Remittances may slow down further – ING
The country’s much-counted for remittances may continue to post slower growth but could still reach the targeted growth rate and cash transfers reaching $24.3 billion by the end of the year.
In a commentary, ING Bank economist Joey Cuyegkeng said the “slower growth or contraction in remittances from these (Middle East) regions would continue to weigh on remittances.”
Still, Cuyegkeng is hoping it will be more than five-percent growth for 2015. “A flat growth this year, an unlikely scenario, would still mean a cash remittance of $24.3 billion (while) current account is likely to remain in surplus while structural inflows this year could amount to $45-46 billion.”
The economist commented that despite that remittances slowed down for the month of August, structural inflows and current account “should remain favorable.”
“This is the first year-on-year drop in remittances since 2004. The August drop follows a July report of slowing pace of remittances,” noted Cuyegkeng.
He also observed that this was the first time that there was a “back to back weakening” of growth since early 2009. “In the past 11 years, a weak growth of a month is normally followed by a recovery.
He cited that in late 2008, remittances dropped 0.8 percent followed by an almost flat year-on-year growth in January, 2009.
“We hope that the recent development would usher in a rebound for September/October reports.”
In his review, Cuyegkeng said slowed remittances is traced to the strong US dollar against the currencies of host economies such as Eurozone, Japan and Singapore.
“Growth rates of remittances from these regions have eased significantly,” said Cuyegkeng.
He also noted that remittances from the Middle East recorded a significant decline year-on-year in terms of growth, or 6.8 percent from 22.7 percent the same period in 2014. “The major host economies are Saudi Arabia and the United Arab Emirates.
Their currencies have been relatively steady against US dollar from end 2013. (But) prolonged drop in oil prices and the fiscal strain of this and fiscal spending may account for a more modest growth in remittances from the Middle East,” he said.
“We had warned of the impact of lower oil prices and oil revenues and moderating fiscal spending that could limit remittances growth,” Cuyegkeng added.
Saudi Arabia and UAE are source to about 17.4 percent of total remitt an c e s la s t ye a r. “T h e s e re g i o n s account for 41.7 percent of 2014 remittances.”
Cash remittances sent by overseas Filipinos as of end-August amounted to $16.2 billion, up 4.1 percent from the same period in 2014.
For the month of August alone, remittances totaled $2.04 billion, almost unchanged from $2.07 billion in July.
The bulk of cash remittances came from the US, Saudi Arabia, the UAE, the United Kingdom, Singapore, Japan, Hong Kong, and Canada,” it said.