A slowdown in remittance growth should not be a cause for concern, research consultancy Capital Economics said, as there are signs the economy is finding other drivers.
In a research note, Capital Economics Asia economist Gareth Leather said growth in money sent home by overseas Filipino workers (OFW) likely settled below 5 percent last year.
The Bangko Sentral ng Pilipinas has yet to release full-year 2015 remittance data. As of end-November, the amount of cash transfers through banks totaled $22.84 billion, up 3.6 percent from a year earlier.
“Given that remittances are equivalent to around 10 percent of GDP (gross domestic product) and play a key role in supporting private consumption and keeping the current account in surplus, it is perhaps no surprise that the slowdown has got some analysts worried,” Leather noted.
This should not be a major cause for concern, he said, pointing out that while remittance growth has slowed in US dollar terms, depreciation has meant that flows are holding up much better in peso terms, which is what matters for domestic purchasing power.
“The broader economy hardly seems to have been affected. Growth last year came in at 5.8 percent, making the Philippines one of the fastest-growing economies in Asia,” Leather added.
Going forward, Capital Economics expects remittance growth to remain constrained this year, penciling in an expansion of just 4 percent in both peso and US dollar terms.
“But even if remittances do remain weak, this shouldn’t be a disaster,” Leather said.
He pointed out that other sectors of the economy, notably manufacturing and business outsourcing, were growing strongly and should more than make up for the weakness in remittances.
“The Philippines could finally be reaching a stage where it no longer needs to send people abroad in order to grow quickly,” the economist concluded.