BSP monitors impact of Middle East crisis on OFW remittances

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said yesterday monetary authorities are closely monitoring developments in the Middle East as countries in the region account for about 16 percent of the amount of money sent home by overseas Filipino workers (OFWs).

BSP Deputy Governor Diwa Guinigundo said in an interview with reporters that the growing protests in various countries in the Middle East such as Libya, Bahrain, Yemen, and others could have a negative impact on OFW remittances as well as exports.

“We do not expect serious impact at this point but we are monitoring the situation considering the bulk of remittan-ces actually come from Middle East but we will continue to monitor situation,” Guinigundo stressed.

OFW remittances grew by 8.2 percent to a record level $18.76 billion last year from $17.35 billion in 2009 due to the continued demand for skilled Filipino workers abroad as well as the expansion of remittance centers abroad giving OFWs more options to send money to their loved ones in the Philippines.

Data showed that the Middle East accounted for about 16 percent of the total OFW remittances last year. Remittances from the Middle East posted a double-digit growth of 11.2 percent to $2.96 billion last year from $2.66 billion in 2009.

More than half or $1.644 billion came from Saudi Arabia followed by the United Arab Emirates with $776.3 million, Qatar with $248.8 million, Bahrain with $167.28 million, Kuwait with $106.5 million, Israel with $67.3 million, Oman with $66.76 million, and others.

American counties accounted for 52 percent of the total remittances last year with $9.98 billion followed by European countries with 16.9 percent or $3.18 billion, and Asian countries with 12.6 percent or $2.36 billion. 

Huge popular protests in Egypt and Tunisia have toppled entrenched leaders prompting other countries in the Middle East to mount protests against their leaders. Unrests have also rocked Libya, Bahrain, and Yemen.

The Philippine Overseas Employments Administration (POEA) has already issued an advisory suspending the processing and deployment of all OFWs bound for Bahrain, Libya and Yemen until the political and security conditions in the said countries have normalized.

This year, the BSP sees OFW remittances growing by another eight percent and breaching the $20 billion level to hit a new record high amid the strong demand for skilled land-based and sea-based Filipino workers abroad.

Latest data from the National Statistics Office (NSO) showed that the country’s total merchandise exports jumped 33.7 percent to $51.39 billion last year from $38.43 billion on the back of the strong recovery of the electronics and semiconductor industry.

“There will be some impact. Right now, it will be perhaps on remittances and exports,” Guinigundo added.

Meanwhile, former Socioeconomic Planning Secretary and now Sen. Ralph Recto sees the peso strengthening to P35 per $1 once the BSP raise key policy rates from current record low levels.

“The peso could further strengthen to a level better than the P35 to the US dollar as forecast of a foreign bank,” Recto said as higher interest rates would redound to a stronger peso and would mitigate rising global oil and food prices.

Recto, who chairs the Senate ways and means, pointed out that a stronger peso could off-set the impact of any drastic movement in the pump prices of fuel and the resulting high inflation rate as the Middle East region braces for more regional unrest in the coming weeks.

“In layman’s terms, when peso is strong, there would fewer pesos needed to import fuel which we pay in dollars and this should trigger similar downtrend in prices of fuel and food,” he said.

Currently, BSP’s overnight borrowing rate – or the interest imposed by banks whenever BSP borrows - is four percent while overnight lending - or the interest rate slapped by BSP from its borrowing banks - is at six percent.