Cash remittances should prove once again as one of the pillars of the Philippine economy in 2014, as money sent home by Filipino migrant workers was seen hitting another record high and helped keep the country’s current account in surplus during the year.
In a research note, regional banking giant DBS said the November overseas Filipino worker (OFW) remittances were seen growing by 6.9 percent during the month, broadly unchanged from the previous month’s expansion of 7 percent.
DBS also said the remittances were to end-2014 at a record high of $24 billion, from $22.96 billion a year earlier.
Going forward, the remittances were to average $2 billion a month in the early months of 2015, the regional lending powerhouse said.
“Strong inflows of remittances will continue to ensure that the current account remains in surplus,” DBS said. The surplus state of the country’s current account balance essentially means the Philippines has maintained its status as net lender to the rest of the world. It also means the $270-billion Southeast Asian nation exercises a sense of frugality by living within what foreign currency it has earned and no more.
Latest assumption from the Cabinet-level Development Budget Coordinating Committee (DBCC) shows the government expects to end-2014 with a balance of payments (BOP) shortfall of around $3.4 billion. Data from the central bank show the January-to-November BOP deficit totaling $3.7 billion.
Despite this assumption, the current account was seen hitting $6.6 billion in surplus, or 2.2 percent of the country’s gross domestic product (GDP). This, as remittances were seen growing by 5.5 percent this year.
The remittances and their beneficial impact on the current account act as a shield that provides the Philippines with a cushion against so-called volatilities in the global markets this year.
“The current-account surplus is likely to remain circa 2 percent of GDP in 2015, decent enough to limit any external liquidity risks for now,” the DBS said.
The DBCC has crafted programs based, among other key assumptions, on a surplus in the current account, or more or less $6.8 billion.
The DBCC also said the BOP should revert to a surplus of around $1 billion in 2015.
The remittances report for November will be released by the Bangko Sentral ng Pilipinas today.