Remittance growth above par in June

Angelo Taningco
Economist, Treasury Group

Overseas Filipinos (OFs) personal remittances rose 6.8% year-on-year (yoy) to $2.8 billion in June, the second-highest monthly tally for the year, according to the Bangko Sentral ng Pilipinas (BSP) latest remittance data released on 15 August. This led the first half (H1) OFs personal remittance total to reach $15.4 billion, with its cumulative growth rising to 5.5% yoy (Figure 1).

Figure 1: OFs Personal Remittances
Jan. 2015 – Jun. 2017
(yoy %)


OFs = Overseas Filipinos, yoy = year-on-year
Source: Bangko Sentral ng Pilipinas

Cash remittances, which account for 90% of OFs personal remittances, posted 5.7% yoy growth in June, higher than the market’s median forecast of 5.1% yoy but below our projection of 6.1% yoy as compiled by Bloomberg. Its June level stood at $2.5 billion and its cumulative growth was 4.7% yoy in H1.

We think the cash remittance growth in June was induced by steady external demand for Filipino workers, the depreciation of the Philippine peso, and educational costs, among others. Growth in the deployment of Filipino workers abroad has remained positive, and this in turn has increased OF labor supply, and thus, remittances. Moreover, we calculated the peso to have depreciated by 1.4% vis-à-vis the US dollar in June: this may have led OFs to take advantage of the stronger US dollar, enabling them to remit more. In the same month, the start of the public school season has raised educational costs, which could have likewise partly explained the increase in OFs cash remittances.

Meanwhile, cash remittances in H1 valued $13.8 billion, of which $6.9 billion were generated during the second quarter (Q2) (Figure 2).

Figure 2: OFs Cash Remittances
Q1 2015 – Q2 2017
($ million)


OFs= Overseas Filipinos
Source: Bangko Sentral ng Pilipinas

We believe cash remittances will continue to support household consumption and ultimately gross domestic product (GDP). We retain our full-year OFs cash remittance forecasts of $28.6 billion and 6.5% yoy growth. In Q2, we expect household consumption growth to have contributed 60% to real GDP growth, which we forecast to be at 6.5% yoy.

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