THE personal remittance market will remain resilient despite a weak peso and possible recession from source markets, an executive of a cash-transfer operator said.
“We have seen it [impact of a strong dollar on the personal remittance market] as half of flows originate in the US,” Robert Mitchell, CFO of WorldRemit brand operator Zepz Group, told the BusinessMirror.
An October 17 statement by the Bangko Sentral ng Pilipinas (BSP) said the growth in cash remittances from the United States (US), Saudi Arabia, Singapore and Qatar contributed largely to the increase in remittances in the first eight months
of 2022.
“But we see this [impact of a strong dollar on remittances] as temporary and these things tend to equalize. We haven’t seen any volume in terms of demand go away. It’s [strong dollar] more of just a translation; a FX [foreign exchange] issue.”
Data from the BSP revealed that the Philippine peso has become the worst performing currency among the Asean-5, depreciating by around 13.48 percent. (See https://businessmirror.com.ph/2022/10/28/currency-declines-to-worsenfood-energy-crisis-says-wb/)
However, the peso’s weakness hasn’t stopped Filipinos from sending cash to the Philippines.
The central bank has said that personal remittances from Overseas Filipinos (OFs) reached $3.02 billion in August, higher by 4.4 percent than the $2.89 billion posted in the same month last year.
Mitchell, a former PayPal executive, said globally, the remittance market continues to grow at 2 percent to 3 percent in annual revenues and “is probably” at $1.5 trillion in size.
“We have not seen any pullback in demand with the global turbulence in the economic markets,” he said. “If anything, remittances continue to play a much stronger role in people’s lives, particularly in the market in the Philippines.”
Since 1997
THE London, United Kingdom-headquartered firm’s Philippine Country Manager said that the resilience of remittances was proven during the Asian financial crisis in 1997.
Even during the onset of the pandemic and throughout the past two years or three years, remittances only declined by 1 percent, Earl Melivo told the BusinessMirror.
“Now we’re seeing a 4-percent to 5-percent growth this year, which is already pre-pandemic levels in terms of year-on-year growth in the Philippines,” Melivo said. “And this is also true in key markets: remittances will remain a vital source of support for economies that are very much dependent on remittances.”
Mitchell also doesn’t see recession risks “even actual economic recessions” as prompting the remittance market to grow a monobrow.
“These are vital money flows that are part of daily life that doesn’t go away with recessions,” he told the BusinessMirror.
According to Mitchell, recessions are more of “a pullback in investments; in discretionary spend.”
“A lot of our services we’re providing are for everyday usage [like paying for] medical bills and utility bills [and for] family support. These are not some things that go away because of recessions.”
“If anything, it [remittances] becomes more urgent,” Mitchell told the BusinessMirror.