Remittances forecast to grow 4.5% this year; peso weakness to persist

Published April 18, 2018, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

Remittances are expected to increase higher than what the central bank has estimated for 2018 but not enough to support a recovery for the local currency, according to a ING Bank.

“The central bank expects 2018 remittance growth of four percent. We are slightly more optimistic with a forecast of 4.5 percent,” said ING senior economist, Joey Cuyegkeng, in Manila.

Cuyegkeng said remittance growth slowed in February because of lower fund transfers from the Middle East and this “bodes ill for the Philippine peso.”

“The normalization of remittance growth does not augur well for the peso as remittances would fall short in financing a wider trade gap,” he noted in a commentary. “This underfunding is now the norm. We estimate that this shortfall could be as large as $5.4 billion this year from 2017’s $1.6 billion.”

The peso has been hugging the P52:$1 level since mid-February this year. It averaged at P52.07 in March and in the first half of April, averaged at P52.06, based on Bangko Sentral ng Pilipinas (BSP) data.

The ING’s “Financial and Economic Analysis” report said the lower remittances from the Middle East was due to the deployment ban to Kuwait resulting to a 45 percent year-on-year decrease in remittances compared to the January growth of 19 percent.

Cuyegkeng added: “(The) Saudization (a policy intended to boost hiring of Saudi nationals in the private sector) also resulted in a 17.5 percent drop of remittances from Saudi Arabia. The drop in remittances from Kuwait was more than offset by the surge of remittances from Qatar in January, at a growth rate of 15 percent but February remittances dropped 3.7 percent.”

The BSP reported on Monday that for the first two months of the year, remittances coursed through the banking networks increased by 7.1 percent year-on-year to $4.65 billion.