REMITTANCES likely grew modestly in July from a year ago as overseas Filipino workers (OFWs) reaped benefits of a weaker peso, a global bank said, giving their families more cash even with the same level of dollars they used to send home.
HSBC Global Research said cash remittances likely grew by 5.1% in July. If realized, this would signal recovery from the 4.5% decline in such inflows in June but would ease from a 7.1% year-on-year pickup in July 2017.
The Bangko Sentral ng Pilipinas (BSP) is scheduled release the latest remittance data today.
“Remittances have been slow at the start of the year, up just 2.7% year-on-year for the year to date. Annual remittance growth ranges around 5-7%, and lower transfers this year mean that growth will probably come in at the low-end of the usual range, at around five percent,” the economists said in a report published over the weekend.
Money wired home by OFWs through banks amounted to $14.179 billion last semester, a modest climb from $13.813 billion in last year’s first half. The increase is softer than the BSP’s forecast of four percent growth in remittances for the entire 2018.
The BSP had said the slower rise in remittances could be due to thousands of Filipinos working in the Middle East who availed of the repatriation offer of the Duterte administration amid reports of illegal recruitment and maltreatment at the hands of their employers. This resulted in smaller inflows from United Arab Emirates, Saudi Arabia and Kuwait.
Around 10 million OFWs provide for their families in the Philippines. In turn, these cash transfers fuel household spending that drives more than 60% of overall economic growth.
The peso’s weakness against the dollar is likewise expected to keep remittance amounts steady. “[T]here are downside risks to remittance growth given PHP weakness, which may be limiting growth in dollar terms as overseas Filipino workers do not feel the need to send so many dollars back home,” HSBC said.
The peso has depreciated versus the greenback in recent months, touching a fresh 12-year low after breaching the P54:$1 mark last week. The global lender said this gave OFWs the leeway to send the same amount of dollars to their families from a year ago, as these would have bigger values once converted to the local currency.
In a separate commentary, ING Bank N.V. Manila senior economist Jose Mario I. Cuyegkeng said remittances have been “weak” in recent months and have been “inadequate to cover the wider trade deficit”.
The country’s current account deficit ballooned to $3.1 billion as of end-June, already hitting the BSP’s full-year forecast, on the back of surging merchandise imports and an export slump. — Melissa Luz T. Lopez