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Tuesday, December 02, 2008

Philippines remittances in context, UBS Study

A recent study of UBS

Investor concerns about remittance flows into the Philippines has jumped, both with the dramatic deterioration in dollar liquidity in Asian markets and de-leveraging flows. These concerns were all the more heightened by the slowdown in remittance growth from 25% on the year in July to just 10% yoy in August.

We take a look at Philippines remittance flows in an international context. Given our projection of the worst global growth environment since the early 1980s, it is quite easy to see how Philippines remittance flows could see some declines in 2009. However, because the Philippines will also benefit from lower commodity prices, we expect the Philippines’ current account balance to rise in 2009 relative to 2008 even with lower remittances. This will be a plus for the peso and help sustain the currency verses the US dollar once de-leveraging flows abate.
Near term, however, we remain cautious, although the fierceness of the de-leveraging trend does appear to have lessened in recent days.

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