Disasters show Philippines' reliance on remittances
Funds transfers from overseas Filipinos in wake of typhoon underscores role in lifting economy
After Lyn Lyn Rael's three-room house was swept away by Super Typhoon Haiyan, leaving her husband and five children homeless, she borrowed 25,000 pesos (HK$4,404), the equivalent of two months' wages, from her employer in Singapore to send to her family.
"They're all depending on me," said the 30-year-old nanny, who comes from Leyte province. "I had to leave the country two years ago to make money to pay for my kids' education and for our rice farm. Now to add to it, I need to rebuild our house."
Remittance growth rose an average 3.7 percentage points in the three months after past major disasters, investment bank Nomura said this month, using data from seven calamities since 2004.
Transfers from 10.5 million overseas workers such as Rael are equivalent to about 10 per cent of the Philippines' gross domestic product, underscoring the reliance on these funds even with the fastest expansion among Southeast Asia's biggest economies.
"Calamities highlight the Philippines' dependence on remittances to finance domestic consumption, with the affected families turning to their relatives working abroad for help," said Trinh Nguyen, an economist at HSBC in Hong Kong, who forecasts the funds could rise 6 per cent this year.
"Unless the government succeeds in creating more jobs at home, Filipinos will still need to travel abroad to have better employment opportunities, and this dependence will persist."
The Philippine stock market has fallen more than 6 per cent since the November 8 typhoon swept away coastal towns and destroyed an entire city in the Visayas group of islands. The peso has dropped about 1.5 per cent against the US dollar in the same period.
Damage to residential, commercial and agricultural properties is estimated at between US$6.5 billion and US$14.5 billion, catastrophe modelling firm AIR Worldwide said last week. The storm left more than 5,000 dead and displaced 3.4 million.
The World Bank forecast last month that remittances to the Philippines would rise 5.7 per cent this year to US$26 billion. Overseas Filipinos rushing to send money to families affected by Haiyan will boost funds over the next few months, according to HSBC, UBS, Credit Suisse and Barclays.
In the world's third-largest recipient of remittances, the funds are the biggest source of foreign exchange after exports, and help boost domestic consumption. Remittances rose 5.8 per cent year on year in the first three quarters of this year, the country's central bank said.
The Philippines avoided a recession during the 2009 global economic slump as remittances helped counter a slide in exports, even as neighbouring economies contracted. The number of workers from nurses to engineers leaving the country increased 12.6 per cent last year to a record 2.08 million, even as GDP grew 6.8 per cent, the fastest pace since 2010.
"Philippines does depend on its remittances which is inevitable, given the economic opportunities within the country are limited," the Asian Development Bank's managing director-general Rajat Nag said, adding that the "economy needs to get more diversified".
President Benigno Aquino has overseen an economic revival with growth exceeding 7 per cent for four consecutive quarters. The nation this year won investment-grade scores from Moody's Investors Service, Fitch Ratings and Standard & Poor's.
Economic growth this quarter may be between 4.1 and 5.9 per cent, Economic Planning Secretary Arsenio Balisacan said this month when commenting on the effects of the storm. Full-year growth this year would probably be 6.5 to 7 per cent, within the government's targeted range.
Aquino is still struggling to create enough jobs to reduce a poverty rate that has not decreased since 2006. Unemployment was 7.3 per cent in July, the highest after India among 15 Asia-Pacific economies.