OFW transfers slowing as deployment falls—BPI

Remittances from overseas Filipino workers (OFWs) are expected to slow down as a result of lower job deployment and tighter fund-transfer requirements on banks, according to the Bank of Philippine Islands (BPI) periodic research paper Market Insights. 

The paper cited the Bangko Sentral ng Pilipinas (BSP) report on the 5.4 percent year-on-year drop in the growth of both cash remittances last July to $2.1 billion and personal remittances to $2.4 billion.

It noted a 10.3-percent contraction in the deployment of land-based OFWs and 44.4-percent drop in sea-based workers during the seven-month period.

”This was the last negative print since Nov. 2015 as seasonality of remittance appears to be shifting, given adjustments in school year timing as well as BSP’s ongoing efforts to effectively tag remittance sources,” the research paper said.

As of end-July this year, cash remittances coursed through the formal sector amounted to $15.3 billion, up 3 percent compared with the $14.9 billion year ago.

Personal remittances, which include in-kind inflows, amounted to $16.9 billion, up 2.9 percent from year-ago’s $16.4 billion.

The research explained that, in the past three years, a notable decline was seen on the growth of inflows from the Americas and Europe, which countered the growth of inflows traced from the Middle East, Oceania and Africa.

”This, coupled with the shifting trends in school year timing, look to undermine the seasonality and predictability of OFW remittance data. We’ll have to see where the dust settles in the coming months,” the research paper said.

Monetary officials have said that, based on records, the bulk of remittance inflows in the past originated from the United States because this is where most of the banks that OFWs tap to send remittances are based.

Thus, with improved tagging of inflows from overseas Filipinos along with developments in OFW deployment, the market research projects “sharp swings” in remittance inflows in the coming months.

It noted, however, that the coming holiday season will again motivate higher remittance inflows.

“In all, we can expect steady to marginal growth in remittance flows, given POEA (Philippine Overseas Employment Administration) deployment and the zealous nature of OFWs enabling them to remit money to fund Peso consumption,” the research paper said.

But while remittance inflows are seen to be moderate, the market research discounts this will hurt remittances’ impact on domestic consumption and its share on the economy’s expansion.

The strong peso, which the research note said has appreciated by about seven percent to date, “should allay fears that remittances will no longer be able to provide ample peso purchasing power to drive the economy to growth of roughly 6.5 percent for the year.”