Philippine remittances suffer from currency strength

To illustrate this point, we look to the peso’s performance against countries which provide the bulk of remittance including the US, eurozone, Canada, Saudi Arabia, UAE, Japan and Singapore. Broadly speaking, the peso is stronger against the USD, EUR, SAR and AED (which make up over 70% of inflows), but weaker against the CAD, SGD and JPY (which make up close to 20% of inflows).

By weighting the sources (and avoiding the USD bias), we calculated that the PHP has strengthened by close to 6% against this basket of currencies since early 2010. This takes some shine off the 7% YoY increase in remittance growth in June. With the outlook of the global economy still uncertain and policies negatively impacting on overseas Filipino worker deployment in Saudi Arabia, remittance is unlikely to provide much tailwind to the domestic economy in the coming months.