Remittances hit year-high in July

Grow by 3% to nearly $21 billion in 7 months

MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) went up by 2.9 percent in the first seven months after a year-high inflow in July, the Bangko Sentral ng Pilipinas (BSP) said.

Latest data released by the central bank showed personal remittances reached $20.91 billion from January to July, about $585 million higher than the year-ago level of $20.33 billion.

China Bank chief economist Domini Velasquez said OFW workers tend to send more as prices of basic commodities in the Philippines continue to rise. “Overseas workers generally send more money when home conditions deteriorate,” she said.

Inflation averaged 6.6 percent during the seven-month period, still above the BSP’s two to four percent target range, after accelerating to 5.3 percent in August that snapped a six-month downturn.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the unusually high OFW remittances in July was due to tuition payments and other related spending in preparation for the start of the new school year.

Ricafort said the consistent growth in remittances could be attributed to higher commodity prices that require sending more money to augment the needs of OFWs’ families back home.

For July alone, the sum of net compensation of employees, personal transfers and capital transfers between households increased by 2.5 percent to $3.32 billion, the highest for the year so far.

This, however, was the slowest growth since the monthly record high of $3.49 billion in December last year.

“The growth in personal remittances in July 2023 was due to higher remittances sent by land-based workers with work contracts of one year or more, and sea- and land-based workers with work contracts of less than one year,” the BSP said.

According to the BSP, remittances from OFWs with contracts of one year or more went up by 2.6 percent to $2.63 billion in July from $2.57 billion in the same month last year, while that of workers with contracts of less than one year grew by 2.3 percent to $620 million from $600 million.

Of the total during the seven-month period, cash remittances coursed through banks grew by 2.9 percent to $18.78 billion from $18.26 billion in the same period last year.

According to the BSP, the growth in cash remittances from the United States, Singapore and United Arab Emirates mainly contributed to the increase in remittances from January to July.

In terms of country sources, the US posted the highest share of overall remittances during the period with 41.3 percent followed by Singapore (6.9 percent), Saudi Arabia (5.9 percent), Japan (five percent), the United Kingdom (4.8 percent), United Arab Emirates (4.1 percent), Canada (3.5 percent), Qatar (2.8 percent) and South Korea and Taiwan  (2.7 percent each).

For July, cash remittances increased by 2.6 percent to a seven-month high of $2.99 billion from $2.92 billion in the same month last year. This was also the highest since the record monthly high of $3.16 billion in December last year.

Velasquez said a relatively depreciated currency may also induce more remittances in the next few months.

The peso strengthened to the 53 to $1 level from an all-time low of 59 to $1 in October last year due to the aggressive rate hikes as well as active intervention by the BSP in the foreign exchange market.

However, the local currency weakened anew and almost touched the 57 to $1 mark late last month and early this month due to prospects of additional rate hikes by the US Federal Reserve as well as the decision of Fitch Ratings to downgrade the credit rating of the US to AA+ from AAA.

Velasquez said OFW remittances moderated in July, especially those coming from Europe and the US, as advanced economies experienced slowing economic activities.

However, she pointed out that remittances from Asia are expected to outperform the rest of the world led by ASEAN, Hong Kong and the Middle East in the near term.

“As inflationary pressures remain, such as higher rice and oil prices, that could lead to higher prices of other affected goods and services, OFW remittances could continue by a similar pace year-on-year, similar to gross domestic product growth for the coming months,” Ricafort said.