Banks see slower OFW remittance growth

MANILA, Philippines -  Banks operating in the Philippines see the growth of money sent home by Filipinos abroad slowing down but expect steady growth in the amount of loans extended to corporate and individual borrowers this year.

Bankers Association in the Philippines president Aurelio Montinola III told reporters that the growth in overseas Filipino workers’ remittances would slow down to a range of five percent to six percent primarily due to the tensions in the Middle East and North African (MENA) states as well as the disasters in Japan.

“I think the remittance was close to double digit before and I think the projections today is between five percent and six percent,” Montinola stressed.

The BSP has lowered its OFW remittance growth forecast to seven percent or $20.1 billion instead of eight percent or $20.2 billion this year. It expects the growth in OFW remittances to ease further to five percent or $21.2 billion next year.

OFW remitttances inched up by 8.2 percent to a record level $18.76 billion last year from $17.35 billion in 2009. The amount of money sent home by OFWs to their loved ones in the Philippines has been posting double digit growths until 2008 before slowing down to a single digit growth of 5.6 percent in 2008 due to the global financial crisis.

Latest datas from the BSP showed that OFW remittances climbed 5.9 percent to $4.594 billion in the first quarter of the year from $4.339 billion in the same quarter last year. Filipinos in the US, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, and Italy accounted for 80 percent of the total remittances in January to March this year.

Montinola, who is also president and chief executive officer of the Ayala-controlled Bank of Philippine Islands (BPI), said banks expect lending to grow by at least 12 percent this year despite the lower growth in OFW remittances.

He pointed out that the pick up in loans from the manufacturing sector as well as housing would make up for the slow down in the take up in consumer loans particularly auto loans.

According to him, banks see auto loans inching up by four percent to five percent after surging by as much as 30 percent after the massive floods caused by super typhoon Ondoy damaged several vehicles in the country.

“Housing, I think, is still okay but I don’t have the industry numbers. Manufacturing, I think, is picking up. Let’s wait and see what will happen after the second quarter,” he added.

The BSP earlier reported that bank loans grew 14.1 percent to P2.732 trillion as of end-March from P2.078 trillion as of end-March last year due to the projected sustained economic growth. This was the third straight month that bank lending posted a double digit growth after expanding by 11 percent in January, 12.3 percent in February, and 14.1 percent in March.

Loans extended to productive activities jumped by 15.6 percent to P2.149 trillion as of end-March from P1.859 trillion in the same month last year as corporate borrowers sourced more loans from banks to bankroll their expansion programs.

The loan growth to the manufacturing sector grew 20.5 percent to P393.55 billion followed by the real estate, renting, and business services that grew by 17.6 percent to P377.64 billion; agriculture, hunting, and fishery sector with 10.4 percent to P336.71 billion.; the wholesale and retail trade that expanded by 15.3 percent to P261.9 billion; and electricity, gas, and water with 44.8 percent to P211.1 billion.

Loans extended for household consumption posted a double digit growth of 12.9 percent to P194.74 billion in March from P172.53 billion in the same month last year. Credit card loans inched up by eight percent to P118.38 billion from P109.64 billion while auto loans jumped 27.9 percent to P60.88 billion from P47.59 billion.

Economic managers through the Cabinet level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) growing between seven percent and eight percent this year and next year.

The Philippines posted its strongest growth in 34 years after the GDP posted a surprising growth of 7.6 percent last year after slackening to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.