Remittances may grow faster than expectation

MANILA, Philippines — Remittances may grow faster than the projected three percent expansion set by the Bangko Sentral ng Pilipinas (BSP) this year, helping address the widening trade deficit due to strong import, according to economists.

ING Bank Manila economist Nicholas Mapa said remittances continued to defy market expectations, clocking in 5.7 percent growth clip in May.

Mapa said this proves that remittances remain a solid and dependable source of both foreign currency and potent purchasing power.

“Steady inflows from Filipinos abroad have helped bridge the still widening trade gap to arrest the widening of the overall current account balance of the Philippines,” Mapa said.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed personal remittances grew at a faster clip of 5.5 percent to hit a five-month high of $2.89 billion in May from $2.75 billion in the same month last year, while cash remittances increased by 5.7 percent to $2.61 billion from $2.47 billion.

“While the economy gears up for faster growth and attempts to enter a higher growth trajectory via investments in infrastructure, Filipinos both here and abroad have done their share to make this a reality,” Mapa said.

For the first five months, personal remittances rose by 4.1 percent to $13.71 billion from $13.17 billion, while cash remittances coursed through banks went up by 4.5 percent to $12.35 billion from $11.82 billion.

The BSP has set a lower growth target of three percent for remittances this year.

“Time and time again, the Filipino has proven critics wrong, finding a way to send home much needed funds to bolster domestic consumption and perhaps unwittingly helped deliver the much awaited transition to a new growth path,” Mapa said.

Robert Dan Roces, chief economist at Security Bank, said the increase in remittances in May could be seasonal as the remitter provides cash for tuition on top of food, clothing and other provisions for his or her family prior to the start of the school year in June.

“We see this as a positive development since higher remittances also increase domestic consumption on imported and other taxable products while inflation tapers off – the improvement in vehicle sales last month may be proof of this,” Roces said.

Remittances usually fuel personal consumption, helping sustain a steady economic growth. The amount of money sent home by overseas Filipinos usually account for 10 percent of gross domestic product (GDP).

“It should also keep residential property sales strong. From another macro perspective, the higher remittances may further stabilize the country’s balance of payments position by serving as a good source of fiscal cushion,” Roces said.

The peso yesterday penetrated the 50 to $1 level, touching an intraday high of 50.885 after opening at 51 to $1. It has appreciated by 3.2 percent since closing at 52.58 to $1 last year due to the dovish US Federal Reserve and easing inflation.