Central bank keeps forecast of slower remittance growth
THE BANGKO SENTRAL ng Pilipinas (BSP) expects remittances to grow slower this year as worker deployment could snag on policy reversals in the United States, now the biggest source of money inflows.
Money sent home by overseas Filipino workers (OFWs) is expected to increase by four percent to $28 billion this year, according latest forecasts the central bank announced Friday. If realized, this would be slower than the five percent climb to 2016’s record-high $26.9 billion.
In a briefing, BSP Deputy Governor Diwa C. Guinigundo said monetary authorities maintained the four percent projection given during their December assessment in light of the “possible impact of [US President Donald J.] Trump’s policies,” referring to the American leader’s protectionist stance on immigration and trade in a bid to keep jobs home.
Mr. Guinigundo said such US policy bias could likewise affect Philippine merchandise exports as well as the business process outsourcing (BPO) industry “in case Trump really decides to tighten his trade policy.”
Economists have downplayed expectations of slowing remittance growth, noting that BPO sales have been outpacing those inflows to become the country’s principal dollar earner.
Remittances dropped by about 5.9% to $2.083 billion in April, the lowest monthly level since the $1.997 billion which the country received in January 2016. Still, four-month inflows were 4.2% higher at $9.036 billion, versus $8.67 billion recorded in the comparable year-ago period.
The BSP attributed the lower April remittances to the repatriation of workers from Saudi Arabia as the Middle-East nation announced a three-month amnesty program for undocumented immigrants.
The United States is the biggest source of remittances, accounting for roughly a third of total inflows as of end-April at $2.994 billion, according to latest available central bank data.
Remittances support household consumption, which in turn is an anchor of overall economic growth. The inter-agency Development Budget Coordination Committee kept its 6.5-7.5% growth target for the Philippines this year, even as first-quarter expansion clocked 6.4% -- disappointing market expectations but still making the Philippines the second-fastest-growing major Asian economy next only to China in those three months.
Slower growth in remittances would likewise contribute to the projected balance of payments deficit, as outbound flows will likely outpace the four percent climb in the amount sent home by OFWs.
Remittances and BPO receipts have helped keep the country’s current account afloat. But with the latest developments, the current account is expected to reverse to a $600-million deficit this year, coming from 2016’s $601-million surplus.
The current account measures money flows from the trade of goods and services.
The first three months saw the current account post a $318-million shortfall as imports continued to outpace the growth in shipments of Philippine goods, the BSP said. This likewise pulled the January-March balance of payments position to a $994-million deficit, but the gap has been trimmed to a $78-million shortfall as of end-April due to a $917-million surplus that month.
The central bank expects the country’s overall external payments position to remain in deficit for the second straight year at a $500-million gap coming from a $420-million shortfall last year, as uneven global growth is seen to weigh on the country’s economy. -- Melissa Luz T. Lopez