OFW remittances drop slightly to $1.26 billion in January

MANILA, Philippines – Remittances from overseas Filipino workers (OFWs) went down slightly by 0.1 percent to $1.260 billion in January from $1.264 billion a year ago as Filipino workers abroad began to feel the pinch of the global economic crunch, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

On a month-on-month basis, the January inflow was substantially lower than the December remittances of $1.407 billion.

In terms of growth rate, the decline in January was a complete turnaround from the double-digit growth rate of 15 percent in January 2008.

BSP Governor Amando M. Tetangco Jr. said the drop in OFW remittances was due mainly to a decline in inflow from US-based Filipino workers.

Tetangco also explained that authorities had detected a steady decline in the deployment of workers beginning November last year. In December, he said deployment actually declined by 5.8 percent.

The decline in the deployment of workers abroad was also accompanied by displacement in workers that were already working abroad – hit by the economic downturn in the country’s major labor destinations.

But Tetangco said that despite mounting concerns, the latest data on overseas deployment for January actually indicated some recovery. He said the Philippine Overseas Employment Administration (POEA) reported a dramatic 25.3 percent increase in overseas deployment during the review period.

Tetangco said that based on POEA data, January deployment increased to 165,737 workers compared with about 132,285 workers who were deployed in January 2007.

The impact of this increase in deployment, however, would not show up in the January data and is expected to be captured in February or March onwards.

Tetangco expressed confidence that remittances – the country’s most stable source of foreign exchange – would remain robust this year despite expectations that inflows would fall for the first time.

The BSP had projected remittances to post a zero growth rate this year, with total inflows expected to stabilize at an average of at least P1.2 billion every month.

Tetangco said the government expects a pick-up in employment opportunities in host countries such as Canada, Australia, Japan and even in some Middle Eastern countries like Qatar, particularly in health care, education, energy and real estate sectors.

At the start of the crisis, OFW inflows had been projected to grow by six to nine percent – itself the first time that the annual growth rate is projected to fall below double-digit levels.

Outside the BSP, private banks have been expecting remittances to actually decline this year, with HSBC earlier projecting a decline in monthly remittances of as much as 25 percent sometime this year.

Citigroup, on the other hand, expects the growth in remittance inflows to drop dramatically in 2009 from 13 percent in 2008 to only three percent as a result of wage cuts and job losses in the overseas job market.

Citi noted that while remittances in December looked “decent”, the growth rate had actually slowed down and there was a headcount loss of 5.8 percent.

But Citi said its projections showed only a three percent growth – dramatically slower but still better than earlier projections made by Hongkong Shanghai Banking Corp (HSBC) which was expecting remittances to decline by a whopping 20 percent this year.

HSBC said that while remittances in the Philippines have historically proven resilient in the face of tumbling growth elsewhere, the severity and synchronicity of the current plunge in global growth were bound to eventually take their toll on the ability of OFWs to sustain flows.

HSBC said it would take a “rather substantial” fall in remittances to raise worries about the emergence of a structural external payments imbalance. However, the bank said there were few economies and industries that remained unaffected by the global slump unlike the tech bust of 2001 or the Asian financial crisis where some industries were spared. – By Des Ferriols (Philstar News Service, www.philstar.com)