HIGHER remittances from overseas Filipino workers significantly contribute to a wider financial inclusion and foster a more active micro-enterprises sector in the country, a Finance Department study shows.
A research led by Finance Undersecretary Gil Beltran found out that greater investments in infrastructure could also be an effective way to attain a more inclusive economic growth and accelerate poverty reduction.
“This study by the DoF—its first major research paper for the year and led by Finance Undersecretary Gil Beltran—noted that higher remittances by overseas Filipino workers also foster economic inclusion because many of these remitters’ beneficiaries in the country end up lending cash to micro-enterprises if not becoming micro-entrepreneurs themselves,” the report said.
Remittances account for about 10 percent of gross domestic product annually. Remittances in 2016 grew 5 percent over a year-ago level. The government expects a conservative 4 percent growth this year.
“We are submitting our first major research paper for 2017—on the factors that determine movements in poverty incidence,” Beltran, who is also the DoF’s chief economist, said in a report to Finance Secretary Carlos Dominguez III.
Beltran said based on an analysis of poverty incidence movements between 1985 and 2013 plus pertinent policy reforms initiated over that 28-year period, the DoF research project noted that GDP real growth, wider fiscal space (through higher CCT and infrastructure) and higher micro-finance coverage contributed positively to poverty reduction.
Also, higher OFW remittances lead to more micro-entrepreneurs and more lending to micro-enterprises, which contribute to poverty reduction; food inflation worsens poverty; and better food production and reforms in the rice sector are necessary to preserve the gains from rising incomes.
“At higher levels of GDP growth, the economy becomes more inclusive as more families emerge from poverty and acquire bigger shares in the economic pie,” said the DoF paper.
It said inclusive development programs were most effective if supplemented by higher microf-inance coverage and broader and effectively targeted CCT coverage. These two programs, if implemented effectively, can reduce poverty.
Dominguez and the rest of President Duterte’s economic team last month held two forums at the Conrad Manila Hotel on the government’s economic strategy for an aggressive expenditure program—on infrastructure, human capital formation and social protection—to sustain the growth momentum.
Alongside infrastructure development, Dominguez said a hefty part of the higher revenue take from the proposed CTRP reforms will be dedicated to programs on education, health, skills training and other forms of human capital formation.
