By Melissa Luz T. Lopez
REMITTANCES are expected to recover by April following March’s decline, a global bank said, even as it likely kept the peso weaker versus the US dollar.
“We expect remittances to exhibit some resilience in April,” Jose Mario I. Cuyegkeng, senior economist at ING Bank N.V. Manila, said in a report released yesterday.
“The central bank pointed to fewer banking days due to the Holy Week commemoration. This implies that April should show a good rebound since Holy Week in 2017 was in April.”
Remittances would likely bounce back by April following a 9.8% decline the previous month, the bank analyst said, pointing out base effects as the inflows clocked in a 10.7% growth in March 2017.
The recent drop came on the back of a repatriation order issued by President Rodrigo R. Duterte for overseas Filipino workers (OFWs) in Kuwait back in February, which was followed by a deployment ban amid reports of abuse.
Tensions eventually eased and led to the signing of a memorandum of agreement between the two nations last Friday.
Mr. Cuyegkeng said the drop in cash transfers — which was the steepest fall in 15 years — may be attributed to a “sustained weakness” of inflows from the Middle East, with remittances from Saudi Arabia, Qatar and Kuwait on a decline for two straight months.
Apart from its impact on domestic consumption, the softer remittance inflows are also affecting the economy via the exchange rate.
“The shortfall of remittances is the norm and contributes to the underlying weakness of PHP (Philippine peso),” the bank economist said. “The recent bout of PHP weakness is a combination of this shortfall, low emerging market risk appetite, the market’s dovish take of the central bank’s policy rate hike and higher oil prices.”
The peso averaged at P52.0676 versus the dollar in March, maintaining a depreciation trend since the year opened.
“We had expected that remittances would more than cover the March trade deficit by $100 million. Instead, remittances in March were $248 million short to cover the trade gap,” Mr. Cuyegkeng added.
The local currency has been dubbed as the worst-performing currency in Asia this year given a widening current account deficit.
However, BSP officials have said that the trade gap should be taken positively, as it reflects the increased importations of capital goods and raw materials needed for increased domestic economic activity, particularly the infrastructure push of the Duterte administration.