Late-year GDP likely boosted by OFW cash
A DOUBLE-DIGIT surge in remittances seen in November likely provided a boost to household spending during the fourth quarter of 2016, which is expected to prop up economic growth beyond 6% during the period, a bank economist said.
Emilio S. Neri, Jr., vice-president and lead economist at the Bank of the Philippine Islands, said the strong growth in the money sent home by overseas Filipino workers (OFWs) supported robust domestic consumption during the fourth quarter, helping gross domestic product (GDP) rise by as much as 6.5% during the last three months of the year.
November remittances hit $2.217 billion, up 18.5% from a year earlier, the fastest uptick since a 24.6% rise recorded in July 2008, the Bangko Sentral ng Pilipinas (BSP) reported on Monday. The cash inflows posted a strong rebound from a 3% decline in October and a 6.2% slide a year earlier.
The central bank said “improving global economic conditions” particularly in the United States fueled the surge in remittances. Mr. Neri added that OFWs likely took advantage of the weaker peso as they decided to send more funds back home.
“The combined effect of the peso’s depreciation and surge in US dollar remittances on the purchasing power of the OF’s relatives should have additional multiplier effects on household final consumption. We won’t be surprised if GDP expands by more than 6.5% again in the fourth quarter,” Mr. Neri said in an e-mail interview, noting that the workers may have decided to send more money home given the favorable exchange rates.
“We hope it is not a sign that OFs are anticipating tighter immigration policies and are sending their savings, not just their current incomes,” Mr. Neri added. “It’s also very possible that OFs from oil exporting economies are getting paid on time given the favorable global oil price movements that month.”
Remittances received by OFW-dependent families continued to spur further consumption, which is among the key drivers of the local economy.
Personal remittances — which include both cash and in- kind items from migrant workers — hit a high of $28.308 billion in 2015 and fueled household spending, which in turn accounted for nearly a 10th of GDP.
The Philippine economy posted a 7.1% rise during the third quarter, riding on an investment surge and upbeat domestic consumer spending. This brought the nine-month average pace to 7%, matching the top end of the government’s 6-7% growth goal.
The Philippine Statistics Authority will report fourth quarter and full-year economic growth data on Jan. 26, although economic managers have said that GDP growth likely hit at a rate closer to 7% for 2016.
Multilateral lenders World Bank and Asian Development Bank expect growth to clock in at 6.8%, noting a possible slowdown during the last three months of the year. Deutsche Bank analysts also expect a 6.5% rate for October-December, saying that conditions have “normalized” after hitting a peak during the election season during the first semester.
In 2015, cash remittances coursed through banks posted a 4% rise to a high of $25.607 billion. The central bank expects the figure to grow by another 4% this year, to roughly $26.6 billion.
Mr. Neri said the projection looks “very doable” even with one month to go.
December usually accounts for the biggest cash inflows in any given year as OFWs send back more money during the Christmas season. To hit the full-year estimate, December remittances should hit some $2.3 billion.
Monthly remittances have been above the $2-billion level since February, with the tally now at $24.341 billion as of end-November, according to BSP data.