By Elijah Joseph C. Tubayan
MONEY sent home by overseas Filipino workers (OFWs) grew by its fastest clip in six months in October, according to data the Bangko Sentral ng Pilipinas (BSP) released on Monday, prompting analysts to expect household spending that fuels overall economic growth but whose growth has slowed lately to have picked up this quarter.
OFW cash remittances increased by 8.7% to $2.474 billion in October from $2.275 billion a year ago. The latest inflows were also 10.59% more than the $2.237 billion logged in September.
“The top countries that contributed to the increase were the United States (US), Canada, and Taiwan,” the BSP said in a statement accompanying the data.
“Cash remittances from… land-based ($18.7 billion) and sea-based ($5 billion) workers grew by 2.8% and 4.2% year-on-year, respectively.”
October inflows brought year-to-date cash remittances to $23.768 billion, 3.1% more than the $23.06 billion recorded in last year’s comparable 10 months.
The 10 months to October saw the US, Saudi Arabia, United Arab Emirates, Singapore, Japan, United Kingdom, Qatar, Canada, Germany and Hong Kong accounting for 79% of cash remittances.
For Michael L. Ricafort, economist at the Rizal Commercial Banking Corp. (RCBC), OFWs sent more cash to help their families cope with fast increases in prices of widely used goods and at the same time to take advantage of the peso’s weakness.
“Higher prices of goods and services may have required greater amount of OFW remittances needed to be sent back home and converted to pesos, assuming all other factors are the same,” Mr. Ricafort said in an e-mail when sought for comment.
October saw the second straight month of nine-year-high 6.7% inflation, before the pace eased to six percent in November.
Mr. Ricafort also recalled that global oil prices hovered around four-year highs in October, “thereby could have increased the demand for OFWs at that time for host countries that heavily depend on oil revenues (such as for large infrastructure projects), especially host countries in the Middle East, where there is a large concentration/demand for OFWs.”
The peso was trading at the P54-per dollar level from the start of October until the middle of that month, before it tapered to P53.535 at the end of the month. Mr. Ricafort said that made it “attractive to… convert more OFW remittances to get more peso proceeds after waiting for the US dollar/peso exchange rate to top out/reach the peak.”
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), said in a separate e-mail that the increase in OFW cash remittances was to be expected as Christmas approached.
“The 8.7% growth level is a good sign for end-year cumulative remittances. The usual seasonal push is driving this growth. OFWs are sending for Christmas spending of households… This definitely bodes well for year-end remittance growth numbers. I expect a stronger inflow in the coming months driven by Christmas season OFW household spending,” he said.
The third quarter saw household spending growth slowing to 5.2% from 5.4% in the same three months last year, and from 5.9% in the second quarter, which was blamed on high inflation.
State economic managers have said that they were “concerned” about the slowdown. Household consumption contributed about 67.18% to gross domestic product (GDP) in 2018’s first three quarters, according to Philippine Statistics Authority data.
At the same time, economic planners have expressed satisfaction that growth is increasingly fueled by investments. Among others, fixed capital formation grew 16.5% last quarter, slower than the preceding three months’ 21.2% increment but still bigger than the year-ago 7.8%.PSA data also showed government spending growth picking up to 13.1% in the first three quarters from 5.5% a year ago.
Hence, both economists expect that household spending could help push up GDP growth this quarter.
“It definitely can be a catalyst,” UnionBank’s Mr. Asuncion said.
“As almost always, household consumption has helped buoy economic growth. It is expected that there will be an uptick in household spending in Q4 because of inflation easing and Christmas spending.”
For RCBC’s Mr. Ricafort, “[r]elatively stronger growth in OFW remittances could continue to sustain up to the following month (November 2018), partly due to lower base/denominator effects and the growth could taper by December 2018 partly due to higher base/denominator by then.”
The economy grew by 6.1% in the third quarter, averaging 6.3% year to date against the government’s current 6.4-6.9% GDP growth target for whole-year 2018 that was revised down from a 7-8% initial projection.