Remittances remain vital to forex reserves – Fitch

The Philippine Star, April 30, 2016, http://www.philstar.com/business/2016/04/30/1578096/remittances-remain-vital-forex-reserves-fitch

MANILA, Philippines – Fitch Ratings said remittances from workers would remain a vital source of forex reserves for emerging economies in Asia including the Philippines.

“Worker remittances proved to be a stable source of foreign currency in Asia in 2015, while dropping significantly in some other countries, especially in Europe and central Asia, partly due to lower outflows from Russia,” Fitch said.

It added remittance inflows to the Philippines, Sri Lanka, Bangladesh, Pakistan and Vietnam are particularly strong relative to the size of their economies.

Data from the Bangko Sentral ng Pilipinas (BSP) showed overseas Filipinos have sent over $228 billion in personal and cash remittances to their loved ones in the Philippines between 2005 and 2015.

Remittances from more than 10 million overseas Filipinos went up 4.4 percent to a record $28.5 billion or equivalent to about 9.8 percent of the country’s domestic output.

Fitch said the resiliency of workers’ remittances to the Philippines, Sri Lanka, Bangladesh, Pakistan, and Vietnam can be attributed to the abundance of cheap and skilled labor in these countries.

It added these countries turn this positive factor into a comparative advantage as higher income levels associated with the foreign-currency receipts partly help drive domestic consumption.

The rating agency noted the slowing growth and capital spending among oil producers in the Middle East may reduce employment opportunities for foreign workers from Asian countries.

Fitch-rated Gulf Cooperation Council countries led by Saudi Arabia are expected to reduce their public capital expenditure by 16 percent this year and by six percent next year after dropping it by 15 percent last year.

“The risk of lower demand for foreign workers in the Middle East has, so far, hardly materialized in Asian countries dependent on remittances from that region,” Fitch said.

It pointed out remittances are a relatively stable source of foreign-currency receipts as illustrated by the resilience of inflows during the 2007-2008 global financial crisis.

BSP Governor Amando Tetangco Jr. earlier said remittances from overseas Filipinos have been a dependable source of strength for the Philippine economy.

Tetangco said the Philippines has been consistently ranked among the top recipients of remittances.

“Early this month, a World Bank report on 2015 remittances said the Philippines ranks third among the top remittance-receiving countries, next to India and China, both of which have over a billion in population,” he said.