Philippines' remittance growth to slow further

In the first four months of 2012, remittance growth was a moderate 5.4%.

DBS Group Research said:

Remittance growth should slow further this year from 7.2% in 2011. In the first four months of this year, remittance growth was a moderate 5.4% compared to the same period last year.

Unsurprisingly, remittances to Europe were down by 5.9%, but resilient numbers from Asia (11.8%) and the US (11.1%) helped to prop up the overall figure. Notably, in seasonally-adjusted terms, the absolute value has actually been declining since November.

With signs of weakness in the US economy, the persistence of the Eurozone debt crisis and the threat of a hardlanding in China looming, the prospect of a synchronized economic slowdown is real and this will have an impact on remittance. However, given its display of resilience in the past, we still expect remittance growth of around 5% this year.

Accordingly, there will not be as much of a boost to private consumption on this front. Instead, in the event that a sharp external slowdown occurs, it is encouraging that the central bank has the leeway to further lower rates and the government has the fiscal space to embark on fiscal stimulus.