Angelo Taningco
Economist, Treasury Group

Overseas Filipinos (OFs) cash remittance growth quickened to a faster-than-expected pace in July, its third-consecutive month of acceleration. We think such trend exemplifies steady external demand for Filipino workers and the effects of the peso depreciation.

OFs personal remittances in July amounted to $2.6 billion, of which $2.3 billion were cash remittances, according to the Bangko Sentral ng Pilipinas (BSP) latest remittance data released on 15 September. The year-on-year (yoy) growth rate for OFs personal remittances climbed to 8.7% in July from 6.8% yoy in June while that for OFs cash remittances rose to 7.1%-which is above the 6.5% market median forecast-from 5.7% in the previous month. On a cumulative basis, OFs personal and cash remittances were up 5.9% yoy (at $17.9 billion) and 5.0% yoy (at $16.1 billion), respectively, in January-July.

Figure: Monthly & Cumulative OFs Personal Remittance Growth
Jan. 2015 – Jul. 2017
(percent)

 
Among the main country contributors to OFs cash remittance growth for July were the United States (US), United Arab Emirates (UAE), Singapore, and Japan, according to the BSP. Likewise, the top ten country sources of OFs cash remittances-US, Saudi Arabia, UAE, Singapore, Japan, United Kingdom, Qatar, Kuwait, Germany, Hong Kong-during January-July have contributed about 80% of the total. We assert that most of the aforementioned economies have expanded at a healthy pace this year, enabling them to exhibit steady demand for Filipino workers and thereby explaining their strong OF remittance flows to the Philippines. Moreover, the depreciation of the Philippine peso has encouraged OFs to remit more in order to take advantage of the US dollar’s higher domestic value.

We believe OFs cash remittances will likely post relatively strong growth in the remaining months of the year. This is because we expect external demand for Filipino workers to be steady and the USD/PHP to remain above its previous year’s level, showcasing a stronger US dollar vis-à-vis the Philippine peso. As such, we retain our full-year 2017 OFs cash remittance forecasts of $28.6 billion and 6.5% yoy.

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