MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) hit the lowest level in nine months in February as global economic recovery wanes, according to the Bangko Sentral ng Pilipinas (BSP).
Latest data from the central bank showed personal remittances rose by 2.4 percent to $2.86 billion in February from $2.79 billion in the same month last year.
The sum of net compensation of employees, personal transfers, and capital transfers between households in February was the lowest since the $2.7 billion recorded in May last year. In terms of growth rate it was the slowest since the 2.3 percent growth recorded in July last year.
Personal remittances grew by three percent to $5.93 billion in the first two months from $5.76 billion in the same period last year.
Of the total amount, cash remittances coursed through bank went up by 2.4 percent to $2.57 billion in February from $2.51 billion a year ago.
This was the lowest since the $2.42 billion recorded in May last year while the growth rate was the slowest since the 2.3 percent booked in July last year.
The BSP reported a three-percent rise in cash remittances to $5.33 billion from January to February compared with $5.18 billion in the same period last year.
“The growth in cash remittances from the US, Saudi Arabia, Singapore, and Qatar contributed mainly to the increase in remittances in January and February,” the central bank said in a statement.
In terms of country sources, the US posted the highest share with 41.6 percent, followed by Singapore with 7.3 percent, Saudi Arabia with 5.5 percent, Japan with 5.3 percent, United Kingdom with 4.7 percent, United Arab Emirates with 3.7 percent and Canada with 3.2 percent.
China Bank chief economist Domini Velasquez said that remittances from the US would likely slowdown as prospects of a hard landing increases.
“We continue to expect a muted remittances growth as global economic growth wanes,” she said.
Velasquez said layoffs and possibility of a recession would curtail sending of remittances.
In its April 2023 World Economic Outlook, the IMF lowered its global gross domestic product (GDP) growth forecasts by 0.1 percent to 2.8 percent from 2.9 percent for 2023 and to three percent from 3.1 percent from 2024 compared with 3.4 percent in 2022.
Likewise, Velasquez added that a moderate oil prices would likely inhibit economic growth in the Middle East.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that the risk of recession in the US would still be a drag for OFW remittances, especially if there would be job losses for some OFWs.
However, Ricafort said the continued economic reopening in China, which is the world’s second biggest economy, could offset this risk.
Aside from the risks of recession in the US, Ricafort said the slowdown in OFW remittancesmay also have to do with the relatively higher prices in major host countries for OFWs that fundamentally reduced the remittances sent back to the Philippines.
He added that the slowdown in OFW remittances was also partly due to the weaker peso exchange rate that also partly reduced the need to send more remittances due to higher conversion rate for the dollar
The peso appreciated back to the 53 to $1 range in February due to the aggressive rate hikes and the active participation of the BSP in the foreign exchange market to tame inflation and stabilize the local currency.
It has emerged as the strongest currency in the region this year after slumping to an all-time low of 59 to $1 in October last year due to the aggressive rate hikes delivered by the US Federal Reserve to fight inflation.
Ricafort believes remittances will continue to increase as higher inflation locally may have necessitated more remittances as well as the continued reopening of the economy toward greater normalcy with some pent-up demand that also entailed the sending of more OFW remittances to the country
“For the coming months, single-digit or modest growth in OFW remittances could continue as OFW families and dependents still need to cope up with relatively higher prices locally that would require the sending of more remittances,” Ricafort said.
The BSP missed its four percent growth target for the second straight year as remittances increased by only 3.6 percent in 2022.