Remittances inch closer to full-year growth in October

MANILA, Philippines — Remittances from overseas Filipinos are out to prove their resiliency from crises, setting the stage for an unexpected growth this year despite the pandemic displacing thousands of migrant workers.

Cash remittances coursed through banks amounted to $2.7 billion in October, opening the final quarter of the year up by 2.9% year-on-year, the Bangko Sentral ng Pilipinas (BSP) reported Tuesday.

The latest expansion was slower than the 9.3% annual growth notched in September, but that remittances continued to reverse record declines early in the year showed that the Philippines is getting support from an ever-reliable dollar source. 

From January to October, cash remittances were treading flat from last year, down only 0.9% to $24.63 billion, data showed. BSP has projected a 2% decline for all of 2020.

For the central bank, that means larger foreign reserves that hit a historic high of $104.51 billion in November. For consumers, cash inflows provide critical source of purchasing power just when joblessness are persisting at its peak. 

Nicholas Antonio Mapa, senior economist at ING in Manila, said overseas Filipinos are trying their best to support their families at home even if that meant sending more money to keep their allowances intact amid a strong peso. The local currency has appreciated 5.5% this year against the dollar, trimming the value of remittances when repatriated.

“Funding the domestic consumption needs of their families, OFs (overseas Filipinos) may have been forced to compensate for the dollar’s relative weakness against the (peso) by sending home more remittances in dollar terms,” Mapa said in a commentary.

While the upcoming holidays are a boon to remittances, as Filipinos send home more for gifts and expenses, Mapa said fresh lockdowns abroad may yet again prove to be disruptive. “The slower pace in remittance flows from the previous month may reflect the impact of renewed lockdowns imposed by authorities in host nations as COVID-19 infections spiked during period,” he said.

Broken down, remittances in Europe went down 10.6% year-on-year for the first 10 months. Inflows from France and Spain, where governments had reinstated lockdowns last month to arrest a coronavirus resurgence, dropped bigger 43.3% and 24%, respectively. Those from the United Kingdom sank 9.7% annually.

Remittances from the Middle East, where majority of overseas Filipinos are deployed, had also not recovered. Inflows from the Gulf region shrank 12.8% as of October, on set for its third straight year of decline. 

Broken down, Filipinos from Saudi Arabia sent home 17.7% less dollars to their families, while those the United Arab Emirates and Kuwait cut back larger by 22.5% and 23.8%, respectively. Outside the Gulf area, remittances from Canada, also a top sender, inched down 0.2% on-year.

Declines in remittances in these areas were partially offset by sustained increases elsewhere, foremost of which were cash coming from the US that rose 5.9%. A total of 40.2% of cumulative remittances came from the US mainly because Filipinos typically use American banks to send back earnings.

In Asia, remittances grew 4.2% year-on-year, with cash coming from Hong Kong up a faster 5.7%, as well as that from Singapore (11.8%) and Taiwan (14.9%).

“We could see a strong finish in terms of remittance flows to close out the year, ironically keeping the strong dollar theme intact in 2020 and going into 2021. Renewed lockdowns in host countries may mute this rise however,” ING’s Mapa said.