The peso climbed to a 52-month high against the US dollar Monday, rising above the 48 level after the release of data showing that remittances reached nearly $30 billion in 2020 despite the economic impact of the pandemic.
The local currency closed Monday’s trading at 47.93, stronger than 48.045 a dollar on Feb. 11, 2021. It was also its strongest level in four years and four months since it settled at 47.83 on Sept. 22, 2016.
Astro del Castillo, managing director of the Makati-based First Grade Finance Inc., a finance and investment company, said in a phone interview the stronger-than-expected finish of remittances in 2020 boosted the local currency against the greenback.
“This can be attributed to the news that remittances posted (just a) slight decline in 2020 despite the global pandemic,” del Castillo said.
The Bangko Sentral ng Pilipinas said Monday cash remittances amounted to $29.903 billion in 2020, down by 0.8 percent from the record $30.133 billion in 2019. The figure was better than the 2-percent contraction predicted by the BSP.
“The actual annual decline in 2020 was, however, lower than the earlier forecast contraction of 2 percent for the year,” the Bangko Sentral said in a statement.
Strong remittances helped the gross international reserves to reach a record $110 billion in December 2020. Data from the BSP, however, showed the GIR slightly declined to $108.8 billion in January, as the government settled some of its foreign currency debt obligations.
The BSP said another factor that contributed to the month-on-month decline of GIR was the revaluation adjustments from the BSP’s gold holdings.
Data showed that by country source, cash remittances from Saudi Arabia, Japan, the United Kingdom, the United Arab Emirates, Germany, and Kuwait declined, while those from the United States, Singapore, Canada, Hong Kong, Qatar, South Korea and Taiwan increased.
The US posted the highest share of the total remittances at 39.9 percent, followed by Singapore, Saudi Arabia, Japan, the UK, the UAE, Canada, Hong Kong, Qatar and South Korea. The combined remittances from these countries accounted for 78.6 percent of the total cash remittances.
Cash remittances coursed through the banks fell slightly by 0.4 percent to $2.89 billion in December 2020 from $2.902 billion a year ago. Cash remittances from land-based workers fell by 0.7 percent to $2.297 billion, while that of sea-based workers increased by 0.8 percent to $593.2 million.
Personal remittances, which include non-cash items, also went down by 0.8 percent in 2020 to $33.194 billion from $33.467 billion in 2019.
“Nonetheless, personal remittances remained a major source of the country’s foreign exchange inflows, with the 2020 level representing 9.2 percent of the gross domestic product and 8.5 percent of the gross national income,” the BSP said.
It said that in December, personal remittances fell slightly by 0.3 percent to $3.205 billion from $3.216 billion in December 2019. The slight decrease was attributed to the 0.7-percent decrease in remittances from land-based workers with work contracts of one year or more to $2.494 billion from $2.512 billion.
Meanwhile, remittances from sea-based workers and land-based workers with work contracts of less than one year rose 0.8 percent to $647 million in December 2020 from $642 million in December 2019.
ING Bank Manila senior economist Nicholas Mapa said remittance flows bucked the general expectation for a substantial contraction in 2020 with overseas Filipinos managing to send home much-needed funds despite the challenges faced on the economic and health fronts.
“Despite lockdowns, threats to health, the shutdown of the cruise line industry and repatriation due to widespread job losses abroad, remittances fell by only 0.8 percent with OFs finding a way to send home much-needed funds to help support their loved ones,” Mapa said.
“Given our expectation for only a mild appreciation trend for the peso this year, we expect remittance flows to remain flat [or only modest growth] in 2021 with the return of sea-based OFs helping offset the substantial number of OFs sent home over the course of 2020,” Mapa said.
Mapa said with vaccination rollouts ongoing across the globe, job prospects might brighten for overseas Filipinos in the coming months which would be crucial in supporting sagging domestic incomes due to severe job losses and poor consumer confidence.
Cash remittances rose 4.1 percent in 2019 to an all-time high of $30.133 billion from $28.94 billion in 2018.
The BSP expects remittances to grow by 4 percent in 2021, on expectation that the pandemic would be over soon.