Economists expect growth in OFW remittances to slow down

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Economists expect growth in OFW remittances to slow down
For the BSP's Diwa Guinigundo, it is 'very difficult' to determine the cause of the higher-than-expected remittance level in August since there are no concrete data

MANILA, Philippines – From the sharp rebound in cash remittances in August, authorities and economists expect the amount of money being sent home by overseas Filipino workers (OFWs) to slow down in the coming months.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed cash remittances surged 16.3% to $2.32 billion in August, from $1.99 billion in the same month last year. (READ: OFW remittances see highest growth in over two years)

This was the fastest growth booked in more than two years after it jumped 16.6% in March 2014.

But Chidu Narayanan, economist for Asia at Standard Chartered Bank, said the growth in cash remittances is likely to ease in the coming months.

“We expect that remittance growth is likely to be much slower than before as the number of outgoing workers stabilize and overseas income is impacted by a sluggish global economy, particularly in the west which accounts for a significant chunk of remittances,” he said.

This was echoed by BPI associate economist Nicholas Antonio Mapa, who said the Philippines may see a slower pace in the growth of remittances towards year-end as Filipinos abroad adjust dollar wire transfers given the weaker peso.

For BSP Deputy Governor Diwa Guinigundo, it is very difficult to determine what actually drove the higher than expected remittance level in August due to the absence of concrete data and information.

“It is very difficult to make attributions on the dynamics of OFW growth for August. We don’t have much info from the usual data sources,” Guinigundo said.

He pointed out that the 16.3% jump in the amount of cash sent home by Filipinos abroad in August could be attributed to the increase in overseas deployment.

“This means there remains good demand for Filipino labor and that their skill sets defy the pullback of lower oil prices and sluggish growth in the economies of oil exporting countries,” Guinigundo said.

De-risking, base effects

He added that it is also possible that de-risking could not have obviously affected remittances for which reason they declined in earlier periods.

The country’s central bank has put in place measures to cushion the adverse impact of the de-risking activities being undertaken by foreign banks on remittances.

Guinigundo explained the weak peso could have also encouraged OFWs to send more money to their loved ones in the Philippines last August.

For his part, BSP Governor Amando Tetangco Jr traced the strong growth in cash remittances to base effects.

“It may be recalled that in August last year, the dollar value of remittances was relatively low due to weaker host currencies,” Tetangco said.

The BSP chief explained the euro has remained relatively stable while the Japanese yen and Singaporean dollar have strengthened.

He also pointed out cash remittances have been exceeding the $2-billion level since February this year.

Standard Chartered’s Narayanan said about a third of remittances originate from the US, while 10% are from Saudi Arabia, and 7.8% from the United Arab Emirates.

He added that remittances, business process outsourcing (BPO) receipts, and electronics exports support the country’s current account surplus. –

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