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[av_heading heading=’ INTERNATIONAL ILONGGO | Saving for a rainy day ‘ tag=’h3′ style=’blockquote modern-quote’ size=” subheading_active=’subheading_below’ subheading_size=’15’ padding=’10’ color=” custom_font=”]
BY JED JALECO DEL ROSARIO
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Sunday, May 21, 2017
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BACK in the ‘80s, the country’s gross national savings remained below 20 percent. Today, it is now around 25 percent, and is projected to go even higher.
Compared with the world average of 17.53 percent, it basically means that the Philippines’ savings is 6.20 higher than the average country. In short, we have some surplus cash to spend, and based on current trends, national savings are expected to rise even further in the future.
However, it’s also important to remember that the growth of the country’s gross national savings was not due to Filipinos saving more of their income. The real reason is that there are a lot of overseas Filipinos who send money home, and it is these remittances that have driven up the country’s gross national savings. In fact, last year alone, overseas Filipino workers’ (OFW) remittances amounted to around $27 billion.
The problem with this set up is that remittances are based on the ability of Filipinos to find work abroad, which means that our country’s gross national savings is based on external factors beyond our control. Should foreign countries cease to hire Filipinos, either due to declining labor demand, automation, political policies, increased competition from other labor exporting countries or all of the above, then we can kiss our primary source of savings goodbye.
If the country’s savings goes down then investments will go down as well, which in turn will lead to less economic activities and economic hardship. So even though OFWs continue to send back remittances, we shouldn’t be complacent and take this state of affairs as a given, because it isn’t.
Aside from probable changes in the world’s labor market, the rate at which OFWs send money home has been slowing down in the past few years, which basically means that the country’s savings rate will go down in the coming years unless we can find a suitable substitute for OFW remittances.
Some analysts believe that the tourism and business process outsourcing (BPO) sectors could pick up the slack. For the sake of argument, let’s say that this will indeed be the case. The problem with this is that income from the tourism and BPO sectors will be focused on business sectors, and not in the household share of gross domestic product (GDP), which is where most remittances go to. What this means is that even if we could rebalance away from remittances, the transition will likely lead to economic imbalances.
In short, there’s really no way around the savings issue: Filipinos need to learn to manage their finances better if we are to sustain the country’s economic growth.
We have been reliant on overseas remittances to prop up a significant portion of household income that the average Filipino will probably have a hard time coping with a situation where their relatives can no longer (or are unwilling to) send home dollars (or worse, find an overseas job).
So the important point in all this is that although the country generates healthy demand, it also needsto generate domestic savings and investments. In the past, we have relied on OFWs to bear this burden. That may no longer be possible in the future. (jdr456@gmail.com/PN)
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