Money sent home by overseas Filipino workers (OFWs) plunged 20 percent month-on-month in April, the lowest amount of remittances in 15 months, driven by the Saudi Arabian Amnesty program and the depreciation of major host countries’ currencies against the US dollar, official data showed on Thursday.
Despite the drop, analysts remained optimistic that remittances will continue to be resilient this year.
Data from the Bangko Sentral ng Pilipinas (BSP) showed personal remittances slumped to $2.31 billion in April from $2.91 billion in March. They dropped 5.2 percent from $2.44 billion a year earlier.
The amount of remittances in April was the lowest since the level hit $2.20 billion in January 2016.
For the first four months of the year, remittances reached $10.02 billion, up 4.7 percent from $9.57 billion a year earlier.
Personal remittances are transfers in cash or in kind, as well as capital transfers between households.
Cash remittances coursed through banks totaled $2.08 billion in April, down 5.9 percent year-on-year from $2.21 billion. In March, cash remittances totaled $2.61 billion.
“This was attributed to the 7.6 percent drop in cash remittances from land-based workers, which offset the marginal increase (of 0.3 percent) in transfers from sea-based workers,” the BSP said.
The central bank said the top countries that registered declines in cash remittances in April were Saudi Arabia – partly as a result of repatriation of workers under the amnesty program – followed by Singapore, Australia, and the United Kingdom (UK).
The amnesty program gives undocumented foreigners 90 days to leave Saudi Arabia without risk of detention.
“Aside from recorded declines in cash remittances (in original currency) in these countries, the lower US dollar value of remittances in April could be partly due to the depreciation of major host countries’ currencies vis-à-vis the US dollar, such as the Singaporean dollar, Australian dollar, pound sterling and the euro,” the BSP explained.
Furthermore, the fall in remittances could be attributed to the drop in the number of banking days in April 2017, compared with the same month a year ago, the BSP said.
Cash remittances coming from the United States, Saudi Arabia, United Arab Emirates (UAE), Singapore, Japan, UK, Qatar, Kuwait, Hong Kong, and Canada comprised about 80 percent of total cash remittances in the first four months of 2017, it added.
For the first four months of 2017, cash remittances recorded 4.2 percent growth from the level posted in the same period a year ago, reaching $9.0 billion.
“We are not unduly concerned right now because given the peak OFW remittances registered in March 2017, the drop in April might just be a reflection of remittances having been remitted earlier than usual, in March,” said Metrobank Research head Marc Bautista, referring to the record $2.91 billion remittances posted in the third month of the year.
Bautista, however, explained that it would be worrisome if the peak in March and the drop in April reflected savings being repatriated because OFWs were being sent home, which would imply that regular monthly flows might get cut.
“That remains to be seen, however. Meantime, we believe that the [4 percent] BSP [growth]forecast for the year will still be likely hit this year, with OFW inflows at the $2 billion-plus level per month for the rest of the year,” he said.
IHS Markit Asia Pacific chief economist Rajiv Biswas believes that with global economic growth gradually improving, “overall worker remittance flows from overseas Filipino workers are expected to remain resilient during the remainder of 2017.”
Singaporean banking giant DBS predicts that at the current pace, total remittances are going to reach a new record of $28 billion this year.
“This is important on two fronts. First, strong remittance flows will continue to boost private consumption growth. Second, given the trade deficit is also set to widen this year, the growth in foreign remittances will be important to keep the current account deficit in check,” it said.