RP warned about adverse impact of remittances

Manila Standard Today
June 17, 2005

RP warned about adverse impact of remittances

Economists have warned the Philippines against relying too much on dollar remittances from overseas Filipino workers (OFW), saying complacency could get in the way of implementing reforms.

International Monetary Fund economists Robert Burgess and Vikram Haksar, in an IMF working paper titled “Migration and Foreign Remittances in the Philippines,” said while remittances support the expenditure in the country, recipients tend to become reliant on them.

“To the extent that remittance income reduces the recipients’ need to work, this may have a negative impact on overall economic activity,” they said.

The authors of the paper said it was possible that remittance flows may generate similar problems at the national level by supporting the overall balance of payments position and thereby reducing incentives to implement reforms.

“There is not doubt that remittances in the Philippines are an important source of support, especially for the balance of payments,” they said.

Burgess and Haksar, however, said their empirical study failed to confirm that remittances “smooth” income and consumption when looking at high frequency fluctuations in the Philippines.

“Similarly, we do not find compelling evidence that remittances lead to lower growth in the Philippines’ case,” they said.

They noted that some 7.75 million Filipinos, including 2.75 million migrants who have become residents in other countries, sent some $7.2 billion in remittances to their relatives in the Philippines in 2002. Roderick dela Cruz