Angelo Taningco
Economist, Treasury Group

Overseas Filipinos (OF) remittance growth unexpectedly slowed in February notwithstanding rising inflation and weakening of the peso. However, the first two months of the year saw OF remittance growth eclipsing last year’s performance. We expect OF remittance inflows to grow at a faster clip this year, and we posit that this would support the current account balance, contribute to GDP growth, as well as exert inflationary pressures.

OF cash remittances increased 4.5% yoy to $2.3 billion in February. Its yoy growth for the month was unexpectedly slow as it is less than the market’s median forecast of 10.6% and January’s 9.7%. The BSP reported that the two-largest source countries for OF cash remittances were the US and UAE.

On a year-to-date basis, however, the January-February OF cash remittance growth stood at 7.1% yoy, a faster clip than 2017’s 4.3%. We continue to expect OF cash remittance inflows this year to be bigger than last year with our 2018 OF cash remittance growth forecast still at 5.0%. Furthermore, we believe OF remittances will support the current account balance—and thereby to help cushion the peso depreciation; have a positive impact on household spending and GDP growth; and contribute to liquidity growth and inflationary pressures. Against this backdrop, we maintain our 2018 GDP growth and consumer price inflation forecasts of 6.8% and 4.2%, respectively.

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