MANILA, Philippines - The weak euro could continue to weigh on remittances, according to UK-based bank Barclays, adding this may also affect domestic consumption this year.
The recovery in remittances in February was "broadly in line" with expectations but below its forecast.
The bank has estimated a bigger uptick in remittances as the weakness in January was believed to be pulled down by additional holidays following the Pope's state visit.
"While the detailed breakdown has not yet been released, we suspect the continued weakness was driven by ongoing falls in remittances from Europe, likely on the back of currency translation effects amid the sharp euro depreciation," Barclays said. The euro on March 16 weakened to $1.0458, its weakest since January 2003.
"Indeed, the Philippine Overseas Employment Administration continues to report strong growth in job orders, suggesting no fall in demand for overseas workers," the bank said.
Last year, cash remittances from Europe summed up to $3.8 billion or about 16 percent of the total $24.3 billion sent home by Filipinos abroad.
Business ( Article MRec ), pagematch: 1, sectionmatch: 1
Latest BSP data showed remittances from Europe fell 15 percent to $523.8 million in the first two months of the year from $618.6 million in the same period last year.
"As such, while the weak euro could continue to weigh on remittances growth, this should ultimately prove transitory. However, the drop in remittance flows from Europe alongside other regions with weaker currencies, such as Australia and Japan could pose some headwinds for private consumption growth this year," Barclays said.
Cash remittances climbed 4.2 percent to $1.876 billion in February, with the growth rate rebounding from a six-year low of 0.5 percent seen in the previous month.
The BSP said the slowdown in growth in the recent months could be due to relatively high level of remittances after the devastation brought by Typhoon Yolanda in late 2013.
Remittances play a big role in supporting domestic consumption, the main driver of the economy.
© Pakistan Press International, source Asianet-Pakistan