Growth in money sent home by migrant workers might have slowed further in March amid weak economic conditions in Asia, Europe and the Middle East.
British bank Standard Chartered said a recovery could be expected in the second half of 2015 if the United States economy, the Philippines’ largest source of remittances, would post a strong recovery.
“Remittance growth has slowed in recent months.… We see downside risks in the near term as remittances from Europe, Asia and the Middle East decline,” the bank said in a note on Tuesday.
Standard Chartered said remittances from overseas Filipino workers (OFW) likely grew by 3.3 percent last March, slowing from 4.2 percent in February, tracking the recent trend in global cash transfers.
In the six months ending in February, remittances to the Philippines have grown by 4.6 percent on average—slower than the expansion of 6.1 percent in the preceding semester, Standard Chartered said.
Remittance data for March will be released on Friday.
“We expect an increase only in the second half as stronger US growth improves remittance flows,” the bank said. “Slower remittance growth may translate to a slight downside risk for the current account surplus in the first half, owing to a still buoyant services export growth.”
Unlike neighboring countries that rely on earnings from exports for foreign exchange revenues, the Philippines counts remittances from OFWs as the largest source of dollar income for the economy. This ensures a steady supply of dollars in the country, which the government and local companies need to do business with the rest of the world.
A shortage of dollars, known as a balance of payments (BOP) crisis, will force the country to buy foreign exchange from overseas at higher rates to pay for imported goods or to meet debt obligations.
Last year, about $24 billion in remittances entered the country, fueling the prosperity of industries such as real estate and consumer goods to the tune of 8.5 percent of gross domestic product.
The World Bank in a report last April said the global flow of remittances to developing countries like the Philippines would slow to a trickle in 2015, growing by just 0.9 percent year-on-year to a total of $440 billion.
The 2015 remittance growth rates may be the slowest since the global financial crisis of 2008, the bank said.