OFW inflows seen growing 5-10% this year

MANILA, Philippines - British banking giant HSBC sees remittances by overseas Filipino workers (OFWs) posting a double-digit growth this year as the Philippine economy slowly rebounds from the global financial meltdown.

Junie Veloso, head of the corporate banking division of HSBC, told reporters that OFW inflows would grow by five to 10 percent this year, faster than the six-percent growth projected by the Bangko Sentral ng Pilipinas (BSP).

The BSP said remittances likely grew by four percent to a new record of $17.1 billion last year from $16.4 billion in 2008.

Latest data from the BSP showed that OFW remittances climbed by 5.1 percent to $15.78 billion as of November last year from $15.019 billion as of end-November in 2008. Remittances – fastest in 14 months – grew by 11.3 percent to $1.459 billion in November last year from $1.311 billion in the same month in 2008.

Major sources of remittances were the US, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy, and Germany.

“OFW remittances is very strong and it definitely exceeded $17 billion in 2009,” Veloso pointed out.

The growth, he explained, would come from the continued recovery of the global economy as well as the domestic economy.

HSBC sees the country’s gross domestic product (GDP) expanding by 5.1 percent this year.

Veloso said monetary authorities would likely start adjusting the BSP’s key policy rates in the second quarter or third quarter of the year.

“The downside risk is inflationary pressures. Due to continued demand, prices have gone up,” he said.

The central bank’s Monetary Board has slashed its key policy rates by 200 basis points from December 2008 to July 2009 as part of an easing cycle aimed at cushioning the impact of the global financial crisis. This brought the overnight borrowing rate to a record low of four percent and the overnight lending rate to six percent.

According to Veloso, inflation this year would not go beyond the target of 3.5 to 5.5 percent set by the BSP.

“The BSP is very good in reading the situation. They have been managing inflation pretty well. We wouldn’t breach the high end of the target which is 5.5percent,” he said.