Flat growth for remittances of 4% widely expected this year

Remittances from overseas Filipinos Workers (OFWs) is expected to have flat growth this year of four percent, which seems to be the consensus estimate among private forecasters.

In its latest research commentary, ING Bank said they agree with the central bank’s remittances forecast of four percent for 2015 but if the Bangko Sentral ng Pilipinas (BSP) sees four percent as “the worst case” scenario, they see flat growth as base case.

“Ascertaining the overall impact of the oil price plunge on OFW deployment and employment conditions is difficult,” said ING’s senior economist Joey Cuyegkeng. “Deployment so far has been favorable while some rely on resiliency of OFWs in the face of challenges which has been proven during the Arab Spring.”

Still, as far as the country’s structural inflows are concerned, Cuyegkeng estimates seven percent growth since while remittances growth may be slowing, earnings from the business process outsourcing (BPO) sector is increasing and sustainable.

“Outsourcing revenues would still keep overall structural inflows growing,” said Cuyegkeng. BPO revenues are projected to increase by 15 percent to 16 percent this year.

“A flat growth of OFW remittances would still allow structural inflows to gain seven percent year- on- year to barely below $50 billion. It would also still mean $25 billion of inflows which we believe would more than offset the trade gap and still keep the current account in surplus,” said Cuyegkeng.

In a previous commentary, Cuyegkeng has said that the slower growth or contraction in remittances from the Middle East region would continue to weigh on remittances. He did say 2015 remittances could still grow to five percent.

The economist said slowed remittances is traced to the strong US dollar against the currencies of host economies such as Eurozone, Japan and Singapore.

The latest BSP remittances number was at $22.8 billion, up 3.6 percent yearon-year. For the month of November alone, cash remittances went up by 3.2 percent year- on-year to $2.19 billion.

The BSP expects a slightly lower remittances growth for 2015 of four percent from the previous five percent projection.

The reason for the lower remittances projection is the continued dollar appreciation vis-à-vis other major currencies where overseas Filipinos are located.

“However, continued remittances from are still expected on account of the steady deployment of overseas workers, greater diversification of country destinations and shift to higher-skilled types of work,” the BSP explained in a separate report.