BSP sees robust spending despite slower remittances

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said consumption spending would likely remain robust and fuel higher economic growth this year amid the expected slowdown in the amount of money sent home by Filipinos abroad.

In an interview with reporters, BSP Deputy Governor Diwa Guinigundo said the projected slower growth in remittances from overseas Filipino workers (OFWs) would not result to weaker consumption this year.

“Not necessarily,” he said.

The BSP had forecast OFW remittances to grow at a slower pace of five percent this year. Cash transfers from OFWs were estimated to be around nine percent of GDP (gross domestic product) last year and continued to be a major contributor in economic growth through higher consumption.

Latest data showed that remittances went up 7.2 percent to a new record level of $20.117 billion last year from $18.763 billion in 2010, amid the global economic slowdown and the political turmoil in some parts of the Middle East and North African (MENA) states.

Major sources of remittances include the US, Canada, Saudi Arabia, United Kingdom, Japan, United Arab Emirates, Singapore, Italy, Germany and Norway.

The full-year growth of 7.2 percent exceeded the revised remittance growth target of seven percent. Originally, the BSP penned a growth target of eight percent for OFW remittances but was reduced to seven percent in April last year due to the MENA crisis and the twin disasters (earthquake and tsunami) in Japan.

Guinigundo explained that the government managed to find new markets for skilled Filipino workers so the slowdown in demand in the US and Europe due to a sluggish economy and the sovereign debt crisis were neutralized.

“New markets were also found for OFWs so any moderation in terms of the demand in Europe or the US will somehow offset or neutralize by increased demand in new markets for OFWs maybe in higher demand,” he added.

The BSP official said increased government spending through the take off of major infrastructure projects under the Public Private Partnership (PPP) scheme of the Aquino government would help boost the domestic economy.

“It may not fully offset it but if our domestic source of growth like consumption, higher public spending, and more investment from the private sector can provide addition cushion to these external shocks,” Guinigundo said.

Private consumption account for about 60 percent of GDP while public consumption corner about 20 percent.

He added that easing inflation that is expected to fall within the three to five percent target would boost the purchasing power of Filipino consumers.

“You have inflation that we expect to be within target for this year and next year, and this helps keep purchasing power of consumers,” he said.