Remittances fell to six-month low in November

REMITTANCES from overseas Filipinos slipped to a six-month low in November last year following the aggressive monetary policy tightening in the United States in mid-2023, data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed.

Central bank data showed that cash remittances or money transfers coursed through banks or formal channels stood at $2.719 billion in November, lower than the $2.998 billion in October but 2.8% higher than the $2.644 billion the same month in 2022.

This is also the lowest in six months since remittances came in at $2.494 billion in May 2023.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the decline could have been caused by concerns about an economic slowdown in the US after the Federal Reserve hiked rates to tame inflation to its 2% target.

“Risk of economic slowdown or even recession in the US partly due to aggressive Fed rate hikes since March 2022… would still be a drag for OFW (overseas Filipino worker) remittances especially if there would be job losses for some OFWs, though offset by the economic reopening in China,” he said in an emailed commentary.

Locally, the central bank has already raised key policy rates by 450 basis points since May 2022, in a bid to tame inflation. The benchmark target reverse repurchase (RRP) rate is currently at a 16-year high of 6.5%.

Ricafort said the seasonal increase in OFW remittances and the conversion to the Philippine peso could have also been seen in October 2023 ahead of the long break from Oct. 30 to Nov. 2, 2023.

“For the coming months, single-digit/modest growth in OFW remittances could still continue as OFW families/dependents still need to cope up with relatively higher prices/inflation locally that would require the sending of more remittances,” Ricafort said.Year-to-date cash remittances were recorded at $30.211 billion reflecting a 2.8% increase from $29.180 billion in the comparable period of 2022, with the United States accounting for 41.2% of the total.

Singapore accounted for 6.9%, followed by Saudi Arabia with 6.0%, Japan with 5.0%, the United Kingdom with 4.7%, the United Arab Emirates with 4.3%, Canada with 3.6%, Qatar with 2.8%, Taiwan with 2.7%, South Korea with 2.5%, and other countries with 20.2%.

Meanwhile, personal remittances — the sum of transfers sent in cash or in-kind via informal channels — stood at $3.017 billion in November, also the lowest in six months since May 2023’s $2.782 billion.

Cumulative personal remittances came in at $33.585 billion, 2.8% higher than the $32.649 billion in the comparative period of 2022.

“Offsetting risk factors include higher inflation/cost of living for OFWs themselves in host countries where they are based that could lead to more expenses in foreign countries and could potentially reduce any remittances sent back home,” Ricafort said. (GMA Integrated News)