Remittances from Filipinos based overseas grew 3.3 percent in October, its the weakest pace in over a year, data from the Bangko Sentral ng Pilipinas showed.
Overseas Filipino Workers (OFWs) sent home $1.43 billion in October, the second highest volume on record. However, in terms of annual increases, the October data is the lowest since June 2007 when inflows rose just 1 percent. It is also the second single-digit growth rate in 2008, apart from March, a traditionally weak month for remittances.
In September, the $1.33 billion total remittances accounted for a 17 percent growth compared to the same month last year.
Thus, the dismal 3.3 percent increase in October essentially confirms analysts' expectations that the pace of remittances would slow down as the global credit crisis and recession in the developed countries put jobs--including those of migrant workers'--at risk.
Remittance data is one of the most watched economic indicators since it paints a picture of where the economy is headed.
Annual remittances account for about a tenth of domestic economy, outpace foreign direct investments to the Philippines, and is considered the main driver in consumption spending. Previous spikes in demand for real estate properties, especially mid-range residential units, and the robust fee-based income of banks and remittance centers were attributed to the strength of remittance growth.
Retail giants, such as the SM group of companies, which also offer money-changing services, and phone companies, such as Smart Telecommunication and Globe Telecoms that have tapped on the communication needs of OFWs and their families left behind, continue to thrive and are pursuing their capital investments, despite experts' bleak economic outlook for 2009.
BSP governor Amando Tetangco said in a statement the data showed remittances were supporting the economy.
"The steady inflow of remittances from overseas Filipinos, which has stayed above the $1 billion level for more than two years now, shows that remittances remain resilient and continue to be an underlying source of strength for the economy," he said.
In dollar terms, however, the $1.43 billion October remittances was the highest since a record $1.45 billion in June.
Inflows of remittances usually rise from October until the end of the year as expatriates send home money to their relatives for Christmas and New Year, both important and festive holidays to this Christian-dominated country.
BSP documents show that remittances sent through official channels are expected to rise about 6 to 10 percent in 2009, slowing from an expected increase of 10 to 11 percent this year.
Total remittances in the first 10 months of the year were $13.7 billion, up 15.5 percent from the same 2007 period.
United States, Saudi Arabia, United Kingdom, Italy, United Arab Emirates, Japan, Singapore and Hong Kong are the top hosts of Overseas Filipino Workers (OFWs) in the past ten months. Most of these host countries have announced that their economies are already in recession, or have contracted for two consecutive months.
Host countries in recession
Of the top ten hosts, the October remittances from countries in the Americas and Europe showed the biggest drops.
The $804 million sent home by Filipinos living in the Americas--which include the United States, Canada and Guam--was 3.89 percent lower than the $837 million sent in the same month last year, BSP data showed.
The Americas region has already slowed to 5.1 percent in September, a drastic drop from the 23 percent average growth in the first 8 months of the year. It was in mid-September when the US central bank allowed Lehman Brothers to fall, eventually snowballing into a financial crisis that spurred a domino effect to the financial and economic health of other developed countries all over the world.
Remittances from and coursed though the United States account for a hefty 56 percent of total October remittance.
On the other hand, Filipinos in European countries sent $212 million in October, a 0.66 percent less compared to $213 million in the same month last year.
Funds from Italy and the United Kingdom were distinctly lower in October than the month before. OFWs in United Kingdom sent $64 million in October compared to $72 million in September. Those in Italy sent only $45.3 million in October, lower than the $50.2 million recorded a month before.
OFWs in other European countries have likewise been sending less money home not just in October but in the cumulative amounts for the past 10 months. Amounts from France and Denmark, for example, plunged by 36.44 percent and 3.83 percent respectively.
Meantime, OFWs in the Middle East and Asia have taken up the slack and have posted healthy growth rates.
The oil-rich Middle East region, the destination of majority of our construction workers, a number of our nurses, engineers, and domestic helpers, posted a 17.8 percent annual growth rate. This pace, however, is slower than September's hefty 47 percent year-on-year increase. On that month, funds sent home reached $251 million.
In October, the $213 million total remittance from the Middle East mostly came from OFWs in Saudi Arabia ($115 million) and the United Arab Emirates ($59 million).
Both countries are faced with slower oil prices, which is now below $50 a barrel, a far cry in July when the commodity skyrocketed to record $147 a barrel.
On the other hand, countries in Asia posted the highest year-on-year growth rate in October --32 percent. Those in the region have recently been consistent sending money home at this pace since September, when they again recorded a 33 percent annual rate.
In October, OFWs in the region--especially those in Japan, Singapore, Hongkong, and Taiwan--sent home a total of $192 million.
The growth rates and absolute amounts of remittances are influenced by exchange rates and the pace of deployment.
The peso has depreciated against the dollar in the past months, as investors sought currencies perceived as safe and liquid such as the dollar. However, as soon as inflow of remittances for the holidays started, the peso has appreciated, reaching the P47 level in recent days.
Meanwhile, in terms of OFW deployment, Filipinos moving abroad to work climbed 25.5 percent to 1.1 million in the first 10 months of the year, data from the Labour department showed.
Economists said job cuts were expected to hit some of the Filipinos overseas, particularly those in the IT and finance sectors.
However, the central bank said jobs are still opening abroad for migrant workers, such as in Canada, the Middle East and south Australia. - with Reuters