By Reicelene Joy N. Ignacio
CASH sent home by overseas Filipino workers (OFWs) grew to a five-month high in May, rebounding from the preceding month’s slowdown, the central bank reported on Monday, with analysts attributing the increase partly to households’ preparation for a new school year.
Cash remittances — a key driver of real property demand as well as of household spending that contributes nearly 70% to national output — grew by 5.7% to $2.6 billion in May from $2.5 billion in the same month last year, according to a report released by the Bangko Sentral ng Pilipinas (BSP) on Monday.
The increase was bigger than the four percent clocked in April but smaller than March’s 6.6% and the 6.9% recorded in May last year.
Personal remittances — which include transfers in kind — grew by 5.5% to $2.896 billion in May, also the biggest amount since January, from $2.746 billion a year ago, similarly faster than April’s 3.7% clip but slower than March’s 6.4% and the 6.1% increase recorded in May last year.
Year-to-date, cash remittances increased by 4.5% to $12.349 billion from $11.822 billion, which itself involved a 4.2% increment. Cash remittances from land-based and sea-based workers increased by 3.2% to $9.7 billion and by 9.2% to $2.7 billion, respectively, in the first five months.
Personal remittances grew by 4.1% to $13.707 billion from $13.172 billion in the same comparative five-month periods. Inflows from land-based OFWs with contracts of at least a year increased to $10.5 billion from $10.2 billion, while those from both sea-based and land-based workers with short-term contracts of less than a year grew to $2.9 billion from $2.7 billion.
The United States had the biggest share of OFW cash remittances year-to-date at 36%, followed in descending order by Saudi Arabia, Singapore, United Arab Emirates, the United Kingdom, Japan, Canada, Hong Kong, Qatar and Kuwait. Combined remittances from these countries accounted for 78% of total year-to-date cash remittances.
The BSP noted, however, that it is common practice among remittance centers abroad to course remittances through correspondent banks, most of which are located in the United States. Moreover, remittances coursed through money couriers cannot be disaggregated by actual country source and are recorded under the country where the main offices are located, which, in many cases, is in the US. “Therefore, the US would appear to be the main source of OF remittances because banks attribute the origin of funds to the most immediate source,” the central bank explained.
Sought for comment, Security Bank Corp. Treasury Group assistant vice-president and economist Robert Dan J. Roces said: “Part of the cause of higher remittances in May could be seasonal, as the remitter provides cash for tuition on top of food, clothing and other provisions for his or her family prior to the start of the school year in June.”
“We see this as a positive development since higher remittances also increase domestic consumption on imported and other taxable products while inflation tapers off – the improvement in vehicle sales last month may be proof of this,” Mr. Roces added.
Car sales recovered to post year-on-year increases both in June and last semester, according to data jointly released to media on Thursday last week by the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA). The joint CAMPI-TMA data showed total industry sales increased by 8.7% to 31,950 vehicles last month from 29,395 a year ago, taking the six-month total to 174,135 units, about 1.46% more than the 171,635 vehicles sold in 2018’s first half.
“It should also keep residential property sales strong. From another macro perspective, the higher remittances may further stabilize the country’s balance of payments position by serving as a good source of fiscal cushion,” Mr. Roces explained further.
Nicholas Antonio T. Mapa, ING Bank Manila senior economist, said, “Steady inflows from Filipinos abroad have helped bridge the still-widening trade gap to arrest the widening of the overall current account balance of the Philippines.”
“While the economy gears up for faster growth and attempts to enter a higher growth trajectory via investments in infrastructure, Filipinos both here and abroad have done their share to make this a reality. Time and time again, the Filipino has proven critics wrong, finding a way to send home much-needed funds to bolster domestic consumption and perhaps unwittingly helped deliver the much awaited transition to a new growth path.”
Ruben Carlo O. Asuncion, UnionBank of the Philippines, Inc. chief economist, said, “This spike in May remittances may have been clearly induced by domestic needs of OF families, particularly, tuition fees and other educational support matters.”
“Historically, the month of May for remittances is generally positive and robust due to” consumption of education services.
The central bank sees cash remittances growing by three percent this year.
In 2018, remittances grew 3.1% to $28.943 billion from 2017’s $28.060 billion, a little past the BSP’s three-percent growth projection.