An economist Wednesday attributed the increase of cash remittances from overseas Filipino workers (OFWs) partly to higher inflation rate as recipients needed more funds for their needs.
The Bangko Sentral ng Pilipinas (BSP) reported that remittances sent home by Filipino workers overseas reached $2.76 billion in January 2023, higher than the $2.67 billion during the same period last year.
In a commentary, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said higher prices of commodities on account of elevated inflation rate and other spending due to the continued reopening of the economy raised the need for OFWs to send more funds to their beneficiaries.
However, Ricafort said the modest single-digit growth in OFW remittances may be partly attributed to the still elevated global inflation and higher interest rates in recent months that somewhat slowed down the recovery in the global economy.
This also partly weighed on both OFW employment and incomes, especially in host countries, he said.
While the Philippine peso appreciated against the United States dollar in the latter part of 2022 after hitting its record-high PHP59 close several times last September and October, Ricafort said this did not have a big impact on remittance beneficiaries because of price upticks of foods and other goods on account of higher global oil and commodity prices.
Inflation rate further accelerated to 8.7 percent last January, breaching the 14-year high of 8.1 percent in the previous month.
“Thus, there may still be a need to send more OFW remittances due to higher prices/inflation, which erodes/offsets whatever foreign exchange gains due to the stronger US dollar vs. major global currencies,” Ricafort said.
After the Christmas holidays, he said the next seasonal uptick of remittances is during the Holy Week and the fiesta season when people have more time to travel and have more events to attend.
Although remittances are expected to continue rising in the coming months, Ricafort said downside risks include the possible recession of the US economy and continued increases in interest rates.
These factors, he said, “could still be drags on jobs/employment prospects for OFWs and could also potentially slow down OFW remittances in the coming months.”
CURRENTPH NEWS SERVICE
