Global inflation and peso depreciation against the US dollar may affect the sustained growth of remittances in the Philippines, BMI, a unit of Fitch Solutions, said Monday.
“We do highlight several risks to this income over 2023, mostly related to the negative impact from the rising inflation across several global markets,” BMI said in a report.
“In addition, the possible weakening of the peso will reduce the amounts sent back by overseas workers in local currency. This could put pressure on households with fixed expenditures,” BMI said.
BMI said remittances are important sources of income for many households in the Philippines, and the demand for overseas Filipino workers continued to increase globally.
Remittances in 2022 rose 4 percent to $38 billion from $36.7 billion in 2021.
Latest data from the Bangko Sentral ng Pilipinas showed that cash remittances in May rose 2.8 percent to $2.49 billion from $2.43 billion in the same month last year. This brought cash remittances in the first five months to $12.98 billion, or 3.1 percent higher than the year-ago level of $12.59 billion.
BMI also said consumer confidence in the Philippines remained sluggish although the overall trending of the indicator was still a steady improvement from the pandemic years where consumer confidence sank to -54.5 at its lowest.
Consumer confidence stood at -10.5 in the second quarter, slightly lower than -10.4 score reported a quarter ago.
“This short-term fall in consumer optimism is fueled by increases in commodity prices, higher interest rates, decline in sales due to weaker demand, and the expected adverse effects of El Niño,” BMI said.
BMI also expects the Bangko Sentral ng Pilipinas to leave rates on hold through the second half of the year.