July remittances hit a 7-month high

DEPARTING Filipino Expatriate Workers (OFWs) wait at the Bureau of Quarantine on August 31, 2021 to receive their International Vaccination Certificate. – PHILIPPINE STAR/ MICHAEL VARCAS

Through Keisha B. Ta-asan

Cash remittances rose to a seven-month high in July as Filipino overseas workers (OFW) likely took advantage of the weaker peso to send more money to their families amid rising inflation.

Data from Bangko Sentral ng Pilipinas (BSP) showed that cash remittances sent via banks rose 2.3% to US$2.92 billion in July, from US$2.85 billion a year earlier.

That was the highest since $2.99 ​​billion in December. Remittances tend to be higher than usual in December as OFWs send more money to their families ahead of the holidays.

Cash Transfers from Overseas Philippines (July 2022)However, cash remittance growth was the slowest in two months, or since 1.8% in May.

“The expansion of cash transfers in July 2022 was driven by growth in earnings from land and sea workers,” the BSP said in a statement on Thursday.

Remittances from farm workers rose 2.5% year over year to $2.36 billion, while those from sea workers rose 1.3% to $552 million.

“Remittances remained weak in July as global headwinds, particularly in Europe, reduced Filipino migrants’ ability to send more money home,” Domini S. Velasquez, chief economist at China Banking Corp., said in a Viber message.

She said high inflation in advanced economies may have reduced OFW savings and limited their ability to send more money home.

“However, the July data could be offset by a more favorable exchange rate, ie a more depreciated Philippine peso,” Ms. Velasquez said.

The peso closed at 55.130p on July 29, down 0.155p or 0.28% from its close of 54.975p on June 30.

“The modest single-digit growth in OFW remittances can be attributed in part to elevated US/global inflation and interest rates in recent months, which have weighed on the global economic recovery and both OFW employment and incomes somewhat,” Michael said L Ricafort, chief economist at Rizal Commercial Banking Corp.

He also noted that the peso-dollar exchange rate hit a record high of 56.45 pesos on July 12-14, boosting the peso value of OFW remittances.

However, OFWs may need to increase their remittances as their families struggle with rising prices. In July, inbottleation almost hit a four-year high of 6.4%.

“Due to higher prices, there may still be a need to send more OFW remittances, canceling out any FX gains from the stronger US dollar against major global currencies,” Mr. Ricafort said.

In which fiIn the first seven months of 2022, cash remittances grew 2.8% year over year to $18.26 billion.

By country sources, the United States remained the largest source of cash transfers at 41.4%. It is followed by Singapore (6.9%), Saudi Arabia (5.9%), Japan (5%) and the United Kingdom (4.9%).

GNP data showed that personal remittances rose 2.3% to $3.24 billion in July, while remittances from farm workers rose 2.4% to $2.57 billion.

That put its seven-month balance sheet up 2.7% year over year to $20.33 billion.

ING Bank NV Manila senior economist Nicholas Antonio T. Mapa said remittances are “expected to continue to expand in the coming months but are likely to be moderate.”

“We expected dollar growth in remittances to slow due to exchange rate fluctuations. Overseas Philippines may aonwardsTo send just a little bit more with better exchange rates, but higher cost of living will still force them to send more,” he said in a Viber message.

Ms Velasquez said referrals would likely be higher in August when face-to-face classes resume. The school year began on August 22 for most schools.

“Year-to-date growth in remittances (2.8%) through July shows that it could be quite difficult to meet the GNP forecast of 4% growth, especially if the trend remains below potential,” she said.

“We expect remittances to support the peso in November and December. However, aggressive US monetary tightening and US dollar strength could reduce remittance support for the currency,” she added.

The BSP expects remittances to grow by 4% this year.

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