OFW remittances recover in May
REMITTANCES from overseas Filipino workers (OFWs) recovered in May, the Bangko Sentral ng Pilipinas (BSP) announced yesterday, staying on track to a full-year target and helping to fuel household spending that contributes nearly 70% to national output.
Money sent home by OFWs picked up by 5.5% to $2.31 billion that month from $2.188 billion in May 2016 -- slower than the year-ago 5.8% clip but still marking a turnaround from April’s 5.9% decline, according to central bank data.
May had seen merchandise exports grow by double-digit pace for the third straight month and factory output increase at a faster clip, supporting hopes for robust second-quarter economic growth which the Philippine Statistics Authority is scheduled to report on Aug. 17.
Agriculture Secretary Emmanuel F. Piñol said last weekend that he expects second-quarter farm output growth (to be reported on Aug. 15) -- which has historically contributed a tenth to gross domestic product (GDP) -- to have slowed to around five percent from an actual 5.28% in 2017’s first three months, although Rolando T. Dy, executive director at the University of Asia and the Pacific Center for Food and Agri-Business, gave a more optimistic 6-7% estimate.
Socioeconomic Planning Secretary Ernesto M. Pernia last week tempered his expectations for second-quarter GDP growth to about 6.4% -- flat from the preceding three months -- from the seven percent estimate he gave at the start of May.
In its statement yesterday, the BSP attributed the recovery in remittances to increases in the amounts sent home by land-based OFWs which grew by 6.2% to $1.8 billion, coupled with a three percent pickup to $500 million from those working at sea.
For May, remittances from Filipinos in the United Arab Emirates saw the biggest increase in inflows to hit $202.425 million, which in turn contributed 1.5 percentage points to growth. OFWs in Canada, Saudi Arabia and the United States also supported the growth in monthly remittances, the central bank said.
May’s inflows likewise pulled the five-month tally to $11.346 billion, up 4.5% from the $10.859-billion haul during the same period in 2016.
An analyst said school-related expenses likely contributed to the rebound in remittances, following a one-time drop observed in April which was attributed to Saudi Arabia’s amnesty program that allows undocumented foreign workers to leave the country without paying penalties.
“The April contraction may have been temporary and May figures have bounced back via school needs of overseas workers’ families and the weaker peso,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.
The peso hovered within the P49 level versus the dollar in May.
The central bank expects full-year remittances to breach a new record-high $28 billion, about four percent more than last year’s $26.9-billion haul.
Mr. Asuncion said the government’s target is “very attainable,” with monthly remittances logging consistently above $2 billion since February last year.
“Downside risks important to look at are geopolitical situations like that of the recent Saudi Arabia and Qatar spat, which can directly impact the level of remittances if the situation deteriorates,” the bank economist added, referring to the decision by other Middle East countries to sever ties with Doha.
Analysts at Nomura Global Research said in a research note yesterday that the growth in money inflows showed the “resilience” of remittances despite mounting concerns.
“The rebound in remittances in June continue to support our view that this resilience in remittances is driven by several factors, including increased geographical diversification and a higher share of more skilled workers experiencing faster income growth,” the global bank said.
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