OFW remittances prove to be one of the major reasons why our economy keeps going. It is one of the major sources of foreign exchange inflows. However, the strengthening of the US dollar has raised concerns about its effects on the economy.
Finance undersecretary Gil Beltran said that the dollar’s recent appreciation against other currencies lowered the value of remittances sent by OFWs. “Overseas remittances will continue to be a positive factor in the Philippine GDP (Gross Domestic Product) growth and recent slowdown may be temporary as the US dollar strengthens” he added.
Remittances through banks dropped 0.6 per cent to $2.04 billion in August. However, inflows remained 4.1 percent higher for the first eight months.
Beltran also said that “If remittances were valued in respective local currencies growth would have been double-digit in many countries that includes countries “mired in recession” except Italy and the petroleum exporters, which were adversely affected by steep oil price drop”.
For the first eight months some currencies dropped in value according to Beltran and these are euro and Japanese yen down by 18 per cent, Singapore dollar by 8 per cent, the pound by 8.5 per cent and the Philippine peso by 4 per cent.
Beltran mentioned that the US dollar is gaining strength because the US Federal Reserve is expected to hike key rates before the year ends.
According to Reuters, “the Fed kept interest rates unchanged on Wednesday and in direct reference to its next policy meeting put a December rate hike firmly in play”. This came as a surprise for investors.