BSP Remittances to remain strong !

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Slight growth seen in post-crisis era

By Michelle Remo
Philippine Daily Inquirer
First Posted 23:43:00 07/31/2009

MANILA, Philippines – Even if the growth of the global economy were to decrease in a post-crisis era, the country’s remittances would continue to remain strong, the Bangko Sentral ng Pilipinas said.

According to analysts, the world economy is already moving toward stabilization, noting that the worst of the crisis is over. However, they also said that potential growth rates of economies around the world would likely be lower than what they used to register before the financial troubles in the United States turned into a full-blown crisis in late 2007.

This had raised concerns that remittances sent by Filipinos working overseas would shrink.

In its latest forecasts, the World Bank said the global economy would likely register a 2.9-percent contraction in its gross domestic product for this year—a deterioration from the 1.9-percent growth seen last year, and the 3.8 percent posted in 2007.

The world is expected to recover next year, registering a projected growth of 2 percent.

Still, this is lower than the growth rates seen prior to the crisis.

But the BSP said remittances from overseas workers were unlikely to suffer.

BSP Governor Amando Tetangco Jr. said the continued growth in deployment of Filipinos indicated that remittances would be sustained at least in the foreseeable future.

“We remain positive on remittance growth. Remittance flows will continue to be supported by the steady demand for our workers abroad, specially the professional and skilled workers,” Tetangco told reporters.

The central bank chief cited reports from the Department of Labor and Employment (DOLE) that alternative labor markets abroad have been demanding more Filipino workers.

These markets include Canada, Australia, Japan, Qatar, Saudi Arabia and South Korea, all of which have forged hiring agreements with the Philippines.

Remittances sent by OFWs have been considered to be a major growth driver, largely fueling household consumption.

Remittances are also credited for boosting the country’s gross international reserves (GIR), which hit a historic high of $39.6 billion at the end of June.

The BSP expects remittances to match, if not slightly exceed, that of last year’s $16.4 billion.

Monetary officials disagreed with forecasts that remittances would contract this year because of the global economic crisis.

The BSP said OFWs displaced from their jobs because of the crisis were more than offset by the number of newly deployed Filipinos, who were being hired in alternative labor markets.

GIR, an indicator of a country’s external liquidity, is the country’s total amount of dollars and other foreign currencies deposited with the central bank.

It determines the country’s ability to engage in commercial transactions—such as import and settle foreign currency-denominated debts—with the rest of the world.

The large dependence of the economy on remittances, however, reflects insufficient job opportunities at home.

The Philippine economy still faces the challenge of anemic investments, cornering a small chunk of foreign investments, that mostly go to its neighbors.

In the latest world competitiveness report, the Philippines ranked 43rd out of 57 countries this year, three notches lower than the country’s ranking the previous year.