July remittances seen slowing on seasonal trend

MANILA, Philippines - UK-based Barclays expects fewer cash remittances sent to the Philippines in July from the previous month because of seasonal patterns.

“Remittances to contract one percent month on month, consistent with seasonal patterns,” Barclays said in its Emerging Markets Weekly report.

Money sent home by Filipinos working and living abroad summed up to $1.916 billion in June, the highest inflow recorded so far for the year.

Based on Bangko Sentral ng Pilipinas’ data from 2009 to 2012, the remittances figures dipped slightly in July and August before recovering in September.

The central bank is set to release July remittances data tomorrow.

On a year-on-year basis, Barclays expects a slow-down in the expansion of remittances in July.

“On year-on-year basis, 4.8 percent growth is expected,” Barclays said.

This is slower than the 5.8 percent year-on-year growth in June, and the 5.4 percent annual expansion seen in July last year.

In the six months to June, cash remittances already amounted to $10.7 billion, up 5.6 percent in the same period last year. The BSP expects remittances to grow by five percent this year over last year’s $21.391 billion.

Earlier, the International Monetary Fund noted the Philippine government’s big challenge is shifting the use of remittances from mere consumption to become investments.

Ralph Chami, division chief at IMF’s Middle East and Central Asia development, in a July podcast said “The one-million-dollar question is how do we change the nature of remittances from basically trying to help your family at home to becoming a source of capital for development, making it a growth story.”

Chami recounted recipients of the remittances use most, if not all of the money for household expenses, medical needs, education, and so on, leaving only a small amount for savings.

But by helping the families of overseas Filipino workers in transforming their remittances to capital for business or investments, that in turn could contribute to the economy’s growth, Chami said.

“We want to change the nature (of remittances) from alleviating poverty... to making them a sort of like a private capital,” Chami said.