OFW remittances hit all-time high of $38.3B

Money sent home by overseas Filipino workers (OFWs) hit a record $3.73 billion in December, the Bangko Sentral ng Pilipinas (BSP) reported on Monday, bringing the full-year total to an all-time high of $38.3 billion.

December's count was 3.0 percent higher than the year-earlier $3.62 billion and $3.12 billion recorded in November 2024. The BSP, in a statement, said that it was driven by "remittances from both land-based and sea-based workers."

The 2024 tally, meanwhile, was also 3.0 percent higher than $37.21 billion recorded in 2023. It also exceeded the central bank's $34.5-billion target for the year.

Full-year remittances were equivalent to 8.3 percent and 7.4 percent of gross domestic product and gross national income, respectively.

In December alone, cash remittances rose by 3.0 percent to $3.38 billion from $3.28 billion recorded in the same month in 2023. For the full-year, these hit $34.49 billion, also 3.0 percent higher than the $33.49 billion registered in 2023.

The cumulative growth in cash remittances was attributed to flows from the United States, Saudi Arabia, Singapore, and the United Arab Emirates.

The US accounted for the biggest share (40.6 percent) of overall remittances for the year, followed by Singapore (7.2 percent), Saudi Arabia (6.4 percent) and Japan (4.9 percent).

Other countries that contributed to overall remittances were the United Kingdom (4.7 percent), the UAE (4.4 percent), Canada (3.6 percent), Qatar (2.8 percent), Taiwan (2.7 percent) and South Korea (2.5 percent).

The US accounted for the bulk as remittance centers in many cities abroad course funds to correspondent banks that are mostly in that country.

Sought for comment, Philippine Institute for Development Studies senior research fellow John Paolo Rivera said that the growth in remittances highlighted the continued role that OFWs play in supporting the economy.

"Sustained economic recovery in the US, Middle East, and APAC (Asia-Pacific) led to higher wages and employment opportunities for OFWs, boosting remittances," Rivera added.

"Also, the weak PHP (peso) against the USD (dollar) in certain months increased the monetary value of remittances, prompting some OFWs to send more money home."

Rivera also said that the adoption of digital remittance platforms had made transfers faster and cheaper, encouraging higher remittance flows.

Remittances are likely to remain a stable growth driver, he continued, amid more favorable exchange rates that could encourage higher remittance volumes.

"However, this can be disrupted by geopolitical tensions or economic downturns in host countries could affect job security," Rivera said.

"Overall, remittances are expected to maintain modest growth in 2025, barring major economic disruptions. The steady inflows will continue to support household spending, helping drive consumption-led growth."

Source: Manila Times

Bank lending growth hits 2-year high

Bank lending in December expanded at its fastest pace in two years, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

Outstanding loans of universal and commercial banks jumped by 12.2% year on year to P13.1 trillion in December from P11.7 trillion in the same period in 2023.

This was the fastest lending growth in two years or since the 13.7% recorded in December 2022.

On a seasonally adjusted basis, big banks’ outstanding loans rose by 1.4% month on month.

Central bank data showed outstanding loans to residents climbed by 12.4% to P12.8 trillion in December, faster than the 11.4% growth in November.

Meanwhile, loans to nonresidents rose by 5.7% to P330 billion during the month, faster than the 3.9% posted in November.

Outstanding loans to residents for production activities expanded by 10.8% to P11.2 trillion in December, faster than 9.8% in the previous month. Loans for production accounted for the bulk (85.4%) of overall lending.

The BSP said the growth was driven by sustained lending in wholesale and retail trade, repair of motor vehicles and motorcycles (10.1%); electricity, gas, steam and air-conditioning supply (14.2%); manufacturing (7.4%); financial and insurance activities (7.4%); and construction (12.6%).

Meanwhile, consumer loans jumped by 25% in December from 23.3% in the previous month. Consumer loan data excluded residential real estate loans.

This was due to the “increase in credit card loans; salary-based general purpose consumption loans and motor vehicle loans,” the central bank said.

BSP data showed credit card loans rose by 29.4% in December from 26.5% a month earlier. Salary-based general purpose consumption loans also picked up by 16.5% in December from 15% in the previous month.

However, growth in loans for motor vehicles eased slightly to 19.5% in December from 19.6% in the previous month.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said loan growth picked up as the BSP began its easing cycle.

The central bank started its rate-cutting cycle in August last year. It reduced borrowing costs by a total of 75 basis points (bps), bringing the key rate to 5.75% by end-2024.

For the coming months, easing inflation well could justify further rate cuts this year and “spur greater demand for loans due to lower financing costs,” Mr. Ricafort said.

BSP Governor Eli M. Remolona, Jr. has said a rate cut is still “on the table.”

For 2025, he signaled the possibility of cutting by a total of 50 bps, noting that 75 bps or 100 bps may be a bit “too much.”

Mr. Ricafort also noted the cut in the reserve requirement ratio (RRR) “could have fundamentally increased the loanable funds of banks.”

The BSP reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7% from 9.5%, which took effect last October.

Mr. Remolona has said that the Monetary Board is eyeing to again reduce reserve requirements by 200 bps to 5% this year, sometime in the middle of the year.

“The pickup in bank loan growth in recent months could be attributed to improved business and economic conditions, especially in terms of improved data on employment in recent months,” Mr. Ricafort added.

MONEY SUPPLY

Meanwhile, domestic liquidity (M3) grew by 7.7% in December, the same as November.

M3 — which is considered as the broadest measure of liquidity in an economy — increased to P18.8 trillion as of December from P17.4 trillion a year earlier.

Month on month, M3 inched up by 0.2% on a seasonally adjusted basis.

Data from the BSP showed domestic claims rose by 10.4% during the month, though slower than the 10.8% in November.

“Claims on the private sector grew by 12.2% in December from 11.7% in the previous month with the continued expansion in bank lending to nonfinancial private corporations and households,” the BSP said.

The growth in net claims on the central government eased to 7.2% in December from 9.2% in the previous month due to higher National Government borrowings.

Meanwhile, growth in net foreign assets (NFA) in peso terms also eased to 6% from 9.8% in November.

“The BSP’s NFA expanded by 6.8%, reflecting the increase in gross international reserves relative to a year ago. Meanwhile, the NFA of banks declined on account of higher bills and bonds payable,” it added.

Source: Business World

Percentage of Filipinos with savings dips to over 3-year low

The proportion of Filipino households with savings dipped to its lowest level in over three years in the fourth quarter, with pessimistic consumers yet to regain their pre-pandemic confidence level as they continue to brace for higher inflation and borrowing costs.

A nationwide survey of 5,350 families showed 25.6 percent of families in the Philippines have money to save in the October-December period, lower than the 29-percent recorded in the third quarter, the Bangko Sentral ng Pilipinas (BSP) reported.

The top reasons for setting aside cash were emergencies; health and medical expenses; education; retirement; business capital and investment; and house purchase. But data showed the latest result was the lowest reading since the third quarter of 2021, when the percentage of families that can save stood at 25.2 percent amid harsh pandemic lockdowns.

As it is, some analysts believe that the need to rebuild household savings could delay the benefits of the ongoing easing cycle of the BSP, which has so far cut the policy rate by a total of 75 basis points to 5.75 percent. This is because families might defer any big-ticket purchases until they can fix their inflation-battered balance sheets.

The central bank said households expect inflation to increase, which can hurt their ability to save money. Specifically, consumers expect price growth to average 6.2 percent for the next 12 months, running above the 2 to 4 percent target range of the BSP.

Survey results also showed consumers anticipate interest rates to spike and the peso to weaken against the US dollar in the fourth quarter. Respondents were also worried that joblessness may worsen.

This, in turn, brought the overall confidence index (CI) for households at -11.1 percent in the fourth quarter, staying in the negative territory as pessimists continued to outnumber the optimists during the period.

But while the latest CI for consumers was less pessimistic than the -15.6 percent in the third quarter, the BSP noted that the confidence level of households has yet to return to the positive territory seen before the pandemic.

That was a stark contrast to the overall CI for businesses, which climbed to 44.5 percent from 32.9 percent in the preceding quarter as firms gear up for the typical surge in demand during the Christmas shopping season.

For now, respondents attributed their less downbeat sentiment on expectations of higher and additional sources of income; more working family members; and an increase in available jobs and permanent employment.

Source: Inquirer and BSP