MONEY sent home by migrant Filipino workers this year is seen to grow faster by 5 percent, from the projected 4-percent expansion in 2015, as inflows from key sources will remain robust, Barclays Plc said in a report over the weekend.
Barclays said the uncertainty around excessive currency weakness in key regions such as Southeast Asia and the Middle East had subsided, and growth in remittances from these two regions has been significant. Inflows from the United States and Europe continued to underperform.
“A stable Philippine peso and some degree of stabilization in regional currencies supported remittances inflows… We continue to forecast 4-percent growth in remittances in 2015, and see remittances climbing 5 percent in 2016,” it said.
But Barclays said the remittance growth in November of 3.2 percent was below the consensus of a 3.5-percent gain. Barclays earlier projected the growth in November at 4.5 percent.
“… We expect remittances to remain supported in December, as workers remit money to their families ahead of the festive season,” Barclays said.
Bangko Sentral ng Pilipinas in May 2015 projected remittances growth to be around 5 percent. But the target was revised downward to 4 percent last month, taking into consideration global developments, especially geopolitical concerns and the recent US Federal Reserve interest rates hike.
Latest data showed that cash remittances coursed through banks from Filipino workers rose 3.2 percent in November, a recovery from the almost flat growth of 0.2 percent in October. Personal remittances, which include non-cash items, also increased to 3 percent from the 0.2-percent growth a month ago.
Remittances fuel private consumption and are one of the backbones of economic growth. Cash remittances in 2014 posted a record-high $24.308 billion, 5.8-percent higher than $22.968 billion in 2013. They also accounted for 8.5 percent of the gross domestic product in 2014.
Meanwhile, Barclays expects Bangko Sentral ng Pilipinas to maintain its policy stance for the whole year as economic growth is expected to be slower in 2016.
“We continue to expect BSP’s next policy move to be a hike, but with 2016 growth now likely to be slower than we previously forecast [Barclays 2015: 5.5 percent; 2016: 5.5 percent], we recently delayed our forecast timing of the first hike to the second quarter of 2017 [from third quarter of 2016],” it said.
Barclays said Bangko Sentral was likely to raise rates when growth recovered sufficiently and inflation was high enough to justify an increase in interest rates.
Inflation in 2015 averaged 1.4 percent, well below the government’s earlier forecast of 2 to 4 percent.
“Although there is external uncertainty in the form of the Fed rate hike cycle, we think the Philippines’ strong external position and low level of short-term debt should provide BSP enough policy space to maintain an accommodative stance even if rates in US head higher,” Barclays said.