October 30, 2022 | 00:00
MANILA, Philippines — Recipients of remittances from Filipino Overseas Workers (OFW) should spend wisely as the appreciation of the dollar against other currencies, including the peso, has been offset by faster increases in consumer prices, according to London-based remittance company WorldRemit.
Earl Melivo, acting managing director for Asia-Pacific at WorldRemit, said Filipinos should be disciplined in their spending to make their finances sustainable as consumer prices continue to rise.
While OFWs are able to maximize the value of remittances sent home with favorable exchange rates, for their recipients, managing those funds by smartly managing their budget is crucial.
With import costs rising, Melivo said local consumers could boost demand for local products.
“The Philippines has many positive stories of high quality locally made products. If consumers make a conscious decision to support local products instead of buying items overseas, there is a greater chance that prices will come down and become more competitive,” he said.
According to Melivo, Filipino families should also plan ahead by preparing extra funds for expenses and saving whenever possible.
“Staying prepared for price increases will help families maintain their lifestyle despite the uncertainty in the economy. In addition to this, allocating part of his monthly income to emergency funds will be useful if more serious and unexpected situations arise,” Melivo said.
The peso rebounded to the $57-$1 level after hitting a new all-time low of $59-$1 several times this month on the back of more aggressive rate hikes by the US Federal Reserve to tame inflation and growing demand for the greenback as the Philippine economy continues to reopen.
To stabilize the peso and anchor inflation expectations, the Bangko Sentral ng Pilipinas (BSP) has so far raised its policy rates by 225 basis points, bringing the benchmark interest rate to 4.25% from a historic low of 2%.
The BSP is likely to deliver another huge 75 basis point hike on Nov. 17, as BSP Governor Felipe Medalla stressed the need for the Philippines to match point-by-point rate hikes to be made by the US Fed.
A weaker peso increases inflation and disrupts the currency’s purchasing power against the dollar.
While the weaker peso has provided some benefits for Filipinos abroad, for OFWs working in countries with high-value currencies, they have the opportunity to benefit more from remittances sent home, especially as Christmas approaches.