Overseas Filipino Workers, commonly known as OFWs, are the most significant contributors to the economic development in the Philippines. The funds they send back home in remittance enable their families to pay for essential items such as school, food, and healthcare. This expenditure is referred to as domestic consumption and is a crucial factor influencing the country’s gross domestic product (GDP).
In this article, we will analyze how this growth in remittance improved Filipino citizens’ daily lives. And how does overseas inward remittance benefit economic development in the Philippines?
Battling Poverty
First and foremost, remittances have helped a lot of Filipino families out of poverty. According to the data released by the PSA (Philippine Statistics Authority), between 2015 and 2018, the percentage of families whose income fall below the poverty line dropped from 22% to 16%. During the same period, the total annual remittance of the country rose by 13%, from US$25.6billion to nearly US$29 billion—the correlation between the two is clear. As remittance inflow has increased over the years, the number of people living in poverty has also declined.
Nevertheless, there are other reasons behind the heavy dependence on remittances in the Philippines. The funds sent home by OFWs help their families when faced with an unforeseen incident. While facing an unexpected life event such as a natural disaster or a pandemic, remittances provide relief in the form of financial resources in those tough times.
The 2019 Consumer Expectations Survey (CES) released by the BSP give a clearer picture of the usage of the money sent by OFW. While a percentage of the remittances received is spent on essential items like food or other household items. 64% paid towards education, and 44% spent it on healthcare. Furthermore, some receivers invested in more significant purchases like houses or cars. As the remittance inflow will increase, it is clear that it will boost the domestic demand for goods and services.
Empowering Entrepreneurs
Revisiting the CES, we observed that 5% of the families used remittance on investments in businesses or small enterprises. Micro, small and medium-sized enterprises(MSMEs) are the backbone of the Filipino economy. According to the Department of Trade and Industry, MSMEs make up over 90% of the businesses in the country. These MSMEs employ more than 5.7 million people and contribute 35% of the overall domestic economy’s value.
This method is another avenue through which remittances have assisted economic development in the Philippines. MSMEs create job opportunities, and the wages earned are then recycled when the employees spend it on goods and services. MSMEs also help families who can not rely on remittances out of poverty by providing employment. MSMEs have been a driving factor behind the boost in domestic consumption.
Towards a Bright Future
The Filipino remittance statistics provide a clear picture of how international money remittance has helped boost the domestic economy. But remittances can help people in other ways which remain undiscovered. With more money in savings, families can invest in a new house or improve their current home, which is sturdy during natural disasters. Having more funds to invest in better healthcare as essential medicines would be affordable. Parents can invest in their children’s future with better educational opportunities. At school, the children learn various skills they can use to secure employment in the future. Also, the local traditions are vital in the Philippines. Buying presents for extended family may not be a priority in some other countries, but it is an essential part of Filipino culture.
Wrap up
To sum up, international remittances to the Philippines contribute significantly to the domestic economy by creating more demand for goods and services. Also, we can not disagree on the impact remittances have at a human level. The funds sent home by OFWs give hope to their families of a better standard of living and a more prosperous future.
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