OFW remittances hit record high in May

MANILA, Philippines - Remittances from overseas Filipino workers (OFWs) in May were higher than central bank expectations, with the monthly inflows reaching a new record high at $1.48 billion as more Filipinos sought jobs abroad.

The record inflows in May brought the cumulative remittances for the first five months of the year to $6.98 billion, representing a 2.8-percent increase from the level recorded in the same period last year.

OFW remittances are the most closely-watched economic data since these finance private spending which has become the most critical economic growth driver.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that OFW remittances coursed through banks grew year-on-year by 3.7 percent in May 2009, higher than the two- to three-percent growth projected earlier.

Before May, the second highest level of remittances was $1.47 billion, registered in March 2009.

BSP data showed that remittances from both sea-based and land-based workers posted gains of 4.6 percent and 2.4 percent, respectively. 

“The stream of remittances from overseas Filipinos continued to show signs of strength despite lingering global economic fragilities,” said BSP Governor Amando M. Tetangco Jr. He said this provided some basis for “cautious optimism” regarding steady remittance levels for 2009.

Tetangco said remittance flows continued to be underpinned by the steady demand for Filipino workers abroad, specifically professional and skilled workers, as well as the expanded access of overseas Filipinos and their beneficiaries to a wide range of financial products and services offered by banks and other financial institutions.

According to Tetangco, the demand for Filipino workers is expected to continue as a result of hiring agreements forged between the Philippines and some host countries such as Qatar, Saudi Arabia, Canada, Australia and Japan.

Labor export has been a cause for embarrassment for past administrations but the Arroyo administration has made a policy of aggressive marketing of Filipino workers whose earnings boost the country’s dollar reserves.

Earlier, the Department of Labor and Employment (DOLE) reported that the Philippine government entered into a bilateral agreement with South Korea on the employment of Filipino workers.

A memorandum of understanding was signed between the Philippine Department of Labor and Employment and its South Korean counterpart in May 2009 aimed at hiring up to 5,000 Filipino workers in the South Korean manufacturing industry and other sectors within the next 10 months.

The DOLE also said it has started talks with the Libyan health ministry for the recruitment of about 4,000 Filipino medical workers in Libya.

Moreover, the BSP said the Arroyo administration is intensifying efforts to assist retrenched overseas workers by finding new jobs for them abroad.

For the period January-May 2009, the BSP said the major sources of remittances were the U.S., Canada, Saudi Arabia, U.K., Japan, Singapore, United Arab Emirates, Italy, and Germany.  

With remittances showing unexpected resiliency, Tetangco expressed optimism that consumer spending would recover in the coming quarters as consumers have indicated their intention to spend despite the overall pessimism about the economy.

Tetangco said the results of the recent Consumer Expectations Survey (CES) were encouraging in that consumers indicated their intention to spend on what were considered big-ticket items such as housing, motor vehicles and appliances.

He pointed out that based on the first quarter National Income Accounts, the breakdown in the gross domestic product (GDP) reflected that consumers had already raised what he considered “precautionary savings.”

Tetangco said this behavior was understandable since consumers saw the worst in terms of volatility and uncertainty in global economies and financial markets in the last quarter of 2008.

In reaction, consumers opted to put away their cash rather than spend while bracing for the full impact of the global slowdown that was expected to displace workers and lower household incomes.

“However, as more signs of a slowing of the contraction in global economies are seen, the public’s confidence is expected to rise and, therefore, precautionary savings would fall,” Tetangco pointed out.