BPO revenues to offset foreseen remittance slowdown

Top bank economists not worried 

MANILA, Philippines – Top bank economists are not alarmed by the possible slow down in cash remittances from overseas Filipinos amid the tension in the Middle East, softening oil prices, and the weakening of other currencies against the US dollar.

BPI associate economist Nicholas Antonio Mapa said Filipinos working abroad continue to find ways to send money to their loved ones in the Philippines despite the tensions in the Middle East and North African (MENA) nations as well as the slump in oil prices.

“True, troubles in the MENA region may result in late salaries and possible layoffs for migrant labor but Filipinos have always found a way to send home remittances for their loved ones, come hell or high recession, so never count them out,” he said.

He cited the case way back in 2008, when remittances were projected to decline due to the global financial crisis but managed to grow.

 “With all the uncertainty in global markets, we find ourselves right back where we were in 2008.  But eight years under our belts, the Philippines has grown, albeit still skewed to certain sectors but grown nonetheless” he added.

Likewise, he explained the slowdown in the dollar value of remittances in the past few months translates into healthy peso growth supporting private consumption.

Mapa said the country’s business process outsourcing (BPO) industry is ripe for growth and would help offset the slowdown in cash remittances from Filipinos abroad.

For his part, ING Bank Manila senior economist Joey Cuyegkeng projected a five percent contraction in cash remittances this year but would be eased by the projected mid-teens growth in BPO revenues.

Data showed remittances from the Middle East accounted for 22 percent of total in 2014 and in 2015. Money sent home by Filipinos from Saudi Arabia and the United Arab Emirates account for almost 17.5 percent of total remittances.

News from these economies about the repercussions of 12-year low oil prices and challenging fiscal positions raise the likelihood of weakening remittances.

Likewise, the stronger dollar has also affected remittances from other host economies such as EU, Japan and other Asian economies.

 “We cannot sweep aside the possibility of a contraction in OFW remittances. A five percent contraction in OFW remittances and a 16 percent growth in outsourcing revenues would still bring in $48 billion in structural inflows and still bring about higher household consumption,” Cuyegkeng said.

The Bangko Sentral ng Pilipinas (BSP) has lowered the projected growth in cash remittances from overseas Filipinos to four percent instead of five percent for 2015 and 2016 due to the continued weakness of other currencies against the dollar.

Latest data from the central bank showed cash remittances went up by 3.6 percent to $22.83 billion from January to November last year compared to $22.08 billion in the same period in 2014.

About 79 percent of the cash remittances came from the US, Saudi Arabia, the United Arab Emirates, Singapore, the United Kingdom, Japan, Canada, and Hong Kong.