2023 OFW remittances hit all-time high

Cash remittances rose to another record last year as overseas Filipino workers (OFW) sent more money to their families who struggled with spiraling prices, the Philippine central bank said on Thursday.

Money sent home by OFWs through banks increased by 2.9% to USD 33.491 billion, falling short of the Bangko Sentral ng Pilipinas’ (BSP) 3% estimate and slower than the 3.6% expansion in 2022.

Remittance growth could have been tempered by a weaker global environment and restrictive borrowing costs, the BSP said in a statement.

In December alone, cash remittances rose by 3.8% to USD 3.28 billion from a year earlier, the fastest in a year.

“The growth in cash remittances in December 2023 was primarily due to increased receipts from both land- and sea-based workers,” the central bank said.

Land-based OFWs sent USD 2.614 billion in December, 4% more than a year ago. Remittances from sea-based workers grew by 3.2% to USD 665.533 million.

Migrant workers usually send more money during the holiday season, Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. said in a Viber message.

“The slower annual growth of 2.9%, slightly lower than the BSP target, may have been due to the weaker global economic environment amid higher interest rates and geopolitical issues,” he said in a Viber message.

After increasing key rates by 350 basis points (bps) in 2022, the Monetary Board tightened borrowing costs by another 100 bps in 2023 to tame inflation. This brought the policy rate to a near 17-year high of 6.5%.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board might consider cutting policy rates in the second half, but not until there is a sustained downtrend in inflation.

“Remittance flows continue to grow at a very robust and consistent roughly 3% pace, helped by the steady deployment of workers and sustained expansion of host countries,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

Growth in inflows from economies such as the US, Saudi Arabia, and the United Arab Emirates (UAE) contributed largely to the increase in remittances last year, BSP said.

The US was the biggest source of remittances last year, accounting for 40.9%, followed by Singapore (7.1%), Saudi Arabia (6.2%), Japan (5%), the UK (4.7%), UAE (4.3%), Canada (3.6%), Qatar (2.8%), Taiwan (2.7%) and South Korea (2.5%).

These countries accounted for more than three-fourths (79.8%) of cash remittances during the year.

“Overseas Filipinos may have simply sent home more money given still elevated inflation,” Mr. Mapa said.

Inflation averaged 6% in 2023, the second straight year that it went above BSP’s 2-4% target.

Meanwhile, personal remittances, which include inflows in kind, grew by 3.9% to USD 3.625 billion in December from a year earlier. This brought the full-year figure to a record USD 37.21 billion, 3% higher year on year.

“We can expect the same robust pace of growth in remittances again this year as it delivers a healthy dose of foreign inflows while also supporting consumption via the peso’s purchasing power,” Mr. Mapa said.

Mr. Asuncion said he expects remittances to grow by 3% this year before easing to 2.8% in 2025.

He said higher-for-longer interest rates, which may persist this year, would likely affect host countries as tight borrowing costs restrict economic activity.

BSP expects cash remittances to grow by 3% this year. — Keisha B. Ta-asan