The government’s forecast of a 5-percent growth in remittances this year may not be achieved due to slower expansions in the previous months, an economist said Tuesday.
ING Bank senior economist Joey Cuyegkeng said remittances this year though might reach the same level posted last year, which was a record high.
“A flat growth this year, an unlikely scenario, would still mean a cash remittance of $24.3 billion,” Cuyegkeng said in a report. “Current account is likely to remain in surplus while structural inflows this year could amount to $45 billion-$46 billion,” he added.
Remittances contracted 0.6 percent in August to $2.044 billion from $2.057 billion year-on-year due to the stronger dollar against most currencies, reducing the value of the migrant workers’ remittances to the Philippines.
It was the first contraction in more than 12 years, or since the 10.9-percent decline in April 2003. Cash remittances in the first eight months reached $16.206 billion, up 4.1 percent from $15.572 billion a year ago.
Cuyegkeng said a recovery in remittance growth was not far-fetched historically.
“In the past 11 years, a weak growth of a month is normally followed by a recovery. Remittances softened to a 0.8-percent growth in December 2008 followed by an almost flat YoY growth in January 2009. We hope that the recent development would usher in a rebound for September/October reports,” Cuyegkeng said.
He said part of the weakness of remittances could be attributed to a strong US dollar against the currencies of host economies, such as in Eurozone, Japan and Singapore.
“Growth rates of remittances from these regions have eased significantly. The 8M [eight months] remittances growth from Japan slowed to 3.8 percent YoY against the more robust 8.7 percent in 2014,” he said.
“Eurozone remittances dropped 6 percent for 8M 2015 from a full year 2014 drop of 4.9 percent and 15.6 percent growth in 2013. Modest Eurozone growth and an 18 percent drop in the value of Euro since end of 2013 are reasons for the weakness. These three regions account for 24.3 percent of 2014 total remittances,” he said.
He said slower growth or contraction in remittances from these regions would continue to weigh on remittances.
Earlier, Bangko Sentral Deputy Governor Diwa Guinigundo said the bank regulator was sticking to its full-year remittance growth forecast of 5 percent despite the 0.6-percent decline in August.
Guinigundo said remittances growth would rebound in the last quarter of the year as migrant Filipino workers usually send more money during the Christmas season.
He said Filipino skills remained in big demand worldwide. He said despite the soft global growth, Filipino workers continued to find opportunities because of their diversified skills and competencies.
Remittances fuel private consumption and are one of the backbones of economic growth. Cash remittances last year posted a record-high $24.308 billion, up 5.8 percent from $22.968 billion in 2013. They also accounted for 8.5 percent of the gross domestic product in 2014.