Despite the slowdown in the growth of cash sent by overseas Filipinos to their families, their foreign exchange gains continue to outpace the increase in commodity prices, according to a local economist.
On Tuesday, the Bangko Sentral ng Pilipinas (BSP) reported that cash remittances sent by Filipinos abroad grew 3.8 percent in September 2022. This, however, is slower than the 4.3 percent posted in August 2022 and 5.2 percent growth posted in September 2021.
Unionbank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror that they computed the real peso value of Overseas Filipino Worker (OFW) remittances and this yielded an average of 7.6 percent in the January to September period and 12.3
percent year-on-year in September.
“Thus, the PHP (Philippine peso) buying power of recipients of OFW remittances have been upheld despite rising inflation and higher commodity prices,” Asuncion told this newspaper.
Asuncion said Unionbank expects OFW remittances in 2022 to grow 2.3 percent on average, booking a total of $32.1 billion. This, he said, bodes well for the peso as it will lead to the strengthening of the Philippine currency against the US dollar.
“The weak PHP is an attraction for OFWs to send more, but the stronger PHP in the last few days, I believe, is not a reason. A stronger PHP is usually a seasonal phenomenon for sure,” he said.
BPI Chief Economist Emilio S. Neri Jr. told the BusinessMirror, however, that the recent strengthening of the peso has only been partly affected by remittance inflows.
The main reason for the recent strengthening of the peso against the US dollar was mainly the result of the greenback’s “pullback against most currencies this past week.”
The Philippine peso has gotten back to the P57 to the US dollar level last week. This is the strongest level against the greenback since September this year.
“The US dollar’s pullback against most currencies this past week as market participants believe that the Federal Reserve will slow down its rate hikes. The belief, in turn, is based on a slower inflation print for October (7.7 percent versus 7.9 percent median estimate),” Neri told the BusinessMirror.
Slower growth
BSP data showed cash remittances coursed through banks reached $2.84 billion in September 2022 from $2.74 billion recorded in the same month last year.
On a year-to-date basis, cash remittances amounted to $23.83 billion in January-September 2022, up by 3.1 percent from $23.12 billion recorded in the same period last year.
Institute for Migration and Development Issues (IMDI) Executive Director Jeremaiah M. Opiniano said the slower growth of remittances may reflect the situation of OFWs abroad.
Commodity prices in host countries have also risen and this may have prompted some OFWs to reduce their remittances. He said some of these funds may be used for OFWs’ needs to continue living abroad.
“As much as Filipinos abroad want to send more, higher spending in host countries quietly diminishes their allotments for remittances. The expenses in host countries have escalated, and you can’t blame overseas Filipinos if spending in host countries is a visible priority for their incomes,” Opiniano told the BusinessMirror via email.
Opiniano noted that the International Monetary Fund (IMF) expects global inflation to average 8.8 percent in 2022. “People worldwide have felt the spending crunch—in both origin and destination countries.”
However, economists like Asuncion said rising inflation, such as global oil, could benefit the country’s OFWs given that higher oil prices would mean more jobs for foreign workers including those from the Philippines.
Meanwhile, the BSP said the expansion in cash remittances in September was due to the growth in receipts from land-based and sea-based workers.
The growth in cash remittances from the United States, Saudi Arabia, Singapore, and Qatar contributed largely to the increase in remittances in nine months.
In terms of country sources, the US posted the highest share of overall remittances during the period, followed by Singapore and Saudi Arabia.
Personal remittances
BSP data showed that personal remittances from Overseas Filipinos (OFs) in September reached $3.15 billion, 4 percent higher than the $3.03 billion recorded in the same month last year.
This resulted in cumulative remittances rising by 3.1 percent to $26.49 billion in January to September from $25.7 billion registered in the comparable period in 2021.
The increase in personal remittances in September was due to remittances sent by land-based workers with work contracts of one year or more, and sea- and land-based workers with work contracts of less than one year.
Personal remittances are computed as the sum of net compensation of employees—gross earnings of overseas Filipino workers with work contracts of less than one year, including all sea-based workers, less taxes, social contributions, and transportation and travel expenditures in their host countries.
This does not include personal transfers—all current transfers in cash or in kind by OF workers with work contracts of one year or more as well as other household-to-household transfers between Filipinos who have migrated abroad and their families in the Philippines—and capital transfers between households or the provision of resources for capital formation purposes.
Image credits: Alysa Salen