$2.3-billion June remittance biggest drop in a year.
The Bangko Sentral ng Pilipinas (BSP) on Thursday reported cash remittances to have reached $2.29 billion in June 2019. This is the lowest monthly remittance volume to the country for the year. It is also 2.9 percent lower than the remittances of $2.36 billion sent by OFWs in the same month last year.
The slowdown of remittance flows during the month brought the six-month average growth to 3.2 percent, with a total volume of $14.64 billion.
Tracing the source of the drop, the Central Bank traced the decline largely to land-based Filipino migrant workers, whose remittances dropped by 5.4 percent during the month. The overall decline would have been larger, the BSP said, if it were not mitigated by the 6.3-percent increase in the cash transfers of sea-based workers.
By country source, the BSP pinpointed Saudi Arabia and Qatar as the countries that contributed most to the decline.
In a response to a query, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the relatively lower global oil prices in recent years may have reduced demand for OFWs in major oil-producing countries that host huge numbers of OFWs, especially in the Middle East. This, as lower oil prices reduced the revenues of these oil-producing countries, resulting in fewer mega infrastructure projects and less government spending, thereby reducing the deployment of OFWs in these countries.
The United States continued to register the highest share of overall remittances from January to June 2019 at 36.4 percent.
Other culprits identified
Economists, however, said problems in the Middle East were not the only reason behind the contraction of remittances during the period.
Seasonality, in particular, was a reason behind the decline for the month. ING Bank Manila economist Nicholas Mapa said the June slowdown was something they expected and forecast, as June is now considered a 'weak' month for remittances annually.
'We've noted increased volatility in remittance flows over the past three years and this could be due to the fact that overseas Filipinos may be getting their salaries delayed from time to time,' Mapa said in a response to a query.
Ricafort echoed this sentiment, saying OFW remittances for the month of June also tend to taper off after some seasonal increase in May. '[This is] when there are seasonal increase in OFW remittances and conversion to pesos to finance spending by OFWs and their families for tuition payments, other back-to-school expenses, vacations and even fiestas,' Ricafort said.
The strength of the peso against the dollar may also have pushed OFWs to hold off sending more dollars during the month, as these translate lower in peso terms, and the workers would rather wait until the peso loses value against the dollar, economists said.
Ricafort said the slower global economic growth and outlook may be another factor to slower remittances in June as this may have partly dampened demand for OFWs worldwide.
Remittances will still fuel economy
Asked if the decline in remittances could spark a negative trend for the overall transfers to the Philippines in the coming months, Mapa said remittance flows remain 'very healthy' and are 'more consistent than any other type of flows.' Thus they will continue to provide good support for the Philippine peso.
'There will be months of ups and downs but by the end of the year, OF remittance growth should settle right at 3 to 4 percent and will help the Philippines chase
6-percent growth by year-end,' Mapa said.
Mapa said in the coming months, the Philippines can expect increased flows of remittances, particularly as the 'ber' months approach.
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|Publication:||Business Mirror (Makati City, Philippines)|
|Date:||Aug 16, 2019|
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