The economy will not be adversely affected by the weak growth in remittances as the business process outsourcing industry is expected to register robust expansion, the London-based think tank Capital Economics said Monday.
Economist Gareth Leather of Capital Economics said in Emerging Asia Weekly report other sectors of the economy would offset the tepid growth of remittances.
“Other sectors of the economy, notably manufacturing and business outsourcing, are growing strongly and should more than make up for the weakness in remittances,” Leather said.
Latest central bank data showed cash remittances in the first 11 months of 2015 rose 3.6 percent to $22.83 billion from $22.031 billion year-on-year.
Bangko Sentral ng Pilipinas moved the release of the December remittance data on Friday from Monday.
Capital Economics said the release of the December data would confirm that the full-year growth in 2015 was the weakest since 2001.
It said the key factor behind the growth slowdown in remittances was the drop in money being transferred from the US, as well as weaker expansion from the Middle East.
The US and Middle East account for around 40 percent and 20 percent of total Philippines remittances, respectively.
The drop in remittances from the US appears to have been caused by a change in regulations that made it more difficult for US banks to transfer money to the Philippines.
“Past experience suggests it shouldn’t be too long before Filipino workers in the US find other ways of sending money back home,” the think tank said.
“We don’t think the slowdown should be a major cause for concern. The broader economy hardly seems to have been affected,” it said, after the Philippine economy registered a 5.8-percent growth last year.
The think tank said remittances would continue to suffer in 2016 due to external volatilities.
“We think remittances will struggle again in 2016, and have pencilled in growth of just 4 percent,” it said.
The think-tank, however, said despite the external turmoils, the country’s BPO and manufacturing industry would offset the growthy slowdown in remittances.
“The Philippines could finally be reaching a stage where it no longer needs to send people abroad in order to grow quickly,” it said.
