Remittances from overseas Filipino workers (OFWs) from January through May 2004 declined marginally by 0.4 percent to US$3.3 billion over year-ago level. This retreat in cumulative remittances was brought about by the 7.4 percent decline to US$696 million in May 2004.
We expect this decline to be temporary because of a number of reasons.
First, the general weakness of the peso in May attending the national elections allowed the OFWs to remit lower US dollar equivalent while maintaining the level of remittance in pesos. Relatedly, the wait-and-see attitude of OFWs and their beneficiaries regarding the outcome of the May political exercise was also contributory. Second, the continuing strict implementation of the Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations in the Middle East, particularly, Saudi Arabia was also cited by our various sources. Banks in Saudi Arabia now require complete documentation and examination prior to remittance by overseas workers. Remittance centers in most countries have reportedly been implementing strict screening procedures of clients to implement their “know your client” policy. This would provide incentives for OFWs to remit their earnings through non-bank channels which are not captured by official statistics. Over time, we expect some of these informal remittances to show up in the banking system to the extent that they are exchanged for pesos or deposited in dollar accounts. Finally, the ongoing crisis in the Middle East also restrained OFWs from going out of their place of employment to transact with remittance centers.
We expect increased fund transfers from Hong Kong, U.S., and Italy to continue softening the impact of the recent decline in remittances from the traditional labor host countries such as Japan, U.K., and Saudi Arabia. The U.S., United Arab Emirates, Saudi Arabia, Italy, Hong Kong and Japan remained the major sources of OFW remittances.
We maintain our projection of a higher increase of OFW remittances at 6 percent since we expect higher deployment of Filipino workers and higher average income given the increasingly more skillful and more professional profile of OFWs. For the first five months of 2004 alone, total deployment went up by 11.3 percent year-on-year, the highest since 1999.