Remittances, which have consistently grown despite challenges confronting the global economy, are expected to eventually plateau and cause consumer spending to slow down.
Given this projected scenario, the government is urged to intensify efforts to boost investments so that the economy would still expand even without the same level of support from household consumption.
Aurelio Montinola III, president of the Bankers Association of the Philippines (BAP), said in speech delivered Friday that the government should work more intensely on realizing infrastructure projects, such as those under the Public-Private Partnership (PPP) program.
Montinola said delays in the development of the country’s level of infrastructure are costly, citing the urgency of the economy’s need to find an alternative source of growth, as individual consumption may eventually slow down.
“At some point, the overall number (amount of remittances) will plateau, and the peso will appreciate,” Montinola said in a speech delivered during the Philippine Economic Forum held Friday at the Philippine International Convention Center.
He said the possibility of labor markets offshore being saturated should not be discounted given the significant increase year after year in the number of Filipino workers being sent abroad.
Moreover, Montinola said, the peso may embark on a sustained appreciating trend, especially after the crisis in the eurozone is finally solved.
In such a case, consumer spending may be dampened. This is because the appreciation of the peso reduces the peso value, and thus the purchasing power of dollar remittances received by families of overseas Filipino workers.
When the economy is no longer able to depend much on consumer spending for growth, Montinola said, investments both of the private sector and the government should be drummed up.
“We have been talking about the PPP for over a year now,” Montinola said.
He said attracting more job-generating investments from the private sector and increasing government expenditures on infrastructure and other developmental projects are necessary to reduce poverty and grow the economy.
Montinola said there were quite a number of businesses interested in infrastructure-related projects of the government.
To turn this interest into actual investments, he said the government should fast-track efforts to finalize these deals.
He said the fact that industrialized Western economies, which are the usual preferred investment sites, are having problems with their economies and politics at the moment is giving the Philippines a chance to gather more investments.
“There is interest [among investors to place money in the Philippines]. All they need are concrete projects to invest in,” Montinola said.
Montinola said achieving and sustaining a robust growth economic growth entails not only the government’s provision of subsidies to poor households, but also having more middle-class individuals employed through the attraction of more investments, which in turn require a more developed infrastructure.