February gain ushers in low base boost for remittances
MANILA, Philippines — Money sent home by Filipinos abroad grew by their fastest pace in 5 months in February, putting the year-to-date tally in positive territory and potentially ushering in a growth period that rides on the back of last year's devastating results that give the benefit of a low base.
What’s new
Cash remittances increased 5.1% year-on-year to $2.48 billion in February, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday. The expansion was the fastest since the 9.3% growth in September, although in absolute terms, inflows were at a 3-month low.
From January to February this year, inflows reached $5.08 billion, up 1.5% year-on-year and reversing a 1.7% decline at the start of 2021. As typical, BSP said majority of remittances came from the US, which had a 41% share, as Filipinos elsewhere in the world also use American banks to send money home.
In reality however, with 57% of Filipino workers based in the Middle East as of 2017, the latest period on which data is available, cash remittances were also up in Saudi Arabia, United Arab Emirates and Qatar, as well as in Singapore, Japan, Malaysia, Canada, Taiwan and the UK.
Why this matters
Last year, remittances accounted for 9.2% of gross domestic product (GDP), while their continued entry has been traditionally linked to stronger purchasing power of Filipino consumers. These inflows augment earnings of families, which spend on products and services from mobile phone load to education and property. Consumption represents over 70% of GDP.
That said, the pandemic did not entirely leave remittances unscathed, especially with 327,511 Filipinos repatriated back from 90 countries by end-2020, and deployment of new ones falling to the lowest in 3 decades. Last year’s 0.8% decline, while minimal, was a first since 2001 and BSP is hoping for a quick bounce to 4% growth this year.
What an analyst says
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said things are looking up for remittances in the coming months, but largely because of “low base/denominator effects a year ago,” which essentially means that because of last year’s rare dive in inflows, even a small climb up can mark a huge difference when read on a year-on-year growth basis. For instance, at the height of quarantines in April last year, cash inflows plummeted a record 19.3% on-year to $2.12 billion.
At the same time, Ricafort said tough economic conditions may have prompted Filipinos overseas to send more of their earnings.
“Tighter quarantine restrictions (ECQ/MECQ) in NCR plus…could also increase the need to send more OFW remittances especially to assist adversely affected OFW families,” he said in a commentary. — Prinz Magtulis
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