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December cash remittances at record high, but 2018 growth slowest on record

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By Karl Angelo N. Vidal, Reporter

CASH sent home by overseas Filipino workers (OFW) surged to an all-time high in December and clocked in full-year growth that outpaced the central bank’s growth forecast even as it was the slowest annual increase on record, according to the data which the Bangko Sentral ng Pilipinas (BSP) released on Friday.

Cash remittances reached $2.849 billion that month, up 3.9% from the $2.741 billion inflows recorded in December 2017, spurring full-year inflows up 3.1% to $28.943 billion from 2017’s $28.060 a little past the BSP’s three-percent growth projection.

Decembers’ increase was the fastest since October 2018’s 8.7%.




The increase in remittances was propelled by a 2.8% hike in the amounts sent by land-based OFWs, plus a 4.6% pickup in funds sent by those working at sea.

“Cash remittances in 2018 remained strong amid political uncertainties across the globe,” the BSP said in a press release.

Remittances from Filipinos working in the Middle East decreased by 15.3% in 2018, a reversal from the 3.4% growth recorded in 2017, partly due to the continued repatriation program of the Saudi government.

The decline in fund transfers from the Middle East was partly offset by cash inflows from Asia, the Americas and Europe that grew year-on-year by 12.3%, 9.7% and 7.7%, respectively.

For full-year 2018, the United States, Saudi Arabia, the United Arab Emirates, Singapore, Japan, the United Kingdom, Qatar, Canada, Germany and Hong Kong accounted for 79% of total flows in 2018.

CHRISTMAS BOOST
Sought for comment, two economists said the uptick in December inflows was driven by increased spending back home amid Christmas festivities.

“December is the season for sending back money for loved ones in the Philippines,” Union Bank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said in a mobile phone message.

Remittances usually peak towards December each year as OFWs send more money to support increased spending for festivities and gifts during the holidays.

Household spending, in turn, contributes about three-fifths of gross domestic product. Latest available Philippine Statistics Authority data show household final consumption expenditure growth slowing to 5.4% in 2018’s fourth quarter from the year-ago 6.2%, and full-year increase slowing to 5.6% in 2018 from 5.9% in 2017.

Apart from the seasonal increase in remittances in December, Rizal Commercial Banking Corp. economist Michael L. Ricafort cited residual effects of higher inflation that may have prompted Filipino workers abroad to send more money home to help their families cope with higher prices.

The overall year-on-year increase in prices of widely used goods and services eased for the second straight month to 5.1% in December, its slowest pace in seven months even as it was still above the BSP’s 2-4% target band. September and October saw a nine-year-high 6.7%.

“For full year 2018, slower growth in OFW remittances vs. in 2017 may have been partly made up by the +5.3% increase in the US$/peso exchange rate in 2018… that required less OFW remittances for the same amount of pesos needed, assuming all other factors are the same,” Mr. Ricafort said in a text message.

The peso traded at its weakest value against the dollar in 12 years in the latter part of the year, hitting P54.41 against the greenback in October. The local unit ended 2018 at P52.58 to the dollar, compared with P49.93 at end-2017.

UnionBank’s Mr. Asuncion said the slowdown in remittance growth may also be attributed to the lingering negative sentiment due to “recent protectionism issues.”

“Note that markets and economies, both advanced and emerging ones, have been largely affected by the trade tensions between the US and China last year,” he said.

“Even in the last two months, ERU (UnionBank’s Economics Research Unit) has observed that any positive news about the progress of trade talks between the said countries largely affects the general sentiment in global markets, and any negative development brings about the opposite.”

Mr. Asuncion also attributed the slower annual remittance growth to “geopolitical events” as well as the “previous diplomatic issues such as that of Kuwait” earlier last year. In February, President Rodrigo R. Duterte banned Filipinos from working in Kuwait in response to the murder of OFW Joanna Demafelis. He lifted that ban in May.