Philippine's remittances stable

Remittances fell for a second month straight in May on a m/m sa basis, further unwinding the March rebound. 

Philippine's remittances growth remains broadly stable at +5.7% y/y, the same rate of growth was observed last year. With remittances reported in USD, flows continue to be weighed by the near 20% decline in EURUSD over the past year. The Philippine Overseas Employment Administration continues to report strong growth in job orders, suggesting no fall in demand for overseas workers.

According to barclays, "The weak EUR could weigh further on remittances growth, we expects this to prove transitory, and something the BSP would look through."

A bigger consideration for the central bank is likely to be inflation. In comments this morning, Monetary Board member Medalla stated that low inflation gives BSP room to lower the reserve requirement ratio for banks, while at the same time he dismissed the need for monetary stimulus to support growth - consistent with governor Tetangco's rhetoric. While a prolonged period of below-target inflation could raise risks of a one-off rate cut, Barclays says, a hike is more likely next move.