The pace of remittances growth has almost grounded to a halt in January when total money sent home by Filipinos working overseas grew by only 0.1 percent, data from Bangko Sentral ng Pilipinas showed. It was the slowest growth rate since January 2004.

Remittances from overseas Filipino workers (OFW) reached $1.266 billion in January, the BSP reported Monday. It was lower than December 2008's $1.4 billion total, but analysts tend to attribute the December-January difference to the seasonally busy Christmas month of holiday celebrations.

In January last year, remittances reached only P1.264 billion, but it represented a 15 percent increase from January 2007's. The 15 percent performance was one of the many months that remittances grew double digit rates.

Policy makers and investors watch the pace of remittance growth as an indication of where the Philippine economy is headed. Remittance is an important engine of the local economy and is considered a more stable source of foreign funds than long-term investments by multinational firms.

Remittances fuel consumer spending, which benefits various local industries including--but not limited to--retail, real estate, and telecommunications.

Deployment

According to the BSP, the "very modest increase" in January remittances can be attributed to the slowdown in deployment beginning November 2008 as well as the reported displacement of some land-based OFWs in some countries due to the global economic crisis.

The BSP said the United States is the country's biggest source of remittances at $461 million. However, the said amount was a 24-percent contraction from $611 million registered in January the previous year. In the American region as a whole, remittances suffered an 11-percent contraction at $630 million in January from $709 million in the same month in 2008.

Other major sources of remittances include Saudi Arabia ($125 million), Canada ($163 million), Singapore ($58 million), Japan ($57 million), United Kingdom ($57 million), Italy ($53 million), and the United Arab Emirates ($46 million).

Aside from the US, remittances in Taiwan dropped 34 percent at $10 million in January from $16 million in the same month last year. Other countries which posted a decline in remittances are mainland China (-13 percent), South Korea (-10 percent), and the UAE (-9.71 percent).

Preliminary data from the Philippine Overseas Employment Administration (POEA) showed that the number of OFWs abroad in January rose by 25.3 percent to 165,737 from 132,285 in the same period last year.

According to the POEA, the double-digit growth in the number of deployed OFWs is expected to add to the base of potential remitters next month.

POEA also cited its hiring agreements with Canada, Australia, Japan, and in selected Middle-East countries like Qatar to provide support for the sustained deployment of OFWs. In particular, POEA said more workers are to be hired by these host countries in health care, education, power, and real estate sectors.

Earlier, the BSP said OFW remittances will stay flat in 2009 at around last year's level of $16.4 billion. But, according to the median of a Reuters poll of 10 economists, remittances will fall 6 percent this year from 2008.

The Philippines is one of the world's leading sources for skilled and unskilled workers with up to nine million people, about 10 percent of the population, living and working in 140 countries.

Bad to worse

"Your month-on-month (numbers) are really bad," said Joey Cuyegkeng, an economist at ING Bank in Manila. "It argues that there could be some reason to expect a much worse environment in remittances. It's slowing down quite precipitously."

"Remember the profile continues to be biased towards construction and manufacturing jobs, only recently are we deploying nurses and highly skilled professionals. But even the highly skilled professionals are getting hit," he said.

Further slowdown in remittance flows in the coming months could erode the country's balance of payments, which stood at $2.204 billion in the first two months of the year.

That was supported mainly by proceeds from the Philippines' $1.5 billion sovereign bond offer in January. -  With Reuters