In August, cash remittances coursed through banks dipped 0.6 percent to $2.04 billion. File photo
MANILA, Philippines – The US dollar’s strength is cutting through remittance earnings of overseas Filipinos, but the recent drop in inflows could prove to be “temporary,” the chief economist of the Department of Finance said.
“Overseas remittances will continue to be a positive factor in Philippine GDP (gross domestic product) growth and recent slowdown may be temporary as the US dollar strengthens,” Finance Undersecretary Gil Beltran said on Thursday.
In August, cash remittances coursed through banks dipped 0.6 percent to $2.04 billion, the first monthly drop recorded in 12 years. For the first eight months though, inflows remained up 4.1 percent year-on-year.
In an economic bulletin, Beltran said the dollar’s recent appreciation against major currencies lowered the value of remittances sent by Filipinos to their families.
The greenback, he said, is garnering strength from expectations that the US Federal Reserve would hike key rates before the year ends. On Wednesday, the Fed kept its near-zero policy rates steady after its two-day meet.
“If remittances were valued in respective local currencies, growth would have been double-digit or close to double-digit in many countries,” Beltran pointed out.
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That includes countries “mired in recession, except Italy, and the petroleum exporters which were adversely affected by steep oil price drop,” he added.
A strong dollar strips the value of remittances in other currencies if the value being sent remains constant. For the first eight months, a number of emerging market currencies plummeted in value as profit-seeking investors flock to the US to wait for the rate hike.
Beltran named the currencies as the euro and Japanese yen (down 18 percent), Singaporean dollar (8 percent) and the pound (8.5 percent). The Philippine peso also decreased 4 percent.
By segment, land-based overseas workers were the one highly affected by the dollar’s surge. Sea-based workers, meanwhile, have been experiencing a decline in remittances for the past four years.
Aside from the dollar’s surge, Beltran said remittances from Europe and the Middle East also suffer from economic slowdown and drop in oil prices, respectively, although he expects these to recover soon.
“Remittances continue to defy economic slowdowns in Europe and the Middle East,” the Finance official said.
Earlier, the Bangko Sentral ng Pilipinas (BSP) expressed optimism remittances will recover in the coming months as the holiday season prompts overseas workers to send more dollars.
The BSP has set a five-percent remittance growth target this year. As of August, remittances account for 9.7 percent of GDP.
