WHILE the national savings rate remained stable at 18 percent of gross domestic product (GDP), the savings rate for households has been trending down from year 2000 (9.8 percent) to 2006 (1.7 percent), rebounding only slightly to 2.4 percent in 2007.

The prohibitive costs of sending children to school and medical and health needs is being blamed for this.

The twin trends were contained in a report of the Asian Development Bank, titled “Savings in Asia and Issues for Rebalancing Growth,” issued recently.

“Demographic development has been cited as one of the factors to explain the declining [household] saving trend in the Philippines. The increase in the young dependency group would have increased the education and health expenditures, which result in lower aggregate saving,” said the authors—Economics and Research Department senior economist Shikha Jha, economist Akiko Terada-Hagiwara and Eswar Prasad, the Nandlal P. Tolani Senior Professor of Trade Policy at Cornell University.

The working paper said the share of the dependent population or those between the age of zero and 15 in 2005 was about 36 percent of total population in the Philippines. This is close to the South Asian economies’ average and much higher than its neighboring Southeast Asian economies’ average of about 26 percent.

The paper said households with older members have higher savings rates, especially those that receive remittances from working-age family members abroad.

The authors said that this is especially the case since most of these financial flows are channeled through the informal financial sector and are not directed to productive use in the economy. The paper added that the aging population has complex effects on household savings.

“Households with an elderly head have working-age family members in the Philippines, which would contribute to a higher saving rate. Therefore, one has to be careful in taking into account the factors driving family composition in different countries. In countries where it is the norm for elderly persons to live with their adult-age children, high household saving rates of households headed by older persons could reflect family composition rather than high individual saving rates of the elderly.”

The authors recommended that policies geared toward developing financial markets be entrenched in order to discourage borrowing; and that public spending be rationalized to increase social transfers, that pension systems be reformed, and that universal health-care insurance and education be provided.

If younger households try to save, it is because they lack access to credit and have to accumulate savings to be able to purchase durable goods such as television sets, white goods, and automobiles. Urban households, on the other hand, make precautionary savings to hedge against risks of illness and other healthcare expenses.

Earlier, National Economic and Development Authority (Neda) Director General Ralph Recto traced the significant gap between GDP and gross national product to the increase in the savings rate of Filipinos.