NextGen Day

An economist said on Wednesday that increasing inflation was partially to blame for the rise in cash remittances from overseas Filipino workers (OFWs), since receivers needed more money to meet their demands.

Remittances from Filipino workers abroad were $2.76 billion in January 2023, up from $2.67 billion in the same month the previous year, according to the Bangko Sentral ng Philippines (BSP).

Michael Ricafort, the chief economist of Rizal Commercial Banking Corporation (RCBC), stated in a commentary that higher commodity prices brought on by high inflation rates and other spending brought on by the economy’s ongoing recovery increased the need for OFWs to send more money to their beneficiaries.

However, Ricafort said that the recent increase in interest rates and persistently high global inflation may be partially responsible for the moderate single-digit growth in OFW remittances, which has somewhat hampered the recovery of the world economy.

According to him, this had an impact in part on both OFW employment and incomes, particularly in host nations.

Although the Philippine peso strengthened against the US dollar in the second half of 2022 after reaching a record-high PHP59 close several times in September and October, according to Ricafort, this did not have a significant effect on recipients of remittances due to increases in the cost of food and other goods due to higher global oil and commodity prices.

The inflation rate increased even further in January of last year, reaching 8.7 percent and surpassing the 14-year record of 8.1 percent set in the month before.

“Thus, there may still be a need to send more OFW remittances due to increased prices/inflation, which erodes/offsets any gains in foreign money due to the stronger US dollar compared to key global currencies,” Ricafort added.

He claimed that following the Christmas break, the next time remittances increase is during the Holy Week and fiesta season when individuals have more time to travel and more activities to attend.

Although if remittances are anticipated to rise further in the upcoming months, downside risks, according to Ricafort, include the potential for a US economic recession and ongoing interest rate increases.

These elements “may still be dragging on jobs/employment prospects for OFWs and might also potentially slow down OFW remittances in the future months,” the author stated.

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