The inflow of US dollars from overseas Filipino workers (OFWs) is shoring up the Philippines’ external position, with personal remittances growing 5.3 percent year-on-year in the 11 months ending Nov. 30 last year.
The Bangko Sentral ng Pilipinas (BSP) said January to November remittances reached $31.59 billion in 2021 from $29.99 billion in the same period of 2020.
In November alone, the BSP observed a 4.8-percent growth with an inflow of $2.77 billion compared to $2.64 billion in the same month of the previous year.
Transfers from land-based OFWs with work contracts of at least one year reached $2.14 billion or 6.3 percent higher than $2.01 billion previously.
At the same time, other OFWs—both based on land and at sea, but with contracts of less than one year—sent $581 million, an increase of 1 percent from $575 million.
Of total remittances, cash that OFWs sent through banks reached $2.5 billion in November, higher by 5.1 percent than the $2.379 billion sent in a year before.
From January to November, cash remittances grew by 5.2 percent to $28.43 billion from $27.01 billion.
The United States accounted for 41 percent of 11-month remittances, followed by Singapore, Saudi Arabia, Japan, the United Kingdom, the United Arab Emirates, Canada, Taiwan, Qatar and South Korea.
Jonathan Koh, Standard Chartered’s Asia economist, said they expect remittances to continue to contribute toward the current account balance.
Current account deficit
Latest data from the BSP show that from January to September last year, the country’s current account was pegged at a deficit of $2.6 billion compared with a surplus of $7.8 billion in the same period of 2020.
“However we expect the [remittances] contribution to be outweighed by the increase in imports of capital goods and travel services (as borders reopen), resulting in the widening of the current account deficit,” Koh said.
Nicholas Mapa, ING Bank senior Philippines economist, said in a research note a steady dose of OFW remittances and business process outsourcing receipts has helped support the peso throughout most of 2021, when the local currency depreciated like most in the region.
“We can expect these two structural types of flows to continue to flow in 2022, helping steady the [peso] yet again,” Mapa said.
“However, we expect external events to overtake real sector flows as the Fed [United States Federal Reserve] prepares its eventual rate liftoff this year,’ he added. “Remittances and BPO receipts will likely be relied on heavily to steady the currency.”