Philippine President Duterte has threatened to make a ban on deploying overseas workers to Kuwait permanent, in a move that could spur a short-term boost the Philippine peso, Nomura said in a note on Thursday.
The country’s leader has asked Filipinos working in Kuwait to return home as well, Nomura noted, which brings concerns on remittances.
“If workers were to return to the Philippines, we believe there could be a short-term positive impact on the Philippine peso (PHP) given the potential for immediate remittances,” it said. But it noted that the boost could be less than expected as many overseas Filipino workers (OFWs) have little savings left to repatriate.
It pointed to a Farsight survey that found that both Indonesian and Filipina prospective migrants expected to send an average 51 percent of their income home, while 10 percent of returning migrants said they had no money left.
Over the past 12 months, remittances from Kuwait totaled US$790 million, or 2.8 percent of total sent back to the Philippines, it noted, adding the figure could be higher as some funds from the Middle East are categorized as coming from the U.S.
While as many as 241,000 Filipinos may be living in Kuwait, it wasn’t clear that their departure from that country would necessarily affect remittances longer term, Nomura said.
“OFWs who choose to leave Kuwait could seek employment in other Gulf states, especially as repatriation is voluntary,” it said.
But it noted that there was some uncertainty over the overall medium-term outlook for remittances from the Middle East, amid increasing political risks there.
For the near term, Nomura said the prospects for the Philippine peso would likely be driven by monetary policy, with the April inflation print due on May 4.
“A strong print could reinforce expectations of Bangko Sentral ng Pilipinas tightening at the upcoming meeting (10 May), but we will closely listen for BSP rhetoric following the data and monetary policy decision,” it said.
Currently, Nomura said it was staying long the USD/PHP, as stance it said it could change if there were to be a rate hike and clear tightening stance at the upcoming policy meeting.
The dollar was fetching 51.67 pesos at 6:48 P.M. SGT on Thursday.