The Philippines Economy and Remittances
There are a number of concerns regarding the Philippines’ economy. Among these are the COVID-19 pandemic, rate hikes, and rising commodity prices. Another concern is the remittances of overseas Filipino workers. This article will examine each of these issues to assess their potential impact on the Philippine economy.
Impact of COVID-19 pandemic on the philippines economy
The impact of the COVID-19 pandemic on the Philippine economy has been profound. Foreign direct investment (FDI) has fallen by 24.6%, which is the steepest decline since the country’s economic collapse following the 2001 Asian tsunami. The Philippines relies on foreign investment to grow its economy, and the government is now trying to attract more foreign investment with corporate tax cuts.
The Philippines’ economic model has made it more vulnerable to disease outbreaks. Its tourism and service industries are particularly vulnerable to lockdowns caused by the pandemic, as they depend on mobile people. Consumer confidence is also affected, especially for companies that depend on remittances. However, the country’s BPO sector has remained resilient. The country’s economy has recovered, although the demand for services has suffered a steep decline.
Despite these economic problems, the Philippines has made progress in inclusive growth. Its poverty rate has dropped from 23.3% in 2015 to 16.6% in 2016. However, COVID-19 has had a significant impact on poverty reduction in the Philippines. Nonetheless, resuming growth could reverse these trends. However, the impact of the COVID-19 pandemic on the Philippine economy has been profound. The quarantine that followed the disease has severely restricted commercial activity and mobility. This has impacted education, food security, and family incomes.
While there has been an improvement in the economy in some areas, the country may still face a long road to recovery. This is largely due to increased movement restrictions and stricter fiscal stimulus measures. The COVID-19 pandemic has also led to an increase in unemployment, which accounted for nearly four million Filipinos.
The government predicts that the economy will gradually recover in the years ahead, with some recovery expected by 2021. However, the economy is unlikely to reach pre-pandemic levels until 2022. In the meantime, the Philippines economy will suffer from a lack of jobs and sales.
As a result of the pandemic, the Philippines’ GDP fell to its lowest level since the World War II. In the first half of 2020, the economy’s GDP decreased by 9.5%, the biggest drop since 1947. This means that 3.9 million more Filipinos are living in poverty.
Impact of rate hikes and rising commodity prices on the philippines economy
The Philippines’ economy is expected to resume growth in the first half of the current financial year. The recovery will be driven by a large number of returning tourists and rising household spending. However, higher inflation and a weaker fiscal picture are expected to dampen the second half of the year.
In order to combat food inflation, the Philippines may opt to implement subsidies. However, this will put a strain on the state coffers, which are already stretched thin with pandemic-related expenditures and infrastructure spending. In addition, food protectionism will put the Philippines at a competitive disadvantage, further compromising the country’s economy. Another option for the government is to raise interest rates to halt the depreciation of the peso. However, the government has made it clear that it is not eager to raise rates, as it will make food imports more expensive.
The Philippines’ government recently extended lower MFN tariff rates on rice and pork. It also reduced its MFN tariff rates on corn, reducing them from 15 percent to five percent. Additionally, it eliminated the seven percent MFN rate on coal. Moreover, the Central Bank of the Philippines raised its key policy interest rate (PRR) by 25 basis points in May, bringing it up to 2.25 percent from two percent. This action was taken in response to the risks of second-round inflation from the government’s approved minimum wage and transportation fare hikes.
The Philippines’ economy remains vulnerable to rising commodity prices and rate hikes by the United States Federal Reserve. The Philippines’ GDP is estimated to reach $3,500 in 2021, which is below the upper middle-income range. In addition, the Philippines’ imports are dominated by Japan, China, and the United States.
In 2022, the Philippine economy is expected to grow at seven to eight percent. This is a huge improvement from 3.8 percent contraction in 2018. The first quarter of this year saw an 8.3 percent increase in GDP and was close to the 6.6 percent growth rate that was observed in the first half of 2017. However, the economy is facing multiple external risks, including the Russian invasion of Ukraine, the slowdown in China, and the U.S. Federal Reserve’s policy of increasing interest rates. It also faces domestic risks like rising inflation and budget deficits.
Impact of remittances from overseas Filipino workers on the philippines economy
One of the key benefits of remittances is that it boosts the country’s GDP. The country receives about $600 billion a year in remittances from overseas Filipino employees. These funds are used to purchase goods and services in the Philippines. This, in turn, increases the purchasing power of the country’s people and contributes to the nation’s economic development. The remittances also reduce the volatility of the GDP and help maintain the balance between saving and spending.
Another important reason is that these remittances help improve the standard of living for OFW families and their families. These funds are used to pay for education, healthcare, and other basic needs. The money also allows families to spend on better lifestyles and invest in their own business. This benefits entire communities, as OFWs hail from many different parts of the country. While the impact is often seen in big cities and barrios, it can also be felt in small communities and rural areas.
The total remittances from OFWs to the Philippines is now estimated at USD 25 billion, up from the USD 24 billion of the previous year. This sum represents a significant percentage of the country’s GDP. Remittances from overseas Filipino workers are an important source of foreign currency and can help finance educational opportunities, health care, and entrepreneurship.
While the remittances from overseas Filipinos have historically been counter-cyclical, the recent global economic downturn is likely to have a significant impact on the country’s economy. Despite the fact that these funds are still increasing in dollar terms, they have not reached pre-pandemic levels. This is because the Philippines’ peso strengthened against the US dollar, making remittances worth less in dollars than in peso.
Remittances are essential to the Philippine economy. They account for about ten percent of GDP and are the second largest source of foreign exchange after value-added exports. The money sent home by overseas Filipino workers helps the country maintain a stable balance of payments, boost private consumption, and increase foreign exchange reserves.