Remittances go mostly to food—ADB study

MANILA, Philippines—Even as last year’s remittance rose 5.6 percent to a record $17.3 billion, a study by the Asian Development Bank showed that monies overseas Filipino workers send to their families here are spent more on food than on education, health care, and durable goods.

“The results show that it is only for food share that the coefficient of the remittance is statistically significant,” said the study entitled “Remittances and Household Behavior in the Philippines.”

While 2009 remittances from abroad accounted for 10.8 percent of the country’s gross domestic product, the study which was released last month said they did not contribute to creating domestic demand.

“These flows may also contribute to the creation of new social assets and services and community physical infrastructure such as schools, health centers, roads, and other community projects,” the study said.

With the global financial crisis, these fund transfers were seen as possible sources of increasing domestic demand and rebalancing economic growth.

“Unlike the previous studies however, our estimations show that remittances to the Philippines do not have a significant influence on other items of expenditure, particularly investment spending on education, health care, and durable goods,” the study said.

“In other words, the analysis in this paper does not support evidence of remittances contributing toward rebalancing growth by creating domestic demand,” it added.

This study, which used 2000, 2003, and 2006 data from the Family Income and Expenditures Survey to analyze the role of remittances in household consumption, investment, and poverty reduction, showed that about 20 percent of all Filipino households receive remittances.

“And this fraction has been rising over time,” it said.

The study shows that richer households receive more remittances.

“While less than 10 percent of lower income households receive remittances, the proportion increases with income. These flows from abroad contribute as much as 15 percent to the incomes of the highest income quintile but just over 1 percent for the poorest quintile,” it said.

The study also shows that receiving households tend to be bigger with fewer employed members compared to households that don’t receive remittances.

This reflects “higher dependency ratio as a factor in attracting remittances,” it said. - INQUIRER.net, February 16, 2010