Money sent home by Filipinos working abroad rebounded in August, and analysts are upbeat that the central bank’s $26.8 billion target for the whole of 2016 is “doable.”
Personal remittances reached $2.55 billion in August, up 16 percent from a year ago, and reversed the 5.4 percent decline in July, central bank data showed. It is the biggest gain posted in 29 months.
For the first eight-months of the year, remittances stood at $19.48 billion—just $7.32 billion shy of the full-year target of the Bangko Sentral ng Pilipinas—and up 4.4 percent versus the same period in 2015. The BSP’s full-year target represents a 4 percent rise from $25.77 billion recorded in 2015.
“The BSP’s assumption for a 4 percent growth rate (for the whole year) still appears doable,” said BPI economist Nicholas Mapa.
While the last four months of the year usually sees a jump in remittances due to the holiday season, Mapa said growth in repatriated funds may slow given the weakening peso, which slipped to a seven-year low versus the dollar.
“The bump up in remittances this month may easily be offset by a slip in September as the peso weakens, thereby limiting the need for overseas Filipinos to send home an increased amount of dollars to fund a fixed peso consumption or investment amortization,” Mapa said in a reply to e-mailed questions.
The peso closed 8 centavos lower on Monday at 48.52 to a dollar, still its weakest finish since August 2009.
But in peso terms, remittances jumped a whopping 20.7 percent, and fueled a surge in consumer spending, Mapa said.
Negligible impact on current account
Meanwhile, ING Bank’s Manila-based senior economist Joey Cuyegkeng said the growth in remittances will not be enough to counter the negative impact of a wider trade deficit on the country’s current account.
“An estimated $1 billion positive swing in remittances wouldn’t suffice to prevent an estimated $11.6 billion negative swing in the trade deficit from producing a current account deficit,” Cuyegkeng said in an e-mailed statement.
In the first half of this year, the current account posted a surplus of $778 million, way lower than the $5.3 billion surplus in the same period of 2015. This was due mainly to the widening trade gap, which increased 72 percent to $16.4 billion in the same period.
The BSP is forecasting a current account surplus of $5.8 billion this year.