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

Trump seen bad for PH remittances

Remittances to the Philippines and receipts from the business process outsourcing sector could take a hit from US President-elect Donald Trump’s hardline immigration policies, while the possibility of diminished security support from Washington could stir up more tensions in the West Philippine Sea, said Japanese investment bank Nomura.

Those are the channels where the Philippines is most vulnerable after Trump won the race to the White House again following a divisive Nov. 5 election.

Zooming out, Nomura said in a commentary that Trump 2.0 will be negative for growth in Southeast Asia, albeit at varying degrees.

“The Philippines does not have a similar cushion and will be at risk from the impact on workers’ remittances from a possible tightening of US immigration policy and on the outsourcing sector,” Nomura said.

“Increased geopolitical tensions in the South China Sea due to the lack of US security support could put the Philippines on the front line. This could be an issue for the broader region, if China’s assertiveness in the disputed waters intensifies,” it added.

Global anxiety

The uncertainties over the recent US presidential election and the impact of a second Trump term on the global economy caused anxiety all over the world, and the Philippine peso is already feeling it.

The local currency finished the previous week past the 58-level again, a territory not seen in three months as election jitters powered up a rallying dollar, which is already getting a boost from expectations of slower rate cuts by the US Federal Reserve.

Trump staged a stunning return to power after securing more than the 270 Electoral College votes needed to win the presidency and defeat his democratic rival, Kamala Harris. As it is, the European Union is already planning to retaliate if Trump instigates a global trade war and slaps a universal tariff of up to 20 percent on all imports into the United States, as he warned.

In a separate commentary, ANZ Research said the likelihood of US manufacturers replacing Asian imports in the near term is low, although the Philippines, Malaysia and Taiwan “could be vulnerable to shifts in the electronic integrated circuit supply chains.”

Data from ANZ showed the Philippines’ exports to the United States accounted for 17.7 percent of the Asian country’s total outbound shipments between 2021 and 2023 on average, making the United States a major trading partner of the Philippines.

Meanwhile, American demand for Filipino products cornered 3.5 percent of the Philippines’ gross domestic product during the same period.

Overall, ANZ said Trump might train his protectionist policies on economies with large trade surpluses with the United States like China, Vietnam, South Korea and Taiwan.

Source: Inquirer

Household spending boosted by remittances

Overseas remittances substantially boost household spending and are dependent on a host of factors that include the exchange rate, unemployment and transfer costs, Bangko Sentral ng Pilipinas (BSP) researchers said.

In a discussion paper, researchers Veronica Bayangos and Cymon Kayle Lubangco noted that OFW remittances have long been a vital pillar of the Philippine economy, supporting household spending and foreign currency reserves, especially in economically challenging periods.

OFW households, they said, prioritize consumption over savings and investments. Migration status and educational attainment also influence where the money is used.

Immediate consumption also tends toward non-food, and "largely welfare-inducing" items such as health, education and housing, while allocations for productive consumption goods "shows that remittances are treated as transitory income."

"Our estimates reveal that receipt of cash remittances is positively driven by the number of OFWs abroad, unemployment rate, and the depreciation of the peso against the dollar," the researchers said.

"However, high regional wages and bank financial transaction costs reduce remittance receipts."

Remittances may cushion labor market shocks in the short term, but OFW households are also at risk if economic conditions in host countries also worsen, the researchers noted.

Financial development, meanwhile, was said to help raise remittances, but only if accompanied by increased financial inclusion and lower transaction costs.

An apparent decline in cash remittances, the BSP researchers said, can be attributed to a rise in the cost of sending money from abroad to the country.

As of the first quarter of 2024, 96.6 percent of surveyed OFWs families said they were using remittances for food and household needs. Allocations for medical expenses and home purchases also rose compared to the fourth quarter of 2023.

On the other hand, the proportion of households that used remittances for education, savings, consumer durables, debt payments, motor vehicle purchase and investments fell, the researchers noted.

Remittances have been relatively stable at 8.0 to 9.0 percent of nominal gross domestic product since 2017, they said, while cash remittances are slightly lower at 7.0 to 8.0 percent.

Cumulative growth for both types has trended downward, the researchers noted.

The US remained the largest source of remittances as of last year. The Philippines was among the top five five recipient countries at $40 billion, outpaced only by India ($125 billion), Mexico ($67 billion) and China ($50 billion).

The BSP researchers noted that while remittances are expected to grow by 3.1 percent this year, this could change due to an escalation in the US-Ukraine war and conflicts in the Middle Ease, volatile oil prices and exchange rates, and greater-than expected economic slowdowns.

A substantial decline would have an impact at both the macroeconomic and household levels, they said, with families likely to face reduced capabilities to meet education and healthcare needs.

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Source: Business World and BSP