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July remittances hit 7-month high

DEPARTING overseas Filipino workers (OFWs) wait to get their international certificate of vaccination at the Bureau of Quarantine, Aug. 31, 2021. — PHILIPPINE STAR/ MICHAEL VARCAS

By Keisha B. Ta-asan

CASH REMITTANCES jumped to the highest in seven months in July, as overseas Filipino workers (OFW) likely took advantage of the weaker peso to send their families more money amid elevated inflation.

Data from the Bangko Sentral ng Pilipinas (BSP) showed cash remittances sent through banks went up by 2.3% to $2.92 billion in July, from $2.85 billion a year earlier.

This was the highest since  $2.99 billion in December. Remittances are typically higher than usual in December as OFWs send more money to their families before the holidays.

However, the pace of cash remittance growth was the slowest in two months or since 1.8% in May.

“The expansion in cash remittances in July 2022 was due to the growth in receipts from land-based and sea-based workers,” the BSP said in a statement on Thursday.

Remittances from land-based workers jumped by 2.5% year on year to $2.36 billion, while those from sea-based workers went up by 1.3% to $552 million.

“Remittances remained soft in July as global headwinds, especially in Europe, reduced the capacity of Filipino migrants in sending more money home,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

She said high inflation in advanced economies might have led to a decline in OFW savings, limiting their ability to send home more money.

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

The peso closed at P55.130 on July 29, losing P0.155 or 0.28% from its June 30 close of P54.975.

“The modest single-digit growth in OFW remittances may be partly attributed to elevated US/global inflation and interest rates in recent months that some-what weighed on the recovery in the global economy and in both OFW employment and incomes,” said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

He also noted that the peso-dollar rate had matched its record high of P56.45 on July 12 and 14, which increased the peso value of OFW remittances.

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

“There may still be a need to send more OFW remittances due to higher prices, which erodes whatever foreign exchange gains due to the stronger US dollar versus major global currencies,” Mr. Ricafort said.

In the first seven months of 2022, cash remittances rose by 2.8% to $18.26 billion from a year ago.

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

BSP data showed personal remittances increased by 2.3% to $3.24 billion in July, as remittances from land-based workers jumped by 2.4% to $2.57 billion.

This brought the seven-month tally to $20.33 billion, up by 2.7% from a year ago.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said remittances in the coming months are “expected to remain in expansion but will likely moderate.”

“We had expected the dollar growth of remittances to slow due to exchange rate nuances. Overseas Filipinos can afford to send just a tad bit more given better exchange rates but higher cost of living will still force them to send more,” he said in a Viber message.

Ms. Velasquez said remittances would likely be higher in August when face-to-face classes resumed. The school year started on Aug. 22 for most schools.

“Year-to-date growth of remittances (2.8%) until July shows that it might be quite difficult to reach the BSP’s forecast of 4% growth especially if the trend continues to remain below potential,” she said.

“We expect remittances to help prop up the peso in November and December. However, aggressive monetary tightening in the US and the strength of the US dollar may lessen remittances’ support to the currency,” she added. 

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

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