OFW remittances drop to $3.3B in January-May

Remittances from overseas Filipino workers (OFWs) reached $3.3 billion in the first five months of the year, dropping by a marginal 0.4 percent due to a considerable decline in May inflows.

As financial regulations tightened in the Middle East, the Bangko Sentral ng Pilipinas (BSP) said remittances continued to decline in May after going down drastically in April.

Data from the BSP showed that the weakness of the peso shortly before the May elections even resulted in a drop in dollar remittances as OFWs waited for a bigger drop in the peso-dollar exchange rate.

According to the BSP, remittances in May amounted to $696 million as OFWs remitted the same amount in peso at a time when the dollar was worth more.

The BSP said in its May report that part of the reason for the decline was the tightening of remittance policies in Middle East countries whose impact began to be felt in April.

The BSP said the implementation of the Anti Money Laundering (AML) and Counter Terrorist Financing (CTF) regulations in the Middle East, particularly Saudi Arabia, restricted the remittance of dollars into the Philippines.

"Banks in Saudi Arabia now require complete documentation and examination prior to remittance by overseas workers," said the BSP, adding that remittance centers in most countries have started to implement strict screening procedures of clients.

The BSP said this would provide incentives for OFWs to remit their earnings to non-bank channels which are not captured by the banking system.

The BSP added that it expects increased fund transfers from Hong Kong, the US and Italy to soften the impact of the decline in remittances from the traditional labor host countries such as Japan, UK and Saudi Arabia.

International anti-money laundering laws have begun to restrict the remittance of dollars from the Middle East into the Philippines, leading to a 5.6-percent decline to $660 million in April from $699 million in March.

"Consequently, OFW remittances from Saudi Arabia dropped by 7.6 percent," the BSP reported. This the BSP added, was an indication that Filipinos working in Saudi Arabia have not been able to present the proper documentations required by Saudi law.

Deployment statistics from the Philippine Overseas Employment Authority (POEA) showed that Saudi Arabia account for about 20 percent of total landbased Filipino workers overseas.

However, the BSP expressed optimism that OFW remittances would start to pick up in June, in time for the opening of the new academic year and enrollment.

"By that time, we also expect that OFWs in Saudi Arabia would have adjusted to the documentation requirements for fund transfers," the BSP said.