Remittances seen to grow by 10% in Q2
Remittances seen to growing by 10% in Q2
BY JIMMY CALAPATI
Think-tank First Metro Investment Corp. (FMIC) yesterday said that OFW remittances are likely to grow between 8-10 percent for the second quarter, but must offset the expected slowdown in foreign investments, which are on hold due to the May elections.
"OFW remittances are definitely on their way to stability. After the minimal growth in 2009, 10-month single digit growth, persistent pick up has been felt. In fact, January remittances jumped by 8.5 percent from 0.2 percent a year ago," FMIC said in the latest Market Call.
FMIC said that OFW remittances Up by 8.5 percent in January, totaling $1.4 billion.
"It was the remittances from sea-based workers that rallied this growth complemented by the land-based workers, as Filipino seamen retained their first preference position," FMIC said.
Year-on-year growth rates of 18.1 percent and 6.3 percent respectively were observed from the two sources last January.
FMIC said that the continued need of host countries for skilled laborers in the fields of healthcare, education and services was one of the reasons for this growth.
"However, labor recruiters are finding it difficult to fill in orders due to the lack of experience of Filipino applicants (mostly new graduates). Even though deployments are still rising, better remittances from infrastructure and services — better availability of services which cater to remitters — are also helping the steady inflow of these remittances," FMIC said.
In peso terms, remittances grew by 5.7 percent year-on-year.
"We will notice that this is way below the 15.5 percent growth observed last January 2009. But note that the increase last year was not due to the actual growth of dollar remittances but due to the hefty 15.3 percent year-on-year peso depreciation," FMIC said.
The January 2010’s growth was coupled with a 2.5 percent appreciation of the peso which somewhat lessened the effects of remittances on domestic spending.
"We see that remittances will still have favorable growth for the coming month. Coupled with the news from the Philippine Overseas Employment Administration that 19 percent of the job orders made during the first two months of the year have been approved already, we believe that this will open more job opportunities for migrant workers," FMIC said.
On the other hand, FMIC said the sustained appreciation of the peso may hinder these remittances from fully boosting local consumption and residential construction.
BSP said that money sent home by OFs grew by 5.6 percent to $17.3 billion in 2009, higher than BSP’s forecast of $17.1 billion remittance flows or a 4.0 percent growth for the year.
For 2010, BSP sees remittances growing by at least 6 percent.
The central bank said that remittances remained resilient amid the recent global financial crisis, providing strong support to domestic demand, accounting for 10.8 percent of the country’s gross domestic product last year.
Remittances are a pillar of the Philippine economy as these flows, equivalent to about a tenth of gross domestic product, support private consumption, the peso currency and the country’s balance of payments.
According to recent studies, the Philippines is the world’s fourth largest recipient of remittances next to India, China and Mexico.
The central bank expects remittances to boost the country’s foreign exchange reserves this year despite the outflow of portfolio investments, a trade deficit, and the slowdown in foreign direct investments.
In 2008, remittances reached a record $16.4 billion.
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