Decline just ‘seasonal,’ but full-yr 2017 seen better than 2016
MONEY sent home monthly by overseas Filipinos workers (OFWs) in January grew sharply year-on-year, marked by notable annual increases in remittances by land-based workers with longer contracts, central bank data showed on Wednesday.
However, remittances in January fell from the December level.
The central bank did not give an explanation for the month-on-month decline but an analyst said it was due to seasonal factors.
Personal remittances rose 8.5 percent to $2.39 billion in January 2017 from $2.20 billion in January 2016.
The rate of annual increase in January more than doubled the 3.6 percent annual increase in December, but on a month-on-month comparison, remittances in January at $2.39 billion were lower than the $2.82 billion generated in December.
Focusing on the year-on-year increase in January alone, the Bangko Sentral ng Pilipinas (BSP) said the sustained rise was driven mainly by the 13.5 percent growth in transfers from land-based workers with work contracts of one year or more (which summed up to $1.9 billion), more than offsetting the 8.3 percent decline in remittances from sea-based and land-based workers with work contracts of less than one year (at $400 million).
An IHS Markit economist said the month-on-month decline in the value of remittances may be traced to seasonal factors.
“Although the value of remittances did show some moderation in January compared to the December level, this is a normal seasonal pattern as remittances for the month of December are usually the highest monthly remittance inflow each year due to the Christmas and New Year holiday season,” IHS Markit senior economist Rajiv Biswas said.
Personal remittances are transfers in cash or in kind, as well as capital transfers between households.
Analysts said that despite an expected slowdown in remittances this year, their nominal value will still be higher than in 2016.
Cash remittances coursed through banks totaled $2.16 billion in January, up 8.6 percent from $1.99 billion in January 2016. In December, cash remittances totaled $2.55 billion.
“Remittances of land-based workers amounted to $1.8 billion, 13.5 percent higher compared [with]the level posted in the same month a year ago. Meanwhile, sea-based workers’ remittances declined by 8.3 percent year-on-year due to the stiffer competition in the supply of seafarers,” the BSP explained.
By country source, it said the bulk of cash remittances came from the United States, Saudi Arabia, the United Arab Emirates, the United Kingdom, Japan, Singapore, Hong Kong, Qatar, Kuwait and Australia.
“The combined remittances from these countries accounted for more than 79 percent of the total cash remittances,” it added.
The BSP also said the United States, Singapore, Qatar and Japan were the major contributors to growth in cash remittances in January.
“Remittances from the United States grew by 9.2 percent, contributing 3.0 percentage points to the 8.6 percent overall growth. Those from Singapore, Qatar and Japan rose by 19.7 percent, 57.8 percent, and 16.0 percent, respectively, with a combined 3.8 percentage-point contribution to total growth in cash remittances,” it added.
Sustained growth seen in 2017
IHS Markit’s Biswas sees the early 2017 data on remittances showing quite a strong upturn compared with the 4.9 percent annual growth rate for remittances in 2016.
“The buoyant growth of remittances is a very positive sign for the overall economic outlook for the Philippines in 2017 as remittances provide a key source of financing for private consumption expenditure in the Philippine economy” he said.
Given that overseas worker remittances are one of the two main growth engines of the Philippine economy, the other one being the information technology-business process outsourcing (IT-BPO) industry, the early data is a positive signal for sustained strong growth in Philippine GDP growth in 2017, Biswas added.
IHS Markit expects the Philippine economy to grow by 6.3 percent in 2017, supported by continued strong growth in private consumption, as well as investment.
“Strong growth of foreign worker remittances will also help boost the current account position of the Philippines,” he said.
Another economist also forecast that OFW remittances this year will exceed the level in 2016.
“Remittance growth [is expected]to remain subdued in 2017, but still slightly better than in 2016, and supportive in the near term,” Chidu Narayanan from Standard Chartered Bank said.