Growth of OFW remittances slows to 2%

Cracks in the Philippine economy’s foundation were exposed Wednesday as data showed cash transfers from overseas Filipino workers (OFW)—considered the main pillar keeping the economy stable—grew at its slowest pace in more than five years.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that growth in OFW remittances slowed to 2 percent in November to a total of $2.12 billion from October’s 7-percent expansion.

Slowing growth in remittances came even as demand for Filipino labor overseas remained robust, the BSP said, citing data from the government’s worker deployment agency.

“The continued deployment of skilled manpower remained a key driver of the sustained growth of remittance flows,” the BSP said. BSP Deputy Governor Diwa C. Guinigundo said one-off slowdowns should be ignored, noting that year-to-date remittance growth was still within government forecasts.

He said the slower growth in November was likely a result of the weaker peso, which meant OFWs could send less money back to the Philippines and still be able to meet expenses in the country.

“What they’re after is the peso value. The tendency is to adjust so the peso value of remittances will be the same. They can afford to send smaller amounts,” Guinigundo said, noting that this trend was also noted in past spells of peso depreciation.

Growth in remittances in November was the slowest since January 2009, or months after the start of the 2008 global financial crisis, when remittances grew by just 0.1 percent. January to November 2014 remittances were up 5.7 percent to a high of $21.99 billion.

Projections by ING Bank earlier this week showed remittances were expected to grow by 7 percent. DBS, Southeast Asia’s largest bank, said remittance growth for the month was likely at 6.9 percent.

For all of 2014, the government expects remittances to be up by 5.5 percent to a record high of over $24 billion.

These cash transfers from OFWs are the biggest source of dollar income for the economy, which keeps the peso strong by ensuring the steady supply of foreign currencies in the country. This helps the country easily meet its import bill, which is more than what the country earns from exports of goods and services.

Remittances are also a strong driver of domestic consumption, which accounts for more than two-thirds of economic output.

Major sources of remittances were the United States, Saudi Arabia, United Arab Emirates, Singapore, Japan and Hong Kong.

Citing data from the Philippine Overseas Employment Administration (POEA), the BSP said job orders for OFWs reached 855,357, of which 38.3 percent were for service, production, technical, and related workers in Saudi Arabia, Kuwait, Taiwan, and Qatar.