Remittances seen to drop this year

MANILA, Philippines — Economists expect remittances from overseas Filipino workers (OFWs) contracting this year due to displacements resulting from travel restrictions brought about by the spread of the coronavirus disease 2019 or COVID-19.

Sanjay Mathur, chief economist for Southeast Asia and India at ANZ Research, said remittances are likely to take a hit this year as growth is simultaneously challenged in almost all major geographies where OFWs are based.

“Based on these headwinds, the official projection for even a downwardly revised two percent increase in remittances in 2020 still seems optimistic. In all likelihood, remittances will contract this year,” Mathur said.

The Bangko Sentral ng Pilipinas (BSP) is likely to lower the projected growth in OFW remittances to two percent from the original target of three percent this year.

“As remittances play a seminal role in supporting growth in the Philippines, a fall in remittances will have strong repercussions,” Mathur warned.

Mathur said OFW remittances accounted for more than seven percent of the country’s gross domestic product (GDP) over the last three years.

“Although this ratio has been secularly declining, it remains much higher than foreign direct investment flows. On an international comparison, the Philippines is the fourth largest recipient of remittance flows,” Mathur said.

Mathur said weaker remittances would adversely impact a wide range of economic activities, including consumption and investment.

Mathur said an additional headwind this time is the relatively resilient peso, which will weigh on household remittance receipts in local currency terms.

ANZ said the current account position would also be impacted by weaker remittances although a narrower trade deficit will provide some offsetting support.

Lito Soriano, an expert in overseas recruitment and migrants migration policies, said job losses among OFWs could range between 50,000 and 100,000 if the government introduces job preservation measure.

Soriano expects probable losses in OFW remittances of less than $3 billion by the end of 2020, a 10 percent decline from the $30 billion in 2019.

Millions of household service staff and factory or production workers would experience lesser job losses as they are the most resilient skills as observed during the 2008-2010 Global Financial crisis.

OFW remittances hit record levels last year. Personal remittances increased by 3.9 percent to a record high of $33.47 billion last year from $32.21 billion in 2018, while cash remittances coursed through banks went up by 4.1 percent to an all-time high of $30.13 billion from $28.94 billion.