Many people of developing countries leave their homes and families to seek better opportunities abroad. Opportunities like better working conditions, higher wages, and an overall enhanced lifestyle motivate emigrants. And in today’s globalised world, migrants capitalise on the opportunities to move more freely. After years of working abroad, some migrants gain citizenships from their host countries while others continue working as expatriates. They send a significant amount of their earnings back to their families in the form of remittances.
Every year millions of Overseas Filipino Workers (OFWs) send high volumes of remittances back home. The Philippines consider their expatriate population as the country’s top “export”. With approximately 10% of the country’s population working abroad, a big chunk of the Filipino workforce.
These OFWs transfer funds back home to their families via direct remittances. According to the data from 2019, there is a heavy dependence on remittances in the Philippines. In this article, we will analyse exactly how vital are OFWs to the Filipino economy.
OFWs Positive Impact on the Filipino Economy
OFW remittances mould the macroeconomy of the Philippines. However, they offer far-felt micro benefits too. OFW remittances provide a better living standard for many Filipino families. The funds go straight to relatives, friends, family who use those to finance education, healthcare, food and entrepreneurial pursuits.
Money transferred by Filipinos worldwide accounts for at least 10% of the country’s GDP. This contribution makes it the second-largest source of foreign income, following value-added exports like electronic components. In addition, it is also a significant source of private consumption, which in turn accounts for approximately 75% of the country’s GDP.
Other Areas of Impact
The impact of OFW remittances on the Filipino economy goes beyond the GDP. Over the years, OFW remittances have also contributed to the country’s foreign exchange earnings. These remittances have strengthened the country’s balance of payments, reinforcing the surplus on current accounts.
Inward remittances expand the total income of the recipient households. If the family already has a source of domestic revenue, it adds to the family’s disposable income. With more disposable income, household consumption will rise. Expenditure on only basic needs will evolve into an improved consumption basket of food, clothing, leisure and maybe some luxuries. Without any doubt, every family enjoys an improvement in their standard of living.
Better Living Standards for the Families
An essential element of this phenomenon is the effect on the typical family’s educational choice. Families now have more opportunities for higher education or better quality education for their children. This attribute may be one of the most critical impacts of OFW remittances on the country’s economy. With OFWs sending money to the Philippines regularly, these remittances impact regular household chores and their loved one’s future.
For many families living below the poverty line, paying off more significant bills like house mortgage, higher education fees can be challenging. OFW remittances come in as a necessary aid. The families of OFWs can afford essential healthcare, make better lifestyle choices, and live a better life, thanks to the remittances. Not just on a macroscopic level of the national economy of the Philippines, OFW remittances also impacted the lower levels like household finances.
OFWs contribution to the micro and macro level of the country’s economy is undeniable. Thanks to them, many families of OFWs can lead better lives with improved healthcare, higher education and better housing. By increasing the disposal income of families, OFWs also helped drive consumption. With more funds for spending, demand for goods and services also increase. And they all contribute to the national economy of the Philippines.
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