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Wednesday, October 01, 2008

Monthly Remittance Data Shows Downward Spikes

By Jeremaiah Opiniano

MANILA–MONTH-ON-MONTH remittance data reflecting downward spikes may reveal the impact of world oil and commodities prices adjustment to economies like the Philippines that are dependent on cash flow from abroad, economist Alvin Ang said.

“While it is too early to see the effect, we should be on guard of the monthly growth rates of remittance inflows and understand the ‘Philippine cycle’ of these flows,” the University of Santo Tomas economics professor said.

The OFW Journalism Consortium spoke to Ang before the Bangko Sentral ng Pilipinas revealed on August 15 a record high remittance in June of $1.5 billion.

Ang admits that total cash remittance volumes increased, both on a year-on-year level and on a cumulative cash remittance growth rate.

However, Ang said, these growth rates should take into account the start of the US credit crunch, the surge in world oil and food prices, and domestic inflation.

Monitoring cash remittance growth rates in this context is important in determining the level of migrant workers’ propensity to remit back home, Ang said.

He explained month-on-month cumulative remittance data could also help identify the intensity of the impact of world price changes on overseas Filipino workers’ (OFW) money flow.

For example, the BSP cash remittance data between January 2004 to May 2008 that January, February, April, July, September, and November are low-growth months for cash remittance inflows (see Table 1).

Cash remittances’ growth rates usually rebound during the months of March (for graduation), May, August, October (due to tuition and fees payments by students of OFWs), and December (for Christmas).

But when the food crisis peaked in March, remittances growth rate was pegged at 13.44 percent, the lowest March figure over a five-year period.

And when Philippine inflation reached 9.5 percent last May, that month’s remittance growth rate was 1.39 percent.

Ang added Philippine monetary officials should worry if there will be more negative month-on-month cash remittances growth rates this year despite continued increases of total remittance volumes (see Table 2).

The Philippines had seven months of negative month-on-month cash remittance growth rates for both 2006 and 2007, compared to six months of negative growth rates in the years 2005 and 2004.

Three of the first five months of the year saw negative month-on-month growth rates for remittances.

Last year, groups of OFWs circulated electronic mails citing that a strong peso has prompted many of their colleagues to send additional money to maintain the purchasing power of their families in the Philippines.

Money from an estimated 8.7 million Filipinos working or living temporarily or permanently in 193 countries have been credited as keeping consumer spending high or, at best, constant.

However, Ang said that a high-inflation environment and weak dollar cast doubts on the “physical sustainability” of OFWs to send money to the Philippines.

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