Money sent home by Filipinos overseas is expected to fall 5 percent this year despite sustained demand for workers from the country that led to a record rise in remittances in March, a Reuters poll on Thursday showed.

Job cuts, a freeze in wage hikes, and a labor policy to hire more unemployed locals in host countries may put Filipino workers overseas at a disadvantage and weaken remittances in coming months, some analysts said.

The median forecast of ten economists polled by Reuters was for remittances to decline 5 percent this year, slightly better than the 6 percent contraction in a similar poll in March.

The number is key for the Philippine economy because remittances fuel domestic consumption, a major driver of growth.

"An important driver of consumption momentum in 2008...is likely to go into reverse in 2009, exposing the economy to the full impact of the global slowdown," said Simon Wong, an economist with Standard Chartered Bank.

A drop of 5 percent, the first contraction since 2001, translates to about $15.6 billion in total inflows this year against $16.4 billion in 2008. Remittances have grown by double digits in the last seven years.

Remittances hit a monthly record $1.47 billion in March, bringing first quarter remittances to $4.1 billion, up an annual 2.7 percent, as demand for Filipino labor continued to grow at a healthy clip despite the global downturn.

The increase in labour deployment in the first two months points to the possibility of a slight growth in remittances this year as against the Bangko Sentral ng Pilipinas' (BSP) zero growth estimate, allowing the country to hit the high-end of its economic growth target of 3.1-4.1 percent in 2009, BSP Governor Amando Tetangco said last week.

While some analysts say good remittance numbers so far would support growth, Euben Paracuelles, economist at Royal Bank of Scotland, cautioned against premature optimism, saying the current rate of deployment growth may not be not sustainable.

"Demand for new workers may remain soft with host countries adjusting labour policies to prioritise a growing number of unemployed citizens," Paracuelles said.

The World Bank expects inflows of cash from Filipinos overseas to fall 4 percent this year while the International Monetary Fund sees a drop of 7.5 percent.