MANILA (Reuters) - Manila's malls are abuzz with Christmas carols and glitzy decorations but Marlene Isleta has little festive cheer.
A strong Philippine peso and a weak U.S. dollar means that Isleta has less cash in her pocket after receiving the remittance money her husband, a waiter on a luxury cruise ship, sends her every month.
"The money is really tight. Christmas is just another day for me. I'll be hiding from my godchildren that day," she said, on a break from her office job in Manila's financial district.
Isleta's husband is one of an estimated 8 million Filipinos, or around 10 percent of the population, who work overseas due to a lack of opportunities at home and whose remittances have driven the domestic economy to a 20-year high.
The Philippines is the fourth-largest recipient of remittances in the world after India, Mexico and China.
The overseas workforce, known locally as OFWs (Overseas Filipino Workers), and treated to their own visa line at Manila's international airport, have fuelled a local spending boom through their payments, estimated to hit a new record of $14.7 billion this year, 15 percent higher than last year's peak.
The monthly inflows have also made the peso Asia's best performing currency this year, up nearly 15 percent against the dollar.
But this means that overseas workers' foreign currency salaries are translating into less pesos and these workers are having to send home more money every month to provide the same amount of pesos for their families' fixed monthly budgets.
Many remittances into the Philippines still come from the United States, but there are also significant flows from countries which have a dollar peg, such as Hong Kong and Gulf states.
The peso has also risen over 8 percent against sterling since the start of the year and two percent against the euro.
To make ends meet, Filipinos based overseas are taking on second jobs, working overtime or getting loans. Back home, families often have to cut back on spending.
In Manteca California, Donato Tino works overtime at two jobs to send an extra $200 a month home to his wife and two children.
The 38-year-old works in a petrol station and an electronics firm. In the Philippines, he was an x-ray technician but he would need to retrain to get employment in a U.S. hospital.
"I don't have time to study. I have to work and work," Tino said in a telephone interview.
The central bank has tried to temper the peso's rise but it has run up its biggest loss in over a decade doing so and the cost of keeping the currency in check is now too expensive.
The government has cut wharfage fees and removed travel tax for exporters but it's little consolation and exporters have slashed growth estimates for this year to 4.5-5.5 percent from an original forecast of 10 percent.
For OFWs, the state-run Development Bank of the Philippines is hoping to launch a hedging product to allow them to lock their remittances at a particular rate.
But the hedge will only be offered to Filipinos via the firms they work for overseas, ruling out large numbers of OFWs who work as maids, entertainers and builders in the informal sector.
Unlike Mexico, which is expecting remittance growth to slow due to a slide in the U.S. construction sector, investors are not worried about Philippine inflows because Filipinos are scattered around the world in a broad variety of jobs.
Frederic Neumann, economist with HSBC in Hong Kong, said that the tough exchange rate might discourage some overseas Filipinos from remitting while they wait for it to improve but they would be in the minority.
"The overseas Filipinos tend to support families back home and they have to remit regardless of what the level of the peso is."
Economists expect the peso to continue strengthening. HSBC estimates it will hit 41 against the dollar by the end of next year from around 42.8 now and with this in mind, richer Filipinos are looking at switching from dollar assets to other currencies.
But the ever-present threat of political instability and a fear of the taxman mean that many well-off Filipinos will continue to keep their money offshore.
"The primary reason why Filipinos will put their savings and investment money in dollar terms is not really so much on the yield but more so in terms of safety and not being investigated by tax authorities," said a treasury head at one foreign bank.
Expatriates in the Philippines are also feeling the pinch.
At the Manila-based Asian Development Bank, professional staff have seen their dollar incomes drop sharply against major currencies, hiking the cost of overseas college fees and making them think twice about holidays in continental Europe or the
"London just sends a shiver down people's spines," said one employee, who requested anonymity.
Ann Quon, ADB director of external relations, said the bank was looking at ways to ease the burden on staff.
"In 1996, when the dollar went through a similar weakening, we actually introduced a currency option where we let staff be paid up to 30 percent of their salary in their home country currency and that was at a fixed rate and we are looking at something similar."
Isleta, the wife of the seafarer, has already burned through her savings just to pay day-to-day expenses and her son has had to postpone his college education to save money.
Her husband, who has spent the past 16 years working overseas, is thinking about coming home for good.
"He's really tired of going abroad, especially now," she said. "You know, it is not really worth it anymore."
But Tino, while tired, is happy with his lot in California.
"Life here is still easier. There are no jobs in the Philippines."
Editing by Raju Gopalakrishnan and Megan Goldin