Strong Aug remittance growth baffles economists

MANILA, Philippines – Authorities and economists are baffled by the sharp rebound in the growth of cash remittances in August and expect the amount of money being sent home by overseas Filipinos to slow down in the coming months.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said 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,” he said.

Guinigundo pointed out the 16.3 percent 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 pull back of lower oil prices and sluggish growth in the economies of oil exporting countries,” he said.

Latest data from the BSP showed cash remittances surged 16.3 percent to $2.32 billion in August from $1.99 billion in the same month last year. This was the fastest growth booked in more than two years after it jumped 16.6 percent in March 2014.

This resulted in a 4.6-percent expansion in the amount of money sent home by Filipinos abroad to $17.64 billion in the first eight months from $16.87 billion in the same period last year.

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

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

He explained the weak peso could have also encouraged overseas Filipinos 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.

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.