BSP cuts remittance growth forecast
MANILA, Philippines—The Bangko Sentral ng Pilipinas has cut its remittance growth projection for 2011, taking into account the unrest in North Africa and the Middle East (Mena), as well as the disasters in Japan, and their effect on the employment situation of Filipinos abroad.
Still, BSP officials said the reduction would be minimal as demand for Filipino labor in other parts of the globe would remain robust.
From an earlier forecast of 8 percent, remittances are now expected to rise by 7 percent this year to $20.1 billion from $18.8 billion last year, the BSP said.
The decline in growth rate was attributed to a slowdown in deployment in late 2010.
But an economist at HSBC believes otherwise. Sherman Chan, the British banking giant’s expert on Southeast Asia, said growth in remittances could bounce back from a 10-month low seen in February, maintaining a full-year pace of 8.5 percent this year despite the problems overseas.
“Remittances in 2011 are expected to remain resilient amid possible downside risks, such as the turmoil in the Mena region and natural disasters in Japan,” BSP Governor Amando Tetangco Jr. said in a message to economists, bankers and the business community during an economic forum held Friday.
His message was read by BSP Deputy Governor Nestor Espenilla Jr., who attended the event.
BSP officials said that although the projected growth rate had been reduced, the amount of cash sent in through official channels by workers abroad could still reach a new historic high. They noted that last year’s amount was the highest ever recorded. They also said that a 7-percent rise to $20.1 billion would be enough to boost consumption of Filipino households and help drive the overall economy.
Some Filipinos working abroad lost their jobs due to the political unrest in some oil-producing countries and the disasters in Japan. This development dampened expectations on remittances to the Philippines.
However, Tetangco stressed that remittances could still grow by an encouraging rate this year. He said that any adverse effects on overseas communities would be minimal. Also, an increase in demand for Filipino labor in other parts of the globe would offset the decline in employment in strife-torn and disaster-stricken areas.
“The natural calamities in Japan may even encourage greater demand for [overseas Filipino] workers once reconstruction efforts commence,” Tetangco said.
In the fourth quarter of 2010, total deployment fell by 1.6 percent year-on-year, with land-based deployment declining by 2.6 percent. On the other hand, sea-based deployment went up by 0.9 percent during the period.
“Remittance growth disappointed in February with its third consecutive month of deceleration. But we should not rule out a rebound later in the year, as demand for OFWs (overseas Filipino workers) for construction and healthcare work in Saudi Arabia and Japan is expected to rise,” HSBC’s Chan said.
“We maintain the view that deployment, and hence remittances, will remain solid this year, with a still-strong appetite for OFWs in Asia and improving demand in the West.”
Seeking to insulate Saudi Arabia from the social unrest elsewhere in the region, King Abdullah has announced a multibillion-dollar spending package for citizens.
The Middle East accounts for nearly 16 percent of total OFW remittances, compared to Europe’s share of about 17 percent. Bulk of remittances still come from the United States with 53 percent.
Saudi Arabia is the single biggest contributor in the Middle East accounting for about 8.2 percent of the total.
Remittances for the month of February came in at $1.5 billion, with land-based workers making up 79 percent of the total.
“Solid remittances are important to the Philippine economy by supporting private consumption and helping to offset the persistent trade deficit so as to keep the current account balance in positive territory,” Chan explained.
On a seasonally adjusted basis, remittances were up by 0.4 percent month-on-month in February, after rising by 0.8 percent the previous month.
Chan said the February remittance numbers came as a surprise. But the economist agreed with the Philippine central bank that recent events in the Mena region and Japan would not greatly affect the amount of cash sent in.
More job orders
According to the BSP’s latest report, remittances in the first two months of the year amounted to $2.98 billion, up by 6.9 percent from the $2.78 billion recorded in the same period last year.
Citing data from the Philippine Overseas Employment Administration (POEA), the central bank said that, with more Filipinos deployed abroad early last year, their earnings could help boost remittances in 2011.
From January to November last year, about 1.36 million Filipinos were deployed abroad. That figure was slightly higher than the 1.33 million workers reported in the same period of 2009, the central bank said, quoting data from the POEA.
Moreover, there were 43,360 new job orders processed in the first quarter of this year. The resulting deployment over the next few months is expected to support remittances.