Middle East crisis won’t affect OFW inflows much – HSBC

MANILA, Philippines – British banking giant Hong Kong and Shanghai Banking Corp. (HSBC) downplayed the impact of the violence in the Middle East and North African (MENA) states on the growth of remittances from overseas Filipino workers (OFWs).

HSBC economist Sherman Chan said in a research note that a sharp slowdown in remittances from OFWs is unlikely despite the tension in the Middle East.

“While the recent turmoil in the Middle East has dampened prospects for another year of acceleration in money sent home by overseas Filipino workers, the gradual economic recovery in the West coupled with healthy growth in Asia provide support for the Philippine remittances outlook. Therefore, a sharp slowdown in remittances is unlikely in the near term,” Chan stressed.

The economist cited that that OFW remittances climbed by 0.9 percent month-on-month in January after a 2.5 percent month-on-month decline in December on a seasonally adjusted basis.

“Although headline remittances growth has slowed for two straight months, it is too early to conclude that a downward trend is emerging. In fact, there are signs of improvement in January when looking at the seasonally adjusted data on a sequential basis,” Chan said.

Latest data released by the Bangko Sentral ng Pilipinas (BSP) showed OFW remittances climbed by 7.6 percent to $1.476 billion in January from $1.372 billion in the same month last year. About 80 percent of the total remittances came from the US, Canada, Saudi Arabia, Japan, United Kingdom, Singapore, United Arab Emirates, and Italy.

OFW remittances went up by 8.2 percent to a new record level of $18.76 billion last year from $17.35 billion in 2009 exceeding the revised eight percent growth forecast set by the BSP for 2010. Originally, the BSP penned a six percent growth for OFW remittances last year but revised the target due to the strong demand for skilled Filipino workers abroad.

This year, the BSP sees OFW remittances growing by another eight percent to breach the $20-billion level.

However, monetary authorities are now looking at a lower growth due to the impact of the tensions in MENA states as well as the devastating magnitude 8.9 earthquake and tsunami in Japan.

The BSP would review the projected eight percent growth in OFW remittances as well as the country’s projected external payments position including gross international reserves (GIR) and the balance of payments (BOP) next month to take into consideration latest indicators and developments.

Chan explained that concerns about remittance outlook are understandable but brushed aside any major impact as Middle East accounts for only about 15 percent of the total OFW remittances.

“In light of the recent chaos in the Middle East, concerns about the Philippine remittances outlook are understandable. However, with the region accounting for only roughly 15 percent of Philippine remittances in the past five years, economic developments in the West and in Asia still carry larger implications. Hence, we do not expect a slowdown in remittances from the Middle East to weigh too heavily on overall growth,” she said.

According to him, the tension in the Middle East would have limited downside on OFW remittances due to the expected sustained recovery in emerging market economies. –Lawrence Agcaoili (The Philippine Star)