Remittances, BPO dollar inflows to buoy the peso

Manila, Philippines – The central bank expects remittances to grow at an annual 3 percent pace over the near term, and revenues from the business process outsourcing sector by as much as 7 percent, providing dollar inflows that would buoy the peso amid its weakness against the dollar.

The peso sank to fresh record lows last week with a trough at P59.26 against the dollar, but had corrected to return to the P58-per-greenback level.

Governance issues damping growth prospects on the domestic front, and higher US tariffs combined with Federal Reserve cuts, have been the currency’s drag.

“Probably one reason why we still see some robustness in overall growth is that there was some frontloading done in the first half and that supported growth and could have some spillover effects over remaining months of the year,” Bangko Sentral ng Pilipinas Deputy Governor Zeno Ronald Abenoja told a joint press briefing with the Asian Development Bank on Tuesday, Nov. 4.

“The tariffs are much lower than what was initially projected. So the impact seems to be limited,” he added, noting the domestic orientation of the Philippine economy.

Remittances have been a buffer too, the central bank official said.

“The altruistic nature of these remittances has provided some resilience over the global business cycle… So at least 3% growth for remittances,” Abenoja said.

“BPO and tourism is also another channel… The industry is looking at upwards of 5% growth annually over the medium term,” he added.

The peso depreciation is expected to exert pressure on imports – mostly oil and raw materials – widening the nation’s current account deficit that has already been stretched by Trump tariffs.

But that yawning current account gap is “not a bad deficit,” according to Abenoja.

“It's not a bad deficit. Because its being driven by investments and investment will increase output … and should help pay for the deficit,” he said.

The ADB earlier cut its growth forecasts for the Philippines to below 6 percent on the back of slowing demand from trade uncertainties, supply chain disruption from geopolitical tensions, and the financial volatility due to the political noise.

On the flipside, inflation remains muted.

“Stable oil prices in the international market will help contain inflation pressures moving forward,” Abenoja said.

“This path already incorporated some of the actions of the Monetary Board to manage inflation,” he said.

NewsWatch Plus business news anchor Lois Calderon contributed to this story.