Remittances are expected to keep increasing, despite the ‘derisking’ activities, or closure of high-risk accounts by banks, Bangko Sentral ng Pilipinas said Monday.
“We are not worried [but] it is a concern. It’s something that we should continue to monitor because a large part of our external payments position is dependent on the level of remittances,” Bangko Sentral Deputy Governor Diwa Guinigundo said in an interview.
“What is really impending remittances is really derisking—the closure of the accounts of some domestic banks abroad. Yes, the deployment of workers to overseas markets seems to have slowed down, but I think that it is more a reaction to the impact of derisking in remittances but deployment rate continues to grow,” Guinigundo said.
Guinigundo said derisking was heightened by anti-money laundering concerns, counter-terrorism and cybercrimes. Guinigundo said derisking had already been happening even before the $81-million money laundering scam broke out in February this year.
The money was believed stolen by cyber thieves from the account of Bank of Bangladesh in the Federal Reserve in New York and entered the Philippine financial system through a Makati branch of Rizal Commercial Banking Corp.
Experts expressed concern that the incident, one of the biggest so far, could hamper the growth of remittances.
Guinigundo said the sustained growth of the business process outsourcing industry served as a counterweight to the sluggishness in remittances.
“It [BPO sector] is growing by at least 15 to 20 percent. With its growing pace, a 15 to 20 percent is significant and somehow mitigates the apparent slowdown in overseas remittances. Overtime, probably at the end of this year or next year, we will have the same volume of BPO and remittances between $25 billion and $26 billion,” he said.
Latest data from Bangko Sentral showed money sent home by overseas Filipinos in May 2016 rose 1.9 percent to $2.186 billion from $2.147 billion a year ago.
The May expansion was slower than the 4.1-percent growth recorded in April 2016. This brought cash remittances in the first five months to $10.859 billion, up 2.9 percent from $10.555 billion a year ago.
Cash remittances from both land-based and sea-based workers reached $8.5 billion and $2.4 billion, respectively. About 80 percent of cash remittances came from the United States, Saudi Arabia, the United Arab Emirates, Singapore, the United Kingdom, Japan, Qatar, Kuwait, Hong Kong and Germany.
Personal remittances, which includes non-cash items, grew 1.8 percent in May to $2.416 billion from $2.374 billion a year ago. This brought personal remittances in the first five months to $11.993 billion, up 2.7 percent from $11.674 billion a year ago.
Preliminary data from the Philippine Overseas Employment Administration showed that the number of deployed workers reached 211,799 in the first five months of 2016.
More than 80 percent were in services and sales, elementary occupations such as those working in the agriculture, forestry and fishing, mining, construction, manufacturing and transport sectors and craft and related trades workers.
“These workers were deployed mostly to Saudi Arabia, Kuwait, Qatar, Taiwan and Hong Kong. Further, reports from the POEA of additional demand for Filipino nurses in Japan and Germany are expected to support the continued flow of remittances,” Bangko Sentral said.
Cash remittances grew 4.6 percent to a record $25.767 billion in 2015 from $24.628 billionin 2014.
It also accounted for around 10 percent of gross domestic product in 2015. Bangko Sentral retained the 4-percent growth target for remittances this year.
British banking giant Hongkong and Shanghai Bangking Corp. said it was expecting money sent home by overseas Filipinos this year to grow 3.5 percent, bucking the effects of external developments and providing additional strength to the domestic economy.
HSBC said remittances have displayed volatility in the previous months but was able to “hold up well so far this year.”
Remittances and business process outsourcing receipts provide steady inflows which boost private consumption. Together, they account for nearly $50-billion worth of inflows every year.