World Bank predicts 4% dip in remittances

Published by rudy Date posted on March 31, 2009

World Bank said remittances by overseas Filipino workers (OFWs) are likely to post a modest drop this year because of job lay offs, as it cited a larger basis for the projected remittances that included non-cash flows.

Dilip Ratha, the banka’s lead economist for Migration and Remittance Team, said remittances could drop by 4 percent this year from its estimate of $18 billion in total remittances last year. The World Bank also computed the amount of remittances in cash and non-cash flows, including the balikbayan box.

“We might see an increase but not a double-digit growth—­a decline of 4 percent or so,” he explained.

Ratha spoke at International Remittance Conference organized by the Bangko Sentral ng Pilipinas.

He added that remittances in low-income countries would slow down sharper in low-income countries.

For middle-income countries, remittances are expected to drop by 4.9 percent this year. Remittances for low-income countries would drop by 5.4 percent this year.

Total remittances from developing economies grew by 9 percent to $305 billion last year.

This is lower than the annual growth of 23 percent in 2007, which posted a total amount of $281 billion.

Ratha said the sharp decline in the US migrant employment in construction and manufacturing sectors are switching to wholesale and retail and restaurant sector.

Philippine prediction

Meanwhile, the central bank expect remittances, which only measures the cash flows from banks and non-bank channels, to post a flat growth this year. Filipino workers sent home $16.4 billion through banks last year, which posted a growth but the remittances tapered off toward the end of 2008 when the global crisis struck.

“We still expect a flat growth [for remittances],” central bank Governor Amando Tetangco Jr. told reporters, adding that the World Bank used a different basis in reporting the $18-billion remittances it recorded for last year.

Francisco Dakila, central bank’s Center for Monetary and Financial Policy director, earlier said that the stability of food prices would offset the impact of declining remittances in consumption growth.

As prices of food normalizing, it would have significant improvement in the real purchasing power of consumer, he explained. Consumption represent 70 percent of economic output, is considered quite healthy although there’s slight moderation, he added.

In the consumption basket, half of the expenditures of Filipinos consist of food spending.

The annual inflation rate for food increased to 12.8 percent in February from 12.7 percent in January.

The central bank expects inflation, or annual increase of prices to reach 3.9 percent this year and 3.7 percent next year because of lower oil prices.

From an inflation of 7.3 percent in February, the central bank expects inflation to decline further to 5.9 percent to 6.8 percent in March because of the drop in oil prices and a cut in jeepney fare.

Based on the latest report, remittances grew by 0.1 percent year-on-year to $1.265 billion in January this year from $1.264 billion in January 2008, because of the contraction of remittances from the United States.

The result in January was lower than the central bank’s projection, which forecasted remittances to exceed the 0.8 percent month-on-month growth in December. The level in January is also below than the monthly average of $1.3 billion to $1.4 billion. –Maricel E. Burgonio, Reporter, Manila Times

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