OFWs send more money as school year start

MANILA - Money sent home by overseas Filipino workers (OFW) reached a record $1.498 billion in June, amid fears that remittances would contract as rich host countries would slash jobs and prioritize their own citizens in employment generation efforts.

The amount even surpassed the previous month's record inflows of $1.482 billion.

Remittances are a major indicator of where the local economy is heading. It is a key driver of consumption, which oils the engine of the economy usually more than what government spending does. Accounting for about 10% of the economy, it also stabilizes the peso and keeps the balance of payments in surplus.

June is a traditionally strong month for remittances as most schools and universities in the Philippines resume classes. OFWs usually send home more money to their families during this month to pay for tuition fees, uniforms, books, and other supplies needed for school.

This can start as early as May, when OFWs provide funds for family members who study in private schools.

Aside from June, remittance inflows are usually more robust in December as migrant workers send money to their loved ones to celebrate the Christmas season.

Slow growth, but still growing

Sans the seasonal factors (which are eliminated by comparing figures on against the same period last year), remittances in June still showed a modest 3.3% growth. However, this pales in comparison with the 30% rise in remittances in June 2008, which reached a 19-year high at $1.451 billion.

The June figure brought the country's total remittance inflows to $8.479 billion for the first 6 months of the year, a 2.9% rise from $8.241 billion recorded in the same period in 2008.

Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco said this growth was driven mainly by the sustained demand for OFWs abroad, as well as wider access to remittance services offered by banks and other financial institutions.

"The continued growth of remittance inflows since January this year accompanied by emerging signs of improving global economic conditions have affirmed the positive outlook for steady remittances for 2009," he said in a statement released Monday.

During the 6-month period, the BSP said the country's major source of remittances were the United States, Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates, Italy, and Germany.

The government has constantly assured that the $16-billion volume of remittances last year will be maintained in 2009 amid the crisis, but most analysts continue to expect a decline in remittances this year.

For instance, a Reuters poll late last month showed that economists are looking at a 0.5% drop in remittances this year. However, this is already a huge improvement from their previous growth forecasts of -5% and -6% in May and March, respectively.

Where remittances go

Aside from economists, a number of companies have also expressed concern about the slowing growth of remittances in the country, saying that this may impact their sales and profits. Still, some remain confident that OFWs will keep on sending money to their families back home amid the economic slowdown.

But aside from obvious seasonal factors and some earnings reports from local companies, it is hard to determine where remittances are spent during the normal months of the year.

In a briefing last week, professor Emeritus Edita Tan of the University of the Philippines School of Economics said more studies have yet to be made on the spending habits of OFW beneficiaries.

On top of this, she said there is a lack of information on how OFWs split their earnings for their own expenses and savings, as well as for remittances to their families back home. - By Karen Flores, abs-cbnnews.com, with Reuters