It is the judgment of both the Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF) that the slowdown in remittances, the sharpest in a decade, is no cause for alarm.
BSP Deputy Governor Diwa Guinigundo, in a response to the BusinessMirror, said the remittance decline averaging 9.8 percent in March is not expected to persist in the coming months.
Guinigundo blamed the confluence of events behind the sharpest drop in remittances since April 2003—including the high base effects in March last year, the lesser banking days due to the Holy Week celebration during the month, and the repatriation of workers in the Middle East, particularly in Kuwait.
IMF Resident Representative to the Philippine Yongzheng Yang said the drop in remittances reported this week by the BSP should not prove alarming.
Yang said since the decline in remittances was caused by “several technical reasons,” the contraction was “likely to be temporary” and “not cause for much concern”.
In a separate analysis, ING Bank Manila Joey Cuyegkeng said they anticipate remittances to “exhibit some resilience” in April.
“We expected the remittances would more than cover the March trade deficit by $100 million. Instead, remittances in March were $248-million short to cover the trade gap. The shortfall in remittances is the norm and contributes to the underlying weakness of peso,” Cuyegkeng said.
“The recent bout of peso weakness is a combination of the remittance shortfall, low emerging market risk appetite, the market’s dovish take of the central bank’s policy-rate hike and higher oil prices,” he added.
In 2017 the remittances accounted for roughly 10 percent of local output measured as the GDP and equaled 8.3 percent of gross national income.