AN international credit watcher expressed confidence that the slowdown in the Philippines’s remittance inflow is temporary and will recover from the recent below 1-percent monthly growth performance in July.
In its latest overall assessment on the Philippines, Fitch Ratings said that cash from Filipino workers abroad will continue to drive the current account to a surplus level this year and will offset the weakness seen in the country’s trade numbers owing to the slowing global economy.
This confidence comes amid the unusually low growth seen in January and, more recently, in July.
Earlier data from the Bangko Sentral ng Pilipinas (BSP) showed that the remittances from Filipino workers abroad stumbled in July to register a growth of mere 0.5 percent. This is far from the average trend growth of remittances at around 5 percent a month. This below 1-percent growth in remittances was also seen in January, when the money sent by migrant workers also hit a growth of 0.5 percent.
This, Fitch said, should not be a cause for worry on the country’s balance of payments position
going forward.
“Fitch expects the trade deficit to widen and reduce the current account surplus to 3.5 percent of GDP, but still allow the Philippines to continue accumulating next external assets and reserves. Fitch’s view assumes remittances will continue to grow steadily,” the international bank said.
Remittances sent by Filipino workers abroad provide about $24 billion to $25 billion worth of fresh fuel for the Philippine economy, helping accelerate consumer spending and economic activity in the local scene. This makes money sent by Filipino migrant workers one of the pillars of the Philippine economic growth story.
Fitch, however, warned that, while strength is still expected of the remittances in the coming months, uncertainty still looms over the effect of the continuously falling oil prices across the globe.
“The Middle East has been the main contributor to growth of overseas worker remittances since 2013, helping to offset slowing growth of remittances from the US. There is limited evidence from data so far, falling oil prices affecting remittances from the Middle East,” Fitch said.
“However, this could change if low oil prices were to persist, slowing investments that weaken demand for foreign construction workers,” the ratings agency added.
Remittance data as of August this year will be released by the BSP on Thursday. The government’s target for the year is for remittances to grow at an average of 5 percent for the entire 2015.