CASH sent home by overseas Filipino workers (OFWs) grew at the fastest clip in a year to their biggest amount, so far, for 2019 in October, global uncertainties notwithstanding, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
Cash remittances which OFWs sent through banks grew by eight percent to $2.671 billion in October, marking the biggest increment since the 8.7% increase recorded a year ago. That brought year-to-date inflows to $24.858 billion, reflecting a 4.6% year-on-year increase. By type of worker, cash sent home by land-based workers increased by 3.8% to $19.436 billion year-to-date, while those sent home by those at sea increased by 7.5%to $5.422 billion, the central bank said in a news release.
Personal remittances, which include transfers in kind, grew by 7.7% to $2.969 billion, similarly marking the biggest increase in a year or since the eight percent seen in October 2018 and the biggest amount, so far, for 2019. October inflows drove year-to-date personal remittances up 4.3% to $27.612 billion, with those from land-based workers alone growing by 3.8% to $21.1 billion.
In a note e-mailed to journalists on Monday, Nicholas Antonio T. Mapa, senior economist at ING Bank NV-Manila, noted the increase in inflows “despite earlier expectations for weakness in OF remittances owing to unrest in Hong Kong, struggles in the Middle East (given depressed oil prices) and the Brexit issue…”
By jurisdiction, the United States remained the biggest source of cash remittances, accounting for 37.6% of the year-to-date total. It was followed by Saudi Arabia, Singapore, Japan, United Arab Emirates, the United Kingdom, Canada, Germany, Hong Kong and Kuwait. The combined remittances from these sources accounted for 78.4% of total cash remittances in the 10 months to October.
The BSP clarified, however, that many remittance centers abroad course such funds through correspondent banks, most of which are located in the US.
Moreover, remittances coursed through money couriers cannot be tracked by actual location of sources and are lodged under the country in which main offices are based which, in many cases, is the United States.
Mr. Mapa noted that while “Filipinos sent home more dollars than expected” in October, “With global headwinds swirling, remittance flows from affected areas — with the exception of the UK — have all taken a hit with remittances from Hong Kong, Saudi Arabia, Qatar and the UAE all taking a tumble in October.”
“Taken together, remittances from these jurisdictions account for 24% of total, weighing heavily on the total amount of foreign exchange sent home. Offsetting the weakness in these regions was the 26% gain in remittances from Asia which was up 26% with extremely strong remittance flows from Japan, Korea and Singapore, while the US continued to post double-digit growth in remittance flows in 2019.”
He also noted that OFW remittances — which help fuel overall economic growth through household spending that account for nearly 70% of gross domestic product — have been lending strength to the peso against the greenback.
“Sustained remittance flows have helped narrow this year’s current account deficit, working together with a tighter trade gap with exports eking out growth while import compression was in full effect,” Mr. Mapa wrote.
This development, he said, “is impressive given that this occurred even with the US-China trade war and with BSP slashing policy rates aggressively.”
“The peso’s fortunes, however, may reverse in 2020 with the current account expected to come under renewed pressure on projected imports related to the government’s fiscal push,” Mr. Mapa said.
“But one thing’s for sure: OFW remittance will continue to post decent growth prints to offset this weakening pressure.”
Asked on his outlook for remittance flows, Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail that he expects “a further pickup towards the end of the holiday season, but conversion could be at a slight disadvantage as the peso maintains its strength against the dollar.”
Aside from the seasonal factor brought about by the holidays, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in an e-mail attributed continued remittance growth to diversification of manpower markets. “The country’s improved diplomatic relations with the major host countries for OFWs — as well the country’s further diversification of more host countries for OFWs, on top of the traditional ones, to more countries in Asia, Middle East, Europe and Americas — have also supported the recent faster growth in OFW remittances, especially amid aging populations and shortage of labor in some developed countries.”
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion noted that while uncertainty in Hong Kong may be “considerable,” it is “not so big to sway Philippine remittance growth downwards.” “Since the HK conflicts escalated, Philippine remittances have continued to rise considerably,” Mr. Asuncion said in an e-mail. “It seems there are no signs that remittance growth will abate in the near future.”
For Security Bank’s Mr. Roces, however, “some expatriate employers may have begun to leave and this gives some instability in terms of employment opportunities” in the former British colony. — Luz Wendy T. Noble