By Lilian Karunungan
One bright spot from the Philippine peso’s slump to an 11-year low against the dollar can be found among the nation’s more than 10 million overseas workers.
The currency’s slide is spurring Filipinos to send more money home, fueling consumption and economic growth in the Southeast Asian nation. At 10 percent of gross domestic product, remittances are also a key source of foreign income in the Philippines, helping to finance a widening current-account gap.
Aileen Almazan, 37, who works as an information technology professional in Singapore, says it’s an opportune time to lock in more pesos into her Philippine savings account so she has more money to spend when she visits Manila. Marlyn de la Cruz, 51, a domestic helper in Hong Kong, says the decline in the peso is helping defray her family’s household expenses, while Irene Lim, 36, a compliance analyst at a regional bank in the island state, is being goaded by the weaker peso to invest more back home in terms of property and mutual funds.
“My Manila-based family gets to enjoy higher remittance, while I have more investment options given the extra cash generated by the favorable exchange rate,” said Lim, who has been working in Singapore for more than a decade. “It has definitely encouraged me to invest more back home given the slight improvement and the positive outlook on the country’s economy.”
The peso is the worst performer among Asia’s major currencies this year as the government’s aggressive infrastructure drive fuels imports and widens the current-account deficit. Remittances from Filipinos living overseas have been steadily rising for more than a decade to reach a record in 2017, and the nation’s central bank expects them to rise by 3.6 percent to $29.1 billion this year.
In value terms, the Philippines was the world’s largest remittance recipient after India and China in 2016, according to the World Bank. The inflows are the largest source of foreign income for the Philippines after exports.
Still, the benefits of a weaker currency are being eroded by rising living costs in their homeland, the three Filipino workers said.
“Yes, the exchange rate is higher when you convert into pesos, but the money will also buy you fewer goods,” said de la Cruz, who was on her way back to Hong Kong from Manila after spending a week in her hometown of Laoag City in northern Philippines. “The weaker peso helps only to a certain extent.”
Inflation accelerated to 3.9 percent in February under a new series using a 2012 base year, threatening to breach the central bank’s 2 percent to 4 percent target band. Putting pressure on prices are increased levies, higher oil prices, and a depreciating peso, Finance Secretary Carlos Dominguez said in an interview with Bloomberg TV.
Central bank Governor Nestor Espenilla said the pick-up in inflation last month remains within target and most likely in 2018 as well, signaling that the monetary authority will likely keep policy rates unchanged this month. The peso has weakened 4 percent this year to 52 per dollar as of 10:30 a.m. in Manila on Wednesday.
“The peso should weaken” with less support from the central bank, helping keep the value of remittances inflated, said Joey Cuyegkeng, an economist in Manila at ING Groep NV, who revised his year-end forecast for the currency to 52 from 51.30. “Dollar earners, including overseas Filipino worker families, benefit from the recent significant weakness of the peso.”
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