Remittances off to tepid start in 2019

Dollars sent by expatriate Filipinos to their local beneficiaries rose slightly in January, thanks to an increase in volumes sent home by both land- and sea-based overseas workers, the central bank said on Friday.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said personal remittances from the country’s workers stationed abroad grew by 3.4 percent year-on-year in January 2019 to reach $2.75 billion from $2.66 billion in the same period last year.

Personal remittances from land-based workers with work contracts of a year or more rose to $2.12 billion, 2.3 percent higher than $2.07 billion recorded in January 2018. Those from sea-based and land-based workers with work contracts of less than a year rose by 12.6 percent to $580 million from $520 million.

Meanwhile, cash remittances that were coursed through banks—which count only wages sent home by expatriate workers and excludes funds sent home by non-OFW Filipinos—totaled $2.48 billion in January 2019, a 4.4-percent growth from $2.38 billion last year.

This growth was in line with the increase in remittances from both land-based ($1.95 billion) and sea-based ($530 million) workers, which rose by 2.3 percent and 12.7 percent, respectively.

By country source, the United States registered the highest share of overall remittances at 35.5 percent, the central bank said.

It was followed by Saudi Arabia, Singapore, United Kingdom, United Arab Emirates, Japan, Canada, Qatar, Hong Kong and Kuwait. The combined remittances from these countries accounted for almost 78 percent of total cash remittances.

For all of 2018, expatriate Filipinos sent $32.2 billion to their relatives and beneficiaries back home. This represented a growth of only 3 percent from the end-2017 level of $31.2 billion—the weakest annual growth in the last four years where rates stood between 3.8 percent (2015) and 7.5 percent (2014).

Historically, dollar remittances from overseas Filipinos have accounted for as much as 10 percent of domestic economic consumption, providing a key pillar of growth for the Philippines.

London-based Capital Economics had projected that the slowing growth of remittances from Filipinos living and working overseas would further widen the current-account deficit and put pressure on the peso.

For 2018, cash remittances rose by only 3.1 percent, the slowest since 2001 and Capital Economics expected the annual growth in the near term remaining at about 3 percent—half the average rate in the last 10 years.

In a March 14 report titled “Philippines: Is the slowdown in remittances a concern,” Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said the easing remittances growth reflected the “improved performance of the Philippine economy, which made it easier for people to find employment at home and reduced the need for them to go overseas in search of work.”

The Philippines’ gross domestic product (GDP) has been expanding by more than 6 percent yearly since 2012, among the fastest in the region. The domestic unemployment rate also dropped to 10-year lows as the growing economy created more stable jobs in recent years.

Capital Economics also attributed the slowdown in remittances to fewer job opportunities in the Middle East amid a downturn in what had been a top destination for overseas Filipino workers (OFWs). “The [Middle East] is the source of 30 percent of remittances to the Philippines and there has been a marked slowdown in remittances from the region over the past few years,” it said.

With remittances accounting for a tenth of GDP, Capital Economics said weak inflows might “act as a drag on consumption and investment.” But despite easing dollar remittances, “with fiscal and monetary policy set to be loosened this year, economic growth should remain fairly strong,” it said. —DAXIM L. LUCAS