OFW families urged not to hoard dollars

MANILA, Philippines - Bankers are urging beneficiaries of remittances from overseas Filipino workers (OFWs) not to accumulate US dollars as economic growth in the economic superpower is expected to crawl in the long term.

Bankers Association of the Philippines president Aurelio Montinola III, in an interview with reporters, advised the beneficiaries not to hold on to their dollars and instead exchange these to peso immediately.

“The most obvious (is) change, since the US is expected to experience a long-term low growth and long-term low interest rate. So if you exchange it (dollars) into pesos you’ll get a higher interest rate and possibly appreciation of the peso,” he stressed.

The peso has strengthened a little over three percent to 42.475 to $1 the other day from 43.84 to $1 last Dec. 31.

Montinola, who is also president and chief executive officer of Ayala-controlled Bank of the Philippine Islands (BPI), pointed out that it is not wise to hold on to other currencies.

“But many people, for many reasons, don’t like to have everything only in one currency. Therefore, they keep it in other currency. I think for a practical point of view unless you’ll be able to use the money yourself it’s hard to have other currencies,” he added.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the growth in OFW remittances picked up in May, expanding 6.9 percent and posting its fastest monthly growth since January amid the political tensions in the Middle East and North African (MENA) states, the disasters in Japan, and the recent decision of the Kingdom of Saudi Arabia to stop hiring domestic helpers from the Philippines.

The amount of money sent home by Filipinos abroad to the Philippines reached $1.688 billion in May or $110 million higher than the $1.578 billion booked in the same month last year.

The BSP said the 6.9 percent growth in OFW remittances in May was the fastest since January when the amount rose 7.6 percent while the amount was the second highest versus the record monthly remittance of $1.694 billion recorded last December.

Remittances climbed 6.2 percent to $7.898 billion in the first five months of the year from $7.438 billion in the same period last year. Major sources of remittances from January to May were the US, Canada, Saudi Arabia, the United Kingdom, Japan, Singapore, United Arab Emirates, Italy and Germany. 

OFW remittances grew 8.2 percent to a record level $18.76 billion last year from $17.35 billion in 2009 due to the continued demand for skilled Filipino workers abroad as well as the expansion of remittance centers abroad giving OFWs more options to send money.

Last April, the BSP lowered its OFW remittance growth forecast to seven percent or $20.1 billion instead of the original target of eight percent or $20.2 billion this year due to the tensions in the MENA region and the disasters in Japan.

Next year, it expects a slower growth of five percent or $21.2 billion.

Montinola also encouraged investors to diversify their portfolio as the recent downgrade of the triple A credit rating of the US continued to pummel stock markets all over the world including the Philippine Stock Exchange (PSE).

“You should have some kind of strategic allocation, which is similar also to the diversification and think a little bit longer term. At the present time, given the volatility people with stock market holdings are either keeping it the same or reducing it a bit. I think you have to think longer term just to have a mix of assets to invest in,” he added.

He also said Filipinos should learn how to save .

“I think given the international volatility obviously it helps to save for the rainy day,” he added.