Growth of cash sent home by migrant workers was at a six-year low in January, raising concerns that one of the main anchors of the Philippine economy may be dislodged.
Bangko Sentral ng Pilipinas (BSP) data released Monday showed remittances rose by just half a percentage point to a total of $1.81 billion, slowing from December’s 6.3 percent.
The total for the month was the lowest since February last year, while the growth was slowest since January 2009.
“Hopefully, it’s a blip, but if it becomes a trend, it becomes a concern,” Bank of the Philippine Islands (BPI) lead economist Emilio Neri Jr. said in reaction to the data.
In the short term, he said policymakers had little to worry about because cheaper fuel had resulted in a smaller import bill for the country, providing wiggle room for remittances to slow.
He said the slowdown in remittance growth was hard to pinpoint, but one theory was the significant reduction in fuel prices in recent months due to the decision by oil exporters to sustain production levels despite supply glut.
A significant portion of the Philippines’ eight to 10 million migrants work in the Middle East, a region that relies heavily on oil revenues.
“That has to be observed very closely in the coming months. A turn to contraction could affect the medium term balance-of-payments (BOP),” Neri said.
Corporate profit growth may also slow, which could affect investor sentiment toward the country.
“A lot of projects put forward assume that remittances will be very strong,” Neri said.
Apart from being the country’s major source of foreign exchange income, remittances from overseas Filipino workers (OFW) accounted for 8.5 percent of domestic output in 2014.
Official forecasts have remittances growing at 5 percent this year.
The bulk of cash remittances in January came from the United States, Saudi Arabia, United Arab Emirates, United Kingdom, Japan, Singapore, Hong Kong and Canada, according to the BSP.
However, the BSP said it was a common practice for remittance centers in various countries to course cash transfers through banks based in the US. As a result, remittance data from the US may be inflated while transfers from others may be understated.