Rising oil prices positive for remittances — Bangko Sentral

REMITTANCES could potentially get a boost from higher oil prices, resulting in an improved hiring environment in the Middle East, a senior central bank off icial said.

Asked how the recent spike in world crude prices will affect the cash remittances of overseas Filipino workers (OFWs) particularly those based in oil-rich countries, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said it was unlikely that the amounts sent home will see a “significant” drop.

“Maybe we might even see a rise in demand for OFWs because their Middle East employers will be more profitable. Their demand for OFWs has not waned even in difficult conditions because they need Filipino workers,” Mr. Guinigundo told reporters in a chance interview last week.

Reuters reported that international oil prices rose to above $50 a barrel last week amid growing optimism that other countries not part of the Organization of the Petroleum Exporting Countries will follow suit in trimming production to address a supply glut and allow crude prices to recover. This comes after oil prices saw record lows over the past year.

“In the past when oil prices dropped, people thought the demand for overseas labor will come down but it didn’t. Our rate of deployment continues to grow, although a little bit more modestly,” the central bank official added.

Remittances bolster consumer spending, which in turn contributes to economic growth in the Philippines.

SLOWING GROWTH

Money sent home by Filipinos working abroad hit $20.025 billion at the end of September, up 4.8% from a year earlier, according to central bank data.

That pace runs ahead of the 4% growth logged for 2015, but is significantly slower than the 7.2% climb seen in 2014. The central bank expects total remittances to grow by 4% this year to roughly $ 26 billion, which if realized would be a new record.

In a Dec. 13 report, analysts at DBS Group Research said they expect remittances to exceed $2.3 billion in October, roughly the same level seen during the past two months. The BSP is set to release October remittances data on Thursday.

“Total foreign remittances are likely to reach $ 27 billion this year, a decent 5.5% increase from 2015. Strong remittances have been a factor that contributes to the 7% average in private consumption growth thus far this year,” the report read, although they warned that growth may “taper off ” by next year.

Still, DBS expects the money sent home by OFWs to further boost private consumption and support economic growth.

HIGHLY SKILLED

Mr. Guinigundo said demand for Filipino labor is expected to continue growing, given their high reputation in the labor market.

“Before, we were sending domestic helpers and semi-skilled laborers, but now you have more professionals. That is a lot of material value to the stability of our remittances,” the BSP off icial said, pointing out that the country is now enjoying a “positive” demographic dividend.

Monthly remittance inflows have remained at the $2 billion level since the year opened.

The United States has remained the biggest source of remittances at $6.596 billion or roughly a third of total inflows, followed by Saudi Arabia with $ 1.963 billion and the United Arab Emirates $1.591 billion.

Remittances from the Middle East totaled $5.621 billion for the nine-month period, or 16.4% of total inflows.

Mr. Guinigundo also said that OFW deployment is also increasing in Southeast Asia, just as regional economic integration is gaining momentum, amid an increase in merchandise trade and demand for services across member- states of the Association of Southeast Asian Nations (ASEAN).

The government has worked to sign mutual recognition agreements with ASEAN economies to allow certified Filipino professionals to practice the same trades within the region.