Angelo Taningco
Economist, Treasury Group

Overseas Filipinos (OF) cash remittances into the Philippines grew by only 2.0% yoy to $2.3 billion in November—way below Bloomberg’s market’s median forecast of 7.3%, which includes our 6.4% estimate, and October’s 8.4%. We think the remittance slowdown is linked to the peso appreciation and inflation moderation that transpired during that month. Meanwhile, we expect the country’s balance of payments (BOP) to register a surplus in December amid a monthly increase in foreign reserves.

OF cash remittances totaled $25.3 billion in January-November, recording only 4.0% yoy growth; this is less than our full-year forecast of 5.0%. We think remittance growth may have been modest again last month since the peso has appreciated further and inflationary pressures were steady. We assert both the peso appreciation and weaker or steady domestic inflation would tend to discourage OF to remit more. Conversely, higher domestic inflation and peso depreciation would tend to raise OF remittances; against this backdrop, we expect remittance growth to improve (to 6%) in 2018.

This year, we still foresee the BOP deficit to persist amid downward pressures in both the current and financial accounts. Strong domestic absorption will buttress import demand, and thereby contribute to the trade deficit and put downward pressure on the current account balance. Also, further US policy rate hikes will likely induce foreign capital outflows, thereby weighing on the financial account. Along these lines, our forecast for this year’s BOP deficit is −0.3% of GDP.

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