Growth in the money sent home by migrant workers may decelerate to the slowest since the global financial crisis as cheap fuel prices put pressure on incomes of Filipinos in oil-exporting countries.
Signs of weakness in remittances from overseas Filipino workers (OFW) were most pronounced in November 2014, when growth dipped to 2 percent, Dutch financial giant ING said. This slowdown, the bank said, may persist in 2015.
“This year could raise anxieties,” ING economist in Manila Joey Cuyegkeng said in a note this week.
Remittances from OFWs are the largest source of dollar income for the Philippine economy, helping ensure the steady supply of foreign exchange that local businesses and the government needs for transactions such as debt payments and buying imports.
Domestic consumption, which makes up about two-thirds of gross domestic product (GDP), also benefits significantly from OFW remittances.
ING said remittances may grow this year by 4.5 percent, which would be the slowest expansion since 2009’s 5.6 percent.
BSP officials are similarly wary about the sustainability of remittances, noting that a significant portion of OFWs reside in the Middle East—a region that makes most of its income from oil exports.
The plunge in oil prices since June 2014 is similar to the plunge in oil prices during the global financial crisis. Oil prices from October 2008 to September 2009 dropped by an average of 42 percent year-on-year.
“OFW remittances are starting to reflect such a drop,” Cuyegkeng said.
In 2014, remittances rose by 5.8 percent, above the BSP’s projected growth of 5 percent for the year.
Top sources of remittances were the United States, United Arab Emirates and Saudi Arabia.
Apart from fuel prices, the stronger peso—which puts less money in the pockets of families that receive dollar remittances—may also put pressure on cash transfers, BSP Deputy Governor Diwa C. Guinigundo said last month.
Latest data showed remittances in November grew by 2 percent, the slowest expansion since January 2009. Paolo G. Montecillo