Ph Savings Rate Decreasing

ISSUE: PH SAVING RATES DECREASING

Personal Savings in Philippines decreased to 41% in September of 2013 from 72% in August of 2013. It averaged 6.34 Percent from 1982 until 2013, reaching an all-time high of 14.50 Percent in January of 1991 and a record low of 0.41 Percent in September of 2013.

As of September 2013, only one out of four Filipino households has savings. Such rate is the lowest since 1982. Moreover, among the households that have savings, a significant 40 percent still keep their extra money at home rather than depositing them in banks.

ANALYSIS

Savings = Income – Expenses. Decrease in savings may arise from low income and larger expenses. Savings is one of the determinants of the country’s economic performance because larger income could mean larger savings, ceteris paribus. With the trend in the graph, this could mean that the economy is not improving that much because people do not have excess income to save and/or its people do not know how to manage their finances which is evident with the fact that a lot of Filipinos do not put their savings in a bank where it can grow and can be used to finance expenditures and help improve the economy.

If we do not have household savings, we will have to rely on government spending and institutions (borrowing) to fuel economic development. The consequence of too much reliance on government spending is the possible increase in taxation, especially if the government is not able to collect enough revenue from the sale of its assets. This would further eat up the Filipino’s disposable income. From these premises, we can say that low savings rate of the PH is a factor why the country has not yet improved like its neighboring countries with higher saving rate.

In the year 2013 however, savings from may have been consumed due to calamities and other force majeure that has happened in the country. Those that did not have savings may have suffered more because they cannot easily respond financially to the...