BSP lowers 2015 remittance growth target

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) lowered the projected growth of cash remittances from overseas Filipinos due to the global economic slowdown and the weakening of other currencies against the US dollar.

BSP Deputy Governor Diwa Guinigundo said the growth of cash sent home by Filipinos to their loved ones in the Philippines is slightly lower at 4% instead of the earlier projection of 5%.

The central bank was earlier looking at a 5% growth target for cash remittances from Filipinos abroad to $25.6 billion this year.

The amount of money sent home by Filipinos abroad grew 5.9% to $24.35 billion in 2014 from $22.98 billion in 2013.

However, cash remittances grew only by 3.7% to $20.64 billion from January to October this year compared to $19.91 billion in the same period in 2014.

Cash remittances serve as a major source of foreign exchange that serves as buffer against external shocks.

De-risking

Guinigundo also said the de-risking of global banks by enforcing stricter regulatory measures on remittance business in compliance with the Financial Action Task Force (FATF) guidance has affected the growth of cash remittances.

He pointed out some of the domestic bank accounts in global banks have been closed due to money laundering concerns such as terrorist financing and others.

However, he explained there is continued strength in terms of consumption expenditures that have been supported by remittances.

Likewise, he noted steady investments especially in the real estate business that is supported by cash remittances from Filipinos abroad.

“At this point, it is difficult to say that we are seeing a more permanent shift to a lower normal remittances which we should see some recovery moving forward,” Guinigundo said.

Feedback process

For his part, BSP Managing Director Francis Dakila Jr said some Filipinos abroad could be holding on to their earnings overseas instead of sending them to their loved ones to the Philippines due to the strong US dollar.

“To some extent, the reduction in remittances may also be the result of a feedback process. As the peso weakens and as you see the budgetary requirements of the families are stated in pesos, then you actually need less dollars in order to support these requirements. We don’t actually have all the information as to how much of the compensation is being retained in banks abroad,” he said.

For 2016, Guinigundo said remittances are expected to increase by 4% to $26.3 billion on account of the steady deployment of Filipino workers, greater diversification of country destinations, and shift to higher-skilled types of work.

“Looking at the rate of deployment, we continue to see sustained resiliency in the deployment of our workers abroad,” he added. – Rappler.com