By Des Ferriols Updated December 13, 2008 12:00 AM
[ philstar.com ]
Families of overseas Filipinos are now investing less of their remittances on housing and financial instruments and are instead putting more money away for savings, a central bank survey showed.
The Bangko Sentral ng Pilipinas (BSP) said financial investments by OFW households declined as the number of households setting aside money for savings went up from 30.4 percent to 35.8 percent.
According to the BSP, the rise was likely the result of growing pessimism over the country’s economic prospects which compelled families to save rather than spend on consumables.
Based on the BSP’s latest Consumer Expectations Survey, most OFW households spend their remittances primarily on food and other household needs, education, medical expenses, debt payments, and savings.
In the past, the BSP has been tracking a significant increase in the number of OFW households who indicated that they allot part of their remittances for various types of financial investments.
These financial investments include savings, other financial investments and purchase of house which is normally the first investment made by OFW families once a household member starts working abroad.
On this latest quarter survey, however, BSP Deputy Governor Diwa Guinigundo said the number of households that utilized remittances for investments declined to 4.7 percent in the fourth quarter of 2008 from 7.4 percent in the third quarter of the year.
“Most OFW households spent their remittances primarily on food and other household needs,” he said. “About 95.8 percent of households who received OFW remittances spent money on food and education (68.2 percent of all households).”
On the other hand, about 57.6 percent of OFW households spent remittances on medical services, while debt payments accounted for 48.9 percent.
Remittances have been coming into the country at record levels, reaching a monthly average of over $1 billion. The massive inflows of remittances from overseas Filipino workers should be mobilized for investments but the BSP bucked the idea of creating specialized investment instruments with special tax perks.
Remittances have been fueling the country’s economic growth and heavily financing the government’s domestic borrowing but monetary officials said OFWs and their families should be encouraged to invest their money.
The BSP had initially considered supporting programs aimed specifically at mobilizing OFW remittances but officials said this might actually create more problems than it will solve.
The Philippines is now the third biggest recipient of workers’ remittances and OFW remittances are now equivalent to over 11 percent of gross domestic product.
“It’s an offshoot of the combination of two factors: the lack of opportunities at home and the demand for labor offshore,” the BSP said. “Remittances are likely to remain strong due to the continued expansion in the global economy and the aging population in some advanced nations.”
So far, however, the BSP said OFW investments have focused on housing development because homeownership is usually the first objective of OFWs and their families.
After acquiring a house, however, the BSP said longer term investment options should be made available to OFWs who would continue generating income from abroad.
However, monetary officials said offering specialized instruments directed mainly at OFWs would only create distortions in the financial and equities market at a time when regulators were trying to homogenize the taxation of all financial instruments to remove distortions.
Eventually, the BSP said it expects a gradual increase in investments in such instruments as trust funds, mutual funds and other financial instruments.