The cash sent home by the 10 million Filipino migrants living overseas doesn’t just help their families buy schoolbooks and food, it helps buoy the entire economy.
The Philippine peso is currently having a surge in value and has appreciated by 1.6 percent in the month of August, making it the best-performing currency in Asia, according to Bloomberg Markets.
Higher remittances, as well as stronger-than-expected economic growth and record-high foreign reserves, were cited as “strong reasons why the peso is rising,” according to Bloomberg.
That would come as no surprise to Jeremaiah Opiniano, an expert on remittances and migration issues in the Philippines and an assistant professor of Journalism at the University Of Santo Tomas in Manila.
“Overseas Filipinos are called ‘heroes’ in the Philippines – because their foreign exchange has helped stabilize the fiscal standing of the country,” Opiniano told OnFrontiers during a recent interview.
Last year those remittances amounted to $28 billion, according to the World Bank’s most recent report on Migration and Development released in April of this year. At that rate, they amounted to up about 10% of the country’s gross domestic product of $292 billion.
And they made the Philippines the third largest global recipient of remittances in 2015, behind India and China, according to the World Bank.
“Whether you are a temporary migrant, you became a permanent resident, or you became a naturalized citizen, or you are an illegal migrant – they all send money to the country,” said Opiniano.
The Philippines has all of the latest channels for remittances – Internet, mobile, and digital – but traditional banks are still the most popular method, followed by money transfer companies like Western Union, according to Opiniano.
One major issue for remittances in the Philippines right now Opiniano pointed out is the current trend in “derisking” – major international banks closing bank accounts of money transfer operators in order to limit exposure to money laundering and other financial crimes.
The growth in “derisking” in the Philippines has become particularly acute after news broke earlier this year about an $81 million cyber-heist of Bangladeshi funds that ended up being traced to the Philippines.
“Money laundering is a major concern,” said Opiniano. “So the central bank is trying to tighten regulations around remittances.”
There is a fear that the growth in “derisking” could cost the Philippine economy up to $1.4 billion a year because of higher fees and less favorable exchange rates, according to the Wall Street Journal.
In its recent report, the World Bank also cited the danger of “derisking” leading to a spike in remittance costs, and therefore a downturn in their flow to the places they are needed most.
Meantime, the remittances keep flowing back the Philippines. Making up one piece of the $431.6 billion in remittances to developing countries in 2015, according to the World Bank.