HSBC reduces 2011 growth forecast for remittances

REMITTANCES from Filipinos working abroad will likely rebound in the second half of the year, but annual growth may come in lower than expected given the weaker first quarter results, Hong Kong and Shanghai Banking Corp. (HSBC) said.

Sherman Chan, HSBC economist for Asean, said in a commentary that a rebound in remittance growth is still possible in the coming quarter, given solid demand within Asia and the continued gradual recovery of Western economies.

She maintained the view that the reconstruction in Japan and the recent fiscal package in Saudi Arabia will translate into a rise in demand for Filipino workers.

“That said, the weakness of first quarter’s result means that annual remittance growth is set to come in below our initial forecast of 8.5 percent to likely settle around 7.5 percent,” Chan said.

The Bango Sentral ng Pilipinas had said remittance growth came in at 4.1 percent year-on-year in March compared with 6.2 percent in February, marking the fourth straight month of deceleration.

For the first three months, remittances were up 5.9 percent on a year-on-year basis but down 2 percent on a quarter-on-quarter basis.

Remittances from land-based workers rose 4.3 percent year-on-year in the first quarter compared with 8.2 percent in the previous quarter, while those form sea-based workers cooled to 12.1 percent from 13.4 percent.

“With yet another month of notable deceleration in remittance growth, it has become increasingly difficult to refute the fact that growth of money inflows from [Filipino workers] is losing steam. The country breakdown is not yet available for March, but data for the first two months of the year already gives a reasonably clear picture―remittances have been slowing from all regions except Europe,” Chan said.

Remittances are critical for the Philippine economy, helping to sustain private consumption, which accounts for about three quarters of gross domestic product. Steady inflows have also helped to keep the current account positive and support the peso.

“As such, if the freefall in remittances continues in coming months, we may see significant implications not just for economic growth but also for the currency. While we still expect a rebound later in the year, our annual growth projection for this indicator is now lower than initially projected,” Chan said. –LAILANY P. GOMEZ, Manila Times