The Bangko Sentral ng Pilipinas (BSP) ruled out on Monday any deep-seated reason for the apparent slowdown in foreign-currency earnings remitted to families in the Philippines, saying the reported volume reduction was due to the banks’ so-called derisking practices rather than anything fundamental.
In an interview, Deputy BSP Governor Diwa C. Guinigundo told reporters the central bank is monitoring the practice among remitting banks to restrict or even terminate particular operations to lessen their exposure to perceived risks.
The proclivity by foreign remitting banks to cease the operations of a unit believed exposed to some form of danger has unduly affected the volume of remittances reaching the Philippines.
Data from the central bank show cash remittances growing by 1.9 percent in May this year to $2.188 billion, from year-ago level of only $2.126 billion.
This was the slowest cash remittance expansion reported in recent months, second only to the 1.2-percent contraction in March.
“What is really affecting remittances is derisking, or the closure of domestic banks abroad,” Guinigundo said.
He acknowledged while the deployment of overseas Filipinos to the various job sites abroad appear to have slowed, the deputy governor said this was more the practical effect of the derisking activities the various foreign remitting banks have engaged in recent months.
“But deployment rate continues to grow,” Guinigundo insisted.
He clarified that, while the derisking practice among remitting banks has not reached alarming proportions, the monetary officials will closely monitor developments to ensure the central bank is not caught flat-footed.
Guinigundo, time and again, had cited the important role the repatriation of the foreign-currency earnings of millions of overseas Filipinos make possible the growth-boosting impact of domestic consumption activities.
“It is not really a cause for worry. It is a concern. It’s something that we should continue to monitor, because a large part of our external payments position is dependent on the level of remittances,” Guinigundo said.
“It’s good that we have the BPOs [Business-process outsourcing], which serves as a counterweight to remittances. It is growing by at least 15 percent to 20 percent. This, somehow, mitigates the apparent slowdown in overseas remittances,” he said.
According to him, BPO receipts should continue to aggregate maybe $25 billion and $26 billion a year.
Remittance growth in the first five months averaged 2.9 percent, or $10.86 billion. Remittances were earlier projected to grow by 4 percent this year.