BSP traces Aug fall to other currencies weakening vs dollar
Personal remittances by overseas Filipino workers (OFWs) fell in August, the first time since the central bank began releasing the relevant data.
Funds coursed through banks or cash remittances also contracted and the Bangko Sentral ng Pilipinas (BSP) on Thursday said the declines were partly due to other currencies weakening against the US dollar.
An analyst said the trend could continue given the currency weakness in key OFW markets.
Measured in dollars, the amount of OFW remittances to the Philippines reached $2.26 billion in August, down 0.8 percent from the $2.28 billion recorded in the same month last year, the BSP reported.
The central bank began reporting personal remittances data in 2012 and its readily available figures go back to 2010.
“This was partly due to the depreciation of some currencies against the US dollar, particularly the euro, Canadian dollar, and Japanese yen, which reduced the dollar equivalent of remittances sent from host countries,” the BSP explained in a statement.
Personal remittances consist of net compensation for land-based overseas workers with short-term (one year or less) contracts and all sea-based workers; personal transfers in cash or in kind between overseas Filipinos or longer-term overseas workers and their families in the Philippines; and capital transfers between households, such as funds for home construction.
Cash remittances, meanwhile, also dropped by 0.6 percent in August to $2.04 billion from $2.06 billion in the comparative period. The fall in cash remittances was the first since a 10.2 percent drop in April 2003.
Sharing the same view with the central bank was Barclays economist Rahul Bajoria, who traced the August remittances figure to excessive currency weakness in key countries such as Singapore, Malaysia and in some Middle East countries.
“This factor is also likely to have pushed back the decision to remit sums. As such, with the Philippine peso being an outperformer against most regional currencies and with remittances reported in US dollar, flows continue to be weighed by the sharp declines seen in regional currencies,” he said.
Bajora also believes the risk that September will also be negative has risen.
The weakness in host countries’ currencies may push some overseas workers to hold off sending money home, which may result in remittances rising closer to the festive season, he added.
“With the recent rebound in regional currencies, we expect remittance flows to improve in the fourth quarter,” Bajora said.
8-month growth up
Year to date growth in personal remittances, meanwhile, slowed to 3.9 percent at $17.93 billion from $17.27 billion. A month earlier it was 4.6 percent
Funds coursed through banks from January to August climbed 4.1 percent year-on-year to $16.21 billion, also down from 4.8 percent previously.
BSP data showed cash remittances from land-based and sea-based Filipinos at $12.4 billion and $3.8 billion, respectively.
The United States, Saudi Arabia, the United Arab Emirates, the United Kingdom, Singapore, Japan, Hong Kong and Canada were the major sources of the cash remittances for the eight-month period.
Despite the decline, the central bank stressed that the steady deployment of OFWs continued to provide support to remittance inflows.
Data from the Philippine Overseas Employment Administration showed 584,816 job orders were approved in the first eight months of this year. Of these, 41.5 percent were intended for service, production, and professional, technical and related workers in Saudi Arabia, Kuwait, Qatar, Taiwan, and Hong Kong.
In 2014, personal remittances set an all-time high of $24.96 billion while cash remittances reached $24.34 billion.