Channeling Remittances to Spur Economic Growth

Manila Bulletin, April 10, 2009 | Go to article overview

Channeling Remittances to Spur Economic Growth


Global fund transfers in 2008 were estimated to have reached $305 billion so the significant of the discussions and research exchange during the two-day event was timely since countries,including the Philippines, have been developing strategic policies to make sure remittances have more of an impact in the GDP tally.There is now some urgency in this since, according to the World Bank, remittance flows will slow down this year, the low end of forecast being $280 million.This was the second time that the central bank hosted this event and the first one was with the Bank for International Settlements. This year’s theme, which was “The Macroeconomic Consequences of Remittances: Implications for Monetary and Financial Policies in Asia ” focused on the trends among emerging economies over the past decade as far as remittance policies are concerned.The participants of the conference attempted to answer the question of how to harness remittance flows so that it could be more significant and permanent as a growth driver.According to Ratha, remittances as a share of GDP are expected to fall this year and in 2010, but the economist qualified that the decline will not be the same extent as private flows or official development assistance funds. “Migration flows from developing countries may slow as a result of the global growth slowdown, but the stock of international migrants is unlikely to decrease,” said Ratha.Remittances' still on the positiveThe BSP and the rest of the world central bankers have an ongoing debate on the “pro-cyclicality” of remittance flows. In the case of the Philippines , unlike in other countries such as India which has heavy reliance on remittances as well.Tetangco said the effect of remittances is not countercyclical but is instead procyclical. This means remittances can go their own way seemingly undistracted or unaffected by foreign exchange trend or business cycles. Its procyclical trends bode well for households that depend on remittances, especially in a volatile exchange rate market.And then there is the issue of whether remittances are creating a nation of unproductive citizens who are content to just laze around waiting their monthly fund transfers.In a 2007 study, the BSP said there is no evidence of “Dutch disease” despite government’s tendency to depend on these remittance flows. …

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