July OFW Remittances Plunged 5.4%!

To give credit to the BSP, this time they didn’t hide the bad news. 

In the recent past, they produced positive data first, then after a few months, revised them downwards—so as to elude the public’s attention.

 

From yesterday’s disclosure: (bold mine)

Personal remittances from overseas Filipinos (OFs) for the first seven months of 2016 grew by 2.9 percent year-on-year to reach US$16.9 billion, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. announced today. Personal remittances from land-based workers with work contracts of one year or more reached US$13.1 billion while compensation of sea-based workers and land-based workers with short-term contracts (excluding their expenditures abroad) totaled US$3.6 billion. However, personal remittances for July 2016 amounted to only US$2.4 billion, 5.4 percent lower than the level posted in the same month last year.

Cash remittances from OFs coursed through banks summed up to US$15.3 billion for the period January–July 2016, representing a growth of 3 percent year-on-year.  In particular, cash remittances from land-based and sea-based workers totaled US$12.1 billion and US$3.3 billion, respectively. About 80 percent of cash remittances came from the United States, Saudi Arabia, the United Arab Emirates, Singapore, the United Kingdom, Japan, Qatar, Kuwait, Hong Kong, and Germany. 

The BSP still engages in the framing of the presentation of the OFW data though, by focusing on the positive. In previous reports, in the condition that growth is positive, they’d report or mention the monthly data ahead. Now it has been relegated to the end of the paragraph.

Yet note that in a one year period, i.e. July 2015 and 2016, monthly remittance (cash and personal) have posted 5 out of 12 months of negative growth. This is the key reason the downside trend has been magnified. Even the cumulative segments have been rapidly trending down.

And if the trend continues, as I expect it will, then both monthly and cumulative numbers will eventually register negative growth. The BSP will be left with little or no framing option for presentation purposes.

Yet more signs in this direction from the BSP’s own report…

Remittance inflows for the first seven months of 2016 remained stable despite the decline in deployment of skilled Filipino workers. A preliminary report from the Philippine Overseas Employment Administration (POEA) showed that the number of deployed land-based workers (new hires) dropped by 10.3 percent year-on-year to 235,895, while that of sea-based workers fell by 44.4 percent to 134,360.

So not only has the amount being sent been reduced, now even deployment has started to register downside growth. Reduced manpower deployment will amplify the declining trend.

Truisms influencing OFW trends, as I previously updated (As Growth Rates Slow, The BSP Toys with OFW Remittance Data Anew! June 19)

One, the world economy has been slowing down fast.

Two, the law of diminishing returns simply means that considering the size (over 10 million people or 10% of population), OFW growth cannot expand FASTER than the population growth forever. That’s unless authorities have tacitly been working on to significantly drain the resident population!

Three, the quality of overseas job openings may also evolve.

Fourth, currency factors play a role. Weakening currencies where OFWs are employed may see their remittance diminish.

Fifth, global political developments also matter. The rise of nationalism (anti-immigration, right wing politics) may prove to be a significant barrier to overseas employment.

Sixth, the BSP can’t seem to take into context the contributions of domestic economy. For instance, the government has been shouting at the top of their lungs that the economy continues to boom, where jobs have allegedly been growing! Yet if true, then why wouldn’t OFW growth slow? Has the government come to believe that the Philippine residents can multiply its population at the rate of how Gremlins populate?

In a genuine economic boom, where job and income substantially grows, there will be little incentives for residents to work overseas or seek migration. The fact that there remain a good number of people looking for job overseas essentially defies the government’s account of an economic boom!

Now what happens to the race to build the supply side (malls, hotels, vertical and residential properties and etc…)?

With exports down (as imports surge) and remittances down, what happens to US dollar stocks?

Could this have also been another reason why the BSP engaged in a stealth stimulus in 4Q 2015 and Q 2016?