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MANILA, Philippines — The “sub-par” support from remittances is another reason why consumption slowed in the first quarter, with inflows projected to “wane than grow” in the second half amid headwinds that Filipino expats face in their host countries, Pantheon Macroeconomics said.
“The support remittances are providing to private consumption in the Philippines remains sub-par,” Miguel Chanco, economist at Pantheon, said in a commentary.
Money sent home by Filipinos overseas is a major source of purchasing power in the Philippines, where consumption typically accounts for over 70 percent of gross domestic product (GDP). This is especially true today as stubbornly high inflation and expensive borrowing costs continue to squeeze household budgets.
READ: Consumer spending in PH not yet healed from pandemic
Government data showed growth of household spending eased to 4.6 percent in the first quarter—the weakest reading since the 4.8 percent contraction at the height of the COVID-19 pandemic in the first quarter of 2021.
Slowest remittance growth in 9 months
That, in turn, held back the first quarter GDP growth to 5.7 percent, which fell short of the Marcos administration’s 6 to 7 percent target range.
READ: March remittance growth slowest in nine months
Figures from the Bangko Sentral ng Pilipinas showed cash remittances coursed through banks rose by 2.5 percent year-on-year to $2.74 billion in March, softer than the 3 percent expansion recorded in February. This was the slowest growth in remittances in nine months or since June 2023.
While average remittances growth improved in the first quarter as a whole to 4.9 percent, from 0.9 percent in the preceding three months, Pantheon’s Chanco said there’s a weakness in inflows that are being masked by the weak peso, which can increase the value of remittances.
“This was down solely to currency effects rather than an actual improvement in US dollar transfers, a year-over-year lift that is more likely to wane than grow in the second half,” Chanco said.