Philippines: Strong Remittance Data Bodes Well for Economy

Consensus Forecasts

The Philippines’ stellar performance over the past year, which has been buoyed by strong remittance inflows, looks set to continue going into Q2, judging by latest data for remittances. In April’s report, money sent home from overseas workers hit US$2.0bn, which amounted to an increase of 7.0% over the previous year. The latest figure took inflows for the first four months of this year to US$7.7bn, a rise of 6.4% (y-o-y). The buoyant numbers reflect sustained demand for skilled Filipino workers from around the world. Remittances sent back from abroad are a major driver of consumer spending in the economy and key to supporting overall domestic demand. The country reported real GDP growth of 7.8% (y-o-y) in Q1 and government official are now hoping that the second quarter expansion will be the same or even better. As the rest of the region continued to struggle with slowing global demand, the Philippines has continued to buck this trend. The resilience shown by the economy has already led to a spate of international credit ratings upgrade in recent months. That said, though, the country has not escaped global headwinds fully unscathed. Export data for the month of April showed that overseas shipments fell by 12.8% (y-o-y) to US$4.04bn and were down 6.6% in m-o-m terms on the back of weak demand from US and China. Furthermore, despite record rates of growth recently, the jobless rate soared to a 3-year high of 7.5% in April. With inequality and poverty still uncomfortably high, policymakers are now under increasing pressure to achieve sustainable and inclusive economic growth.

Real GDP growth forecasts for 2013 have edged up again this month, along with forecasts for gross fixed investment and manufacturing production.

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