Remittances, a potent source of external liquidity for the Philippines, is projected to round the year at more than USD40 billion this year, according to latest estimates by the World Bank. At this level, the flow of the foreign currency earnings of overseas Filipinos is seen as the fourth largest among recipient countries that include India as undisputed leader, then Mexico and China. Also, such inflows represent a projected expansion by 7.2 percent from last year.
Such inflows already grew by 2.7 percent in October this year based on latest Bangko Sentral ng Pilipinas (BSP) data. As a global phenomenon, remittances are projected to expand by 5.8 percent this year, substantially higher than growth of only 1.2 percent in 2023.
The monetary authorities keep track of the remittance flows given its importance for funding the country’s current account or even its fiscal balance, which stood as a deficit equal to 5.8 percent of local output, or the gross domestic product (GDP) as of September this year. The Philippines posted a budget imbalance equal to 6.2 percent of GDP last year. Based on BSP data, the Philippines posted a budget imbalance averaging 2.7 percent of GDP from 1988 up to last year. The fiscal balance stood as a surplus equal to one percent of GDP in 1994 but was widest as a deficit equal to 8.6 percent in 2021.
As a global phenomenon, remittance flows outpace such other external financial flows as foreign direct investments (FDI) or official development assistance (ODA) loans, the World Bank said.
“The gap between remittances and FDI is expected to widen further in 2024. During the past decade, remittances increased by 57 percent, while FDI declined by 41 percent. Remittances will likely continue to increase because of enormous migration pressures driven by demographic trends, income gaps, and climate change. Therefore, countries need to take note of the size and resilience of remittances and find ways to leverage these flows for poverty reduction, financing health and education, financial inclusion of households, and improving access to capital markets for state and nonstate enterprises,” the World Bank said.
