Political unrest in MidEast, North Africa to impact on remittance inflows this year

MANILA, Philippines - Global banking giant Hong Kong and Shanghai Banking Corp. (HSBC) has expressed concern the political unrest in the Middle East and North Africa will impact on the remittances sent by overseas Filipinos this year.

Roughly 14 percent of the country’s gross domestic product (GDP) is attributed to remittances from overseas Filipinos, which have been fueling private consumption for the past decades.

Consumption and investments remain the major drivers of growth for the Philippines.

In a teleconference briefing yesterday, HSBC chief economist Frederick Neumann said the Middle East and North Africa account for a huge number of deployed migrant Filipinos.

“We are concerned that the remittance inflows can be interrupted,” Neumann said, adding that the March 11 disaster in Japan had minimal impact on the country’s remittance market.

“That actually surprises us that a few Filipinos are deployed in the Japanese market,” he said.

However, Neumann said there are two offsetting factors that would cushion the negative impact on remittance inflows.

Due to the political tensions, a number of Middle East governments have increased spending such as the Saudi Arabia government, which has increased spending by roughly 25 percent of GDP.

Likewise, higher oil prices stimulated increased production from producers to stabilize global prices. “A large number of Filipinos deployed in oil-producing countries are directly involved in oil extraction,” Neumann said.

Meanwhile, HSBC has reset its forex outlook for the peso to 41 to the dollar at yearend, which was prompted by the tightening of monetary policies.

“Monetary authorities will use more interest rates to shore up on inflation,” the HSBC chief economist said.

Food prices had already accelerated to 2.3 percent quarter-on-quarter, compared with 1.3 percent in the same period in 2010.