Remittances to grow faster this year

Nomura Securities Ltd. said it expects remittances to grow faster at 5.5 percent this year from five percent a year ago amid the continued strong demand for skilled Filipino workers abroad.

Euben Paracuelles, economist at Nomura, said robust remittances would continue to support the sustained gross domestic product (GDP) growth in the Philippines.

The investment bank sees the country’s GDP expansion steady at 6.7 percent from 6.8 percent despite the absence of election-related spending to boost consumption.

“This should support domestic demand and thus our GDP growth forecast of 6.7 percent,” he said.

Weak private and public consumption pulled down the GDP growth to 6.4 percent in the first quarter of the year from 6.6 percent in the fourth quarter of last year.

Despite this, economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) retained the GDP growth target of 6.5 to 7.5 percent this year from 6.9 percent a year earlier.

Paracuelles said remittances continued to grow amid the political crisis in the Middle East involving Qatar.

“Importantly, it also points to the resilience of remittances amid concerns over the impact of geopolitical developments in the Middle East, which may have a more lasting impact on workers based there,” he added.

Latest data released by the Bangko Sentral ng Pilipinas (BSP) showed both personal and cash remittances recovered to hit a two-month high in May after contracting in April.

Personal remittances rose 7.1 percent to $2.59 billion in May from $2.42 billion in the same month last year while cash remittances climbed 5.5 percent to $2.31 billion.

This brought the growth in personal remittances to 5.2 percent to $12.61 billion and cash remittances to 4.5 percent to $11.35 billion in the first five months of the year.

“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,” he said.

The BSP sees remittances growing four percent this year.

Remittances from Filipinos abroad contribute around 10 percent of the country’s GDP.