ageing societies in Asia (increasingly for well-trained and better paid healthcare professionals”
The BPO industry aims to generate some $25 million in revenues by 2016, based on a six-year roadmap formulated by the IT & Business Process Association Philippines.