MANILA, Philippines - Remittances should make up a smaller portion of the country’s gross domestic product in the next years on the slowing growth of funds sent home by Filipinos abroad, according to British bank Standard Chartered.
“While overseas workers’ remittances are likely to remain important to the economy, we expect them to make only a small contribution to future domestic consumption growth,” the bank said in a research note.
StanChart expects remittances to account for only seven percent of the country’s GDP “in the coming years,” below the 8.5 percent recorded in 2014.
“Real remittance growth has slowed in recent years, providing less support to real consumption and GDP growth,” StanChart said.
“At the same time, better employment opportunities may prompt more overseas Filipinos to return home, compensating for slowing remittance growth,” the bank said.
“We expect domestic employment to become more important to domestic consumption and GDP growth in the next five years,” it said.
Cash remittances climbed 5.8 percent to $24.308 billion last year from $22.968 billion in 2013, a new record high for the annual tally. The bulk were sent from the United States, Saudi Arabia, the United Arab Emirates, the United Kingdom, Singapore, Japan, Hong Kong and Canada.
The Bangko Sentral ng Pilipinas last week said the increase was on the back of sustained demand for Filipinos abroad, noting 1.6 million individuals were deployed in 2014.
Remittances support domestic consumption, the main driver of the Philippine economy, which grew 6.1 percent last year.
At the same time, the expansion of local banks’ services abroad also supported the growth in remittances last year. The BSP said there were 4,765 tie-ups, remittance centers, correspondent banks, branches, and representative offices as of end-2014.