FMIC-UA&P see 2H fall in remittances

FIRST Metro Investment Corp. (FMIC) and University of Asia and the Pacific (FMIC-UA&P) said remittances will pick up in the near term, before slowing down toward the second half in view of the conflict in the Middle East-North Africa area.

In a joint research note, FMIC-UA&P said remittances should continue to grow near the double-digit pace for the first quarter, before decelerating in the second quarter owing to the exodus of overseas Filipino workers (OFW) from the troubled countries collectively called MENA.

Remittances sent last December reached $1.7 billion, breaking the all-time record set last October. The December record led to a full-year inflow of $18.8 billion as forecast by the Bangko Sentral ng Pilipinas (BSP).

“This is not extraordinary since we have already seen that more dollars are sent back home during the holiday season,” FMIC-UA&P said.

According to the report, the year-to-date amount has increased from 2009’s 5.6 percent to 8.2 percent, signaling continued movement of Filipinos to different parts of the world.

“This positive growth maintains a robust support to local demand and is credited to the various innovations of different financial institutions in making it easy and convenient for remitters to send money.

Nowadays, they need not go personally to banks just to send their money since there are different web-based remittance services already available,” FMIC-UA&P said.

Data from BSP showed that most of the remittances came from the United States, Canada, Saudi Arabia, the United Kingdom, Japan, United Arab Emirates (UAE), Singapore, Italy, Germany and Norway.

Despite the resilience of remittances, FMIC-UA&P said the year-on-year growth in peso terms only improved to 2.3 percent in December.

“Besides the higher dollar remittances sent, the rise may also be credited to the depreciated peso in December, which averaged at P43.95:$1. This was 5.3 percent weaker than the same period in 2009,” they said.

The peso equivalent of December remittance registered at P74.5 billion from P70.1 billion in November, amounting to a total of P845.7 billion for 2010.

“While we expect first quarter 2011 remittances to keep its vitality, the economy should experience slower growth due to lower increases in exports and portfolio capital outflow arising from fears of an inflation surge. With the peso expected to be weaker for the rest of the first quarter, OFWs may take advantage of this to remit more and make up for the peso-equivalent shortfalls in previous months,” FMIC-UA&P said.

They project the peso to have an appreciation bias starting March as the BSP will try to offset higher crude oil and food prices with a stronger peso. They forecast the peso to average 44.05 against the dollar this month, 44.33 in April and 44.98 in May.

“Besides, unlike in the past, the US dollar does not seem to be the favored ‘safe haven’ in the ongoing MENA crisis,” they noted.

The peso has weakened from December’s average of 43.95:$1 to January’s 44.17:$1 because investors have become more anxious with the inflationary pressures brought about by the higher oil and other commodity prices.

“Unfortunately, Libya appears to be another sticky point for the peso with tensions in the MENA rising and thousands of jobs potentially to be lost by OFWs as well as oil prices hitting the roof if the turmoil escalates,” FMIC-UA&P said.

They added that the exchange rate will be volatile but the peso will remain strong. –LAILANY P. GOMEZ REPORTER, Manila Times