BSP cuts growth target for OFW remittances

The Bangko Sentral ng Pilipinas (BSP) has lowered the projected growth of remittances from overseas Filipino workers (OFWs) over the next two years due to the expected global economic slowdown.

In an online press confernomic activity, continues to ence, BSP officer-in-charge for suggest that the global GDP Monetary Policy Sub-Sector growth would continue to be Dennis Lapid said the Monsubdued. etary Board has approved the Based on the projection lowering of the growth target of the International Monfor remittances to three peretary Fund in its latest World cent for 2023 and 2024 from the Economic Outlook, Lapid original target of four percent. said global GDP growth is

“OFW remittances have expected to slow down to 2.9 been revised downward in percent this year and rebound terms of the growth rate to to 3.1 percent next year from three percent from four per3.4 percent last year. cent previously. This mainly “The overall picture for reflects the moderation in growth is more than subglobal GDP (gross domestic dued recovery or growth product) growth as overall acprospects,” Lapid said. tivity in host economies tends According to Lapid, other to moderate,” Lapid said. external risk factors that could

He said the overall outlook affect the country’s external for the external environment, payments position include perparticularly for external eco- sistent high inflation, a protracted Russia-Ukraine conflict, debt distress in some economies, uncertainty in monetary adjustment, and potential ripple effects from the banking sector concerns with the collapse of Silicon Valley Bank and Signature Bank in the US.

Locally, Lapid said risks include persistent high inflation that continues to exceed the BSP’s two to four percent target as well as waning pentup demand.

The BSP missed its four percent growth target for OFW remittances last year after it rebounded with a 5.1-percent increase in 2021 from a contraction of 0.8 percent in 2020.

Data from the central bank showed that personal remittances grew by 3.6 percent to an all-time high of $36.14 billion last year from $34.88 billion in 2021, of which cash remittances coursed through banks went up by 3.6 percent to $32.54 billion from $31.42 billion.

For January, both personal and cash remittances increased by 3.5 percent to $3.07 billion and $2.76 billion, respectively.

The peso has rebounded strongly after slumping to a record low of 59 to $1 in October last year due to the aggressive rate hikes delivered by the BSP to tame inflation as well as the central bank’s active intervention in the foreign exchange market.

BSP Senior Assistant Governor Iluminada Sicat said a study showed that the depreciation of the peso contributes to the increase in remittances.

Sicat, who is also sector-incharge of the BSP’s Monetary and Economic Sector, said that while the depreciation of the peso boosted OFW remittances last year, other currencies where Filipinos are residing or working also weakened against the dollar.

“So if you come to think of it, broadly the peso equivalent may have been the same,” Sicat said.

Sicat explained that remittances are countercyclical as OFWs tend to send more money to their loved ones to catch up with increased expenses whenever conditions in host countries or in the Philippines are bad.

“In 2022, we experienced an increase in inflation and definitely while the peso depreciated and Filipinos would send in more to get more peso equivalent of that.

But on the other hand, the reason why they send in more is to be able to ensure that their families in the Philippines will be able to catch up with the rising prices,” Sicat explained.