MANILA, Oct. 15 (PNA) — Cash remittance inflows to the Philippines posted a negative growth in August 2015 and Barclays forecasts this to be the trend for the third quarter given the weakness of currencies in areas where overseas Filipino workers (OFWs) are deployed.
Data released by the Bangko Sentral ng Pilipinas (BSP) Thursday showed a 0.6 percent annual decline of remittances last August to US$ 2.04 billion as against the US$ 2.06 billion same period in 2014.
In a research note, the investment bank cited that “while seasonality would imply that remittances should have increased m/m (month-on-month), we believe that excessive currency weakness in key countries such as Singapore, Malaysia and in some Middle East countries weighed on valuations.”
“As such, with the PHP (Philippine peso) being an outperformer against most regional currencies, and with remittances reported in USD (US dollar) flows continue to be weighed by the sharp declines seen in regional currencies,” it said.
Barclays said this development is a “major surprise” citing that this is the first negative growth since April 2003.
The contraction is below Barclay’s three percent forecast for the month and the consensus forecast of 2.4 percent.
For the eight-month period, cash remittances grew slower at 4.3 percent from year-ago’s 5.8 percent.
With this development, Barclays believes that “risk of the next print also being negative has risen, and remittances overall could be negative for Q3 (third quarter).”
“Weakness in host countries’ currencies may also push some overseas workers to hold off from sending money home, which may result in higher remittances closer to the festive season,” it said.
The research note pointed that “this is unlikely to be a significant concern, as we think a potential decline in remittances would only likely prove temporary.”
“With the recent rebound in regional currencies, we expect remittance flows to improve in Q4 (fourth quarter),” it added. (PNA)