OFW remittances hit record high in May; growth still low

Sending positive signals for the global money transfer industry, remittances sent by overseas Filipino workers (OFWs) hit a record high in May 2009. However, the pace of growth still remains low, as the global economy continues to reel under the prolonged crisis. Government officials in Philippines indicated that most recipients are resorting to saving their money instead of spending, due to worries over the depth and duration of the global recession.

According to the Bangko Sentral ng Pilipinas (BSP), money sent home by OFWs rose 3.70% YoY to $1.48 billion in May, a record high for the month of May and the highest since March 2009. As a result, total inflows in the first five months to May 2009 increased 2.80% YoY to $6.98 billion. The major sourcing countries for this 5-month period were the US, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy, and Germany. According to the central bank, the steady demand for professional and skilled workers and the greater access of OFWs and their beneficiaries to a wide range of financial products and services offered by banks and other financial institutions are the primary reasons for the rise in remittance inflows in a time of economic gloom.

BSP's official estimate now says that remittances for the whole of 2009 may match last year's $16.40 billion. In a recent report, the central bank said “With the continued growth in remittances for the first four months of 2009, the projected flat growth for the full year 2009 is turning out to be relatively conservative.” However, a Reuters poll in May showed that analysts anticipate remittances to contract 5.0% YoY in 2009, due to job cuts, a freeze in wage hikes and the tendency of host countries to hire more unemployed locals.

Commenting on the emerging trend in OFW remittance, BSP Governor Amando Tetangco said “The stream of remittances from overseas Filipinos continued to show signs of strength despite lingering global economic fragilities, providing some basis for cautious optimism regarding steady remittance levels for 2009.”

Meanwhi le, s low growth in remittances and a shift in remittance recipients' preference towards saving has become a matter of concern for some local industry players. The Chairman and CEO, Tony Tan Caktiong, of Jollibee Foods Corporation, a fastfood giant, said “The [main] issue this year will be OFW remittances, so we're looking at what will happen now. Probably there's a little bit concern on the remittances. We are getting some reports that [remittances] from the United States have lowered.” This slow growth in remittances has led Jollibee to enter into a partnership with iRemit, a money transfer company, for a food remittance delivery service, allowing them to profit directly from remittances, as OFWs can now use their earnings to send meals to family members and beneficiaries in the Philippines.

Real estate companies, however, have remained confident that the slowing pace of remittances would not make much of an impact on their profits. Chairman, Subdivision and Housing Developers Inc. (SHDA), Eduardo Alunan said “There's a very small impact, if any. [The slowdown in remittance growth] is compensated by the exchange rate.”

The Philippines government continues to provide assurances that there remain enough jobs overseas to absorb Filipinos looking for employment. Apart from signing hiring agreements with Qatar, Saudi Arabia, Canada, Australia, Japan, and South Korea, the government remains focused on job generation programs that would help displaced workers find alternative jobs to survive the economic downturn.