OFW remittances up 4.4% to 6-month high in June

MANILA, Philippines — The amount of money sent home by overseas Filipino workers (OFWs) to their families in the Philippines posted a faster growth of 4.4 percent in June to hit the highest level in six months, according to the Bangko Sentral ng Pilipinas (BSP).

Data released by the central bank showed personal remittances – the sum of net compensation of employees, personal transfers, and capital transfers between households – grew by 4.4 percent to $3.06 billion in June from $2.94 billion in the same month last year.

This was the highest in six months or since the $3.3 billion recorded last December.

“The increase in personal remittances in June 2022 was due to remittances sent by land-based workers with work contracts of one year or more, and sea- and land-based workers with work contracts of less than one year,” the BSP said in a statement.

For the first six months of the year, personal remittances went up by 2.8 percent to $17.09 billion from $16.62 billion in the same period last year.

Likewise, the BSP also reported that cash remittances coursed through banks increased by 4.4 percent to $2.75 billion in June from $2.64 billion in the same month last year.

This was the biggest in six months or since the $2.99 billion booked last December.

“The expansion in cash remittances in June 2022 was due to the growth in receipts from land-based and sea-based workers,” the central bank said.

For the first semester, cash remittances grew by 2.9 percent to $15.35 billion from $14.92 billion in the same semester last year.

Cash remittances sent home by land-based OFWs grew by 3.2 percent to $12.16 billion from $11.78 billion, while that of sea-based rose by 1.6 percent to $3.18 billion from $3.13 billion.

In terms of country source, the central bank said the growth in cash remittances in the first half came largely from the United States, Saudi Arabia, Japan, Qatar and Singapore.

The BSP sees remittances increasing by four percent to new record levels this year as countries hosting OFWs continue to reopen from strict COVID-19 lockdowns.

Last year, personal and cash remittances grew by 5.1 percent to record levels of $34.98 billion and $31.42 billion, respectively.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said remittances remain a bright spot for the Philippine economy as consumer spending accounts for at least 68 percent of the economic output.

Due to higher inflation, Ricafort said OFWs continue to send more remittances to the Philippines.

“However, whatever gains OFWs and their families have due to more peso proceeds for their US dollars may be negated by higher inflation, now at a near-four-year high of 6.4 percent. Thus, there may still be a need to send more OFW remittances due to higher inflation,” Ricafort said.

The economist also traced the rise in remittances to the further reopening of the global and local economy toward greater normalcy, with the lowest Alert Level 1 for Metro Manila and other areas since March this year.

According to the economist, another offsetting factor has been the weaker peso exchange rate versus the dollar in recent months, which stood at P55 level recently after the weakest on record at P56.45 on July 12 and 14.

“That could have somewhat reduced the amount of OFW remittances sent or needed to pay for the same amount of spending/expenses in pesos in the country,” Ricafort said.

He said remittances continue to post modest year-on-year growth as the dollar has gained by more than nine percent against the peso since the start of the year, thereby reducing the need to send more remittances.

“Going forward, risk of recession in the US, which is the world’s largest economy, could potentially reduce employment prospects for OFWs and could also potentially slow down OFW remittances in the coming months,” Ricafort said.