Post-Typhoon Yolanda remittances to further boost peso – analysts

A fresh wave of remittances from overseas Filipinos to help families rebuild their lives in Central Philippines will boost the peso against the dollar in the aftermath of Super Typhoon Yolanda, according to analysts. 

 

In an e-mailed note Monday, researchers Craig Chan and Prateek Gupta at global financial services firm Nomura said overseas Filipinos will send more money back home for relief and reconstruction – supporting the local currency.

 

“We see that... remittances growth increased by 3.7 percentage points from growth rates prior to the incident,” Chan and Gupta noted, referring to Typhoon Yolanda which pummeled central Philippines on Nov. 8, flattening coastal towns and cities 

 

Though there is an observed increase in remittances every after disaster, it is hard to put a number at  what level the peso will appreciate against the dollar, said to University of Santo Tomas economics professor Alvin P. Ang.

 

"It's difficult to say... Pressure to appreciate is the better term," he said in a text message to GMA News Online. "The natural disaster... it could have pressure on the peso but the global market still has a bigger impact on the local currency," he added.

 

According to a National Disaster Risk Reduction Management Council report Monday, 2,212,955 families or 10,306,318 people in 10,365 villages in 44 provinces were affected by the typhoon which also destroyed 288,922 houses and damaged another 282,884.

 

In peso terms, the council placed the damage to agriculture and infrastructure at P10.38 billion.

 

“Historically, remittances growth has picked up after natural disasters,” according to Nomura.

 

Major natural disasters that hit the Philippines since 2004 brought a median increase in remittances within three months of the calamity. 

 

Chan and Gupta noted the most extreme increase in remittances came after Typhoon Reming (Durian) in November 2006, during which money transfers rose from 18.8 percent in October 2006 to 28.3 percent in January 2007 with the peso appreciating by nearly 2 percent percent against the dollar.

 

Reming left 709 deaths in its wake and P10.89 billion worth of damage. 

 

More remittances will add to the seasonal rise in cash sent home by overseas Filipinos, according to global financial services firm Barclays Plc.  

 

“Seasonal patterns suggest a jump in remittances into year-end, likely supporting the Philippine peso,” Prakriti Sofat, Singapore-based economist at Barclays, said in an e-mailed note over the weekend, noting the presence of a “seasonal pattern” in higher amount of remittances in December. 

 

“Furthermore, in the very near term, overseas Filipino workers may send additional funds home to help in the rebuilding efforts following Typhoon Haiyan (Yolanda),” Sofat added. 

 

Recent developments further underpin Barclays belief that the peso will outperform peer currencies this year. 

 

The peso has depreciated by 7.088 percent in the year to Friday, Nov. 15 when it closed at 43.66:$1. 

 

In the past months, investors sold down Asian currencies on bets that the US Federal Reserve will wind down purchasing stimulus.  

 

In a phone interview Monday, University of Asia & the Pacific economist Victor Abola said it's only natural for overseas Filipinos to send more money in time of need or during emergencies.

 

“Every May to June, as you can see, Filipinos working abroad send more money as it is the opening of schools,” he added.

 

But Abola warned that an increase in remittances may be a "double-whammy" for the Philippine currency.

 

“Ironically, higher remittances will help peso appreciate that's why in these circumstances, the central bank should support the present rates by buying more dollars coming in,” he said. – VS, GMA News