Remittances inch up by 2.9% in May to $2.78B

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THE remittances made by overseas Filipino workers (OFWs) in May reached $2.78 billion, higher by 2.9 percent than the $2.70 billion registered in the same month last year, data from Bangko Sentral ng Pilipinas (BSP) showed on Monday.

In a statement, the BSP attributed the increase in personal remittances in May to higher remittances sent by 1) land-based workers with work contracts of one year or more and 2) sea- and land-based workers with work contracts of less than one year.

“For the first five months of the year, personal remittances grew by 3.1 percent to $14.46 billion, from $14.02 billion posted in the comparable period in 2022,” it said.              

Of the personal remittances from OFWs, cash remittances coursed through banks rose by 2.8 percent to $2.49 billion in May 2023, from the $2.43 billion recorded in the same month last year, data showed.

Cash remittances expansion in May 2023 was traced to the growth in receipts from land- and sea-based workers.

“On a year-to-date basis, cash remittances reached $12.98 billion, 3.1 percent higher than the year-ago level of $12.59 billion,” the BSP said.

The growth in cash remittances from the United States (US), Singapore, and Saudi Arabia contributed mainly to the increase in remittances in the first five months of 2023.

Country sources

Meanwhile, in terms of country sources, the US accounted for the highest share of overall remittances during the period, followed by Singapore, Saudi Arabia and Japan.

There are some limitations on the remittance data by source.

A common practice of remittance centers in various cities abroad is to course remittances through correspondent banks, most of which are located in the US.

Also, remittances coursed through money couriers cannot be disaggregated by actual country source and are lodged under the country where the main offices are located, which, in many cases, is in the US.

Therefore, the US would appear to be the main source of remittances because banks attribute the origin of funds to the most immediate source.

Chief economist Michael Ricafort of Rizal Commercial Banking Corp. (RCBC) said that “remittances for the month of May [slightly faster against 1.8 percent a year ago—but the continued growth nevertheless is still a good signal for the economy] to $2.494 billion, [is] still among the lowest volume in a year or since May 2022.”

He added that the continued slowdown in OFW remittances data may also have to do with the still relatively higher prices in major host countries for OFWs that fundamentally reduced the remittances sent back to the Philippines.

“The recent slowdown in OFW remittances,” he said, is “also partly because of the weaker peso exchange rate against the dollar compared to year-ago levels [about 10-percent peso depreciation compared to levels before the
Russia-Ukraine war started in February 2022] that also partly reduced the need to send more OFW remittances because of higher conversion rate for the dollar against the peso,” Ricafort added.

For his part, Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., said that “although the remittance figure grew, it is still below the recent high registered in December.”

“One aspect that may have contributed to this is the higher inflation from the source countries” which is “already affecting the amount available for remittance,” he added.

China Banking Corp., chief economist Domini Velasquez, meanwhile, said that cash remittances were up 3.1 percent from a year ago.

“We think that continued growth in remittances was helped by slowing inflation in host countries, which gave overseas Filipinos more disposable income to send home,” she said.

“Improvements in digital banking services and platforms also likely encouraged remittance inflows. Moving forward, we expect remittance growth to remain modest,” Velasquez added.

The economist also said that resilient labor markets in advanced economies will continue to support inflows, but an economic slowdown remains a key risk.

However, continued recovery in sectors such as tourism will ensure a stable source of income from OFWs.

“For instance, higher demand for cruise tourism could lead to steady remittance inflows from some sea-based OFWs,” Velasquez said.

Image credits: Andrii Zastrozhnov | Dreamstime.com