By Melissa Luz T. Lopez
CASH remittances slipped in August from a year ago due to lower inflows from the Middle East, the central bank said on Monday, which could signal softer household spending in the third quarter.
Overseas Filipino workers (OFWs) sent home $2.476 billion that month, 0.9% less than the $2.499 billion which were wired to the Philippines in August 2017, the Bangko Sentral ng Pilipinas (BSP) said. August inflows, however, picked up from the $2.401- billion cash remitted in July and was the biggest amount of remittances received since December’s $2.741 billion.
Around 10 million OFWs provide for their families living in the Philippines. These cash transfers fuel household spending that, in turn, contributes nearly 70% of overall economic output.
“The countries that contributed to the decline in August 2018 are the United Arab Emirates (UAE), Saudi Arabia and Qatar,” the central bank said in a statement.
August remittances pushed eight-month inflows to $19.057 billion, 2.5% more than the $18.595 billion received in 2017’s comparable period. This, however, is softer than the four percent growth expected by the central bank for the entire year, coming from last year’s $28.06 billion.
Land-based OFWs continued to be the biggest source of remittances at $15.1 billion, up by 2.1% from a year ago. Those working at sea also wired 3.8% more funds to $4 billion, the BSP said.
Filipinos working in the United States remained the biggest source of inflows as of August, followed by Saudi Arabia, UAE, Singapore, Japan and the United Kingdom.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said the marginal drop in remittances was expected given that the strong August 2017 inflows were “a bit hard to top.”
The analyst added that lower remittance inflows in August may have tempered domestic spending in the third quarter even as July inflows were 5.2% up.
“With the year-on-year decline in remittances, I expect that there will be a softness in domestic demand, but I still expect a robust Q3 growth result, stronger than previous quarter’s 6.0%,” Mr. Asuncion pointed out, referring to the slower-than-expected expansion in April-June.
“I think that our OFWs are just waiting for yearend to send remittances to their loved ones in time for the Christmas season,” he added.
Remittances usually peak in December each year as OFWs send more money in time for the Christmas season, in order to support increased spending for festivities and gifts during the holidays.
ING Bank senior economist Nicholas Antonio T. Mapa said separately that remittances likely adjusted to mirror school year changes and possible late payments to workers, coupled with exchange rate “nuances”, contributed to the year-on-year contraction.
The peso traded weaker than the P53-per-dollar mark during the month to average P53.2735, compared to the P50.8747 rate in August last year. That means OFW families enjoyed bigger peso values for the dollars they received, putting more pesos in their pockets to spend.
“Going forward, annual and year-to-date growth rates are still seen to average around three percent,” Mr. Mapa said.
By Melissa Luz T. Lopez