‘Remittances to sustain strong growth in 2022’

MANILA, Philippines — Remittances will continue to grow strongly this year, helping drive up private consumption and contribute to economic recovery from the pandemic, according to UK-based think tank Oxford Economics.

In a report, Oxford said remittances may likely improve by 5.4 percent this year from the estimated 4.9 percent growth in 2021. Remittances slipped by 0.8 percent during the height of the pandemic in 2020.

The Philippines remains heavily reliant on overseas remittances to boost household consumption and the continued improvement in remittance inflow is important for economic recovery.

Remittances were up by 5.2 percent in November last year on the back of economic recovery in host countries and   peso depreciation against the dollar amid worsening current account and hawkish signals from the US.

Oxford assistant economist Makoto Tsuchiya said remittances would boost private consumption and residential investment, both of which are set to be key drivers of growth over the next two years.

This as the economy continues to reopen as COVID vaccination coverage increases.

Oxford is looking at a 7.3 percent hike in private consumption while residential investment is expected to jump by nearly 30 percent this year.

“This behavior of remittances proves the altruistic causes of overseas Filipino workers (OFWs) given their efforts to send money home even when the global economy was in recession,” Tsuchiya said.

‘‘We believe that the massive fiscal support in the major host countries allowed OFWs to send home more money than they otherwise might have,” he said.

Tsuchiya said a robust remittance inflow  would help limit the current account deficit, which will widen this year due to improving domestic demand and weak tourism receipts.

Remittances also play a crucial role in the external balance, equivalent to nearly four times more than foreign direct investment inflows, and equivalent to roughly 60 percent of receipts from exports.

While the proportion of the households which use remittances to purchase houses or pay rents has declined since the pandemic, Tsuchiya noted that recovery in the domestic labor market would allow them to allocate back some funds.

This will aid in boosting demand for housing after two consecutive years of double-digit decline in residential investment.

Despite the positive outlook, Oxford still warned of downside risks, including another global COVID  outbreak and prolonged supply chain disruptions.

Tsuchiya maintained that these risks would exert downward pressures on global growth, particularly that of the US which is the Philippines’ biggest source of  remittances at around 40 percent of the total inflows

“As the Omicron variant has reminded us, the pandemic is far from over. Similar outbreaks pose a risk not only to the domestic economy but also to the rest of the world, which in turn will lead to reduced remittance flows,” he said.