ONE of the strong pillars of the Philippine economy are overseas Filipino workers (OFWs). Last year, remittances propped up the country’s economic growth and hit a new record high of $2.56 billion in December. Remittances serve as the direct outcome of labor migration and the most important source of foreign exchange to the economy.
Initially, the main goal of OFWs is to maximize the great opportunities abroad in hopes of providing a better life for their family. However, the promise of a better a life depends on how and where they spend their remittances. Establishing a budget that is not grounded in reality is not really useful at all. One must live within their means and prioritize what is important and beneficial.
In turn, OFW remittances transferred to their families or recipient/s became part of household budgets that are spent on every family’s daily necessities such as increase in consumption of durable and nondurable goods, or can also be used as savings. It can also be beneficial for people who want to start a business. Thus, such overseas cashflows raise the standard of living of recipient families.
Based on the Bangko Sentral ng Pilipinas (BSP) survey of 2016, recipients greatly allocate their remittances on consumption goods. For instance, 97.3 percent are for food and other household needs.
However, as stated by Asia Development Bank (ADB), families sometimes compromise and lower their food expenditure. OFW households prioritize part of their remittances for education (70 percent), purchase of consumer durables (21.9 percent), and purchase of house (11 percent), investment (6.5 percent), and other miscellaneous expenses (4.5 percent).
The expenditure of the remittance-receiving families is closely monitored by the government because it reflects the general condition of the country. In this way, OFWs can expect a better return of investment because of the government efforts to further allow recipients to avail and spend more money on government programs. At the same time, investments on education and nonfood expenditure can impart a long-term growth on the economy because of the higher probability of producing better human resources for the country.
In turn, the increase of investment in human and physical capital aggregate domestic demand and enhances the country’s capital accumulation.
Another expenditure of the family-receiving remittance is their allocation on savings. According to data by BSP, 43.2 percent of Filipinos who are considered mostly put their savings at home. These investments share 43.4 percent on the remittance allocation that can help create new social assets and services like schools, health centers, roads and other community projects that can be beneficial to their recipient who were left in the country.
Furthermore, a portion of OFW households allotted part of their remittances for debt payments (46.5 percent). Geographically speaking, large portion of the OFW households in the NCR allocated their remittances on debt payments, for purchase of food and other household needs, and for investment.
But in spite of their different investments on human and physical capital, only 56.1 percent of OFW on 2016 utilized their remittance for medical expense as compared to last quarter’s data.