Remittance flows seen to be stronger in 2nd half

MANILA, Philippines—Remittances are expected to grow at a faster pace in the second half, despite challenges now facing overseas Filipino workers (OFWs) in some countries.

In the latest issue of “The Market Call,” the joint monthly publication of First Metro Investments Corp. (FMIC) and University of Asia and the Pacific (UA&P), foreign employers’ demand for Filipino workers will continue to grow in the second half, and this development will push up the amount of remittances, growing by at least 7 percent from that seen in the same period last year.

From January to May this year, growth in remittances stood at 6.2 percent, reaching $7.9 billion year on year, data from the central bank showed.

The publication expected demand for Filipino workers to remain strong, while the deployment of more workers abroad would support faster growth in remittances despite adverse developments overseas.

Factors that are expected to pull down remittances include the lingering political unrest in some countries in the Middle East and North Africa (Mena).

Rising tension in some key oil-producing countries has been hampering growth in investments, affecting job requirements in the troubled region. This has led to the displacement of some OFWs.

Another drag in remittances was the series of natural disasters in Japan resulting in job losses for some Filipino workers based there.

The debt problems in the Euro zone have also curbed growth in job opportunities for Filipino workers and have displaced some OFWs.

“Even with the current Mena crisis, together with the Euro zone debt crisis and earthquake-damaged Japan, which all contributed to repatriations of some OFWs, the continuous deployment of more Filipinos was able to counterweigh it,” Market Call said.

Filipino workers deployed abroad in the first half of the year are expected to help spur remittances in the second half.

Still, the impact of higher dollar remittances on the income of OFW households would be tempered by the appreciating peso. A strengthening peso will reduce its value against the dollar, Market Call reported.

The peso has appreciated by about 4 percent since the start of the year. The peso broke into the 41-to-a-dollar territory on Monday to hit its highest level in over three years. The local currency ended 2010 at 43.84 against the greenback.

The appreciation of the peso, which reflects the trend now seen in the currencies of other emerging Asian markets, has been attributed to the rising inflow of foreign portfolio investments. Foreign capital is being pulled out of the United States and Europe and channeled to Asian economies now enjoying robust performance.

“OFW remittances are likely to accelerate slightly in the second half to above 7-percent growth, but the positive impact on the economy is likely to be blunted by the peso’s appreciation,” Market Call said.