Filipino remittances expect worst-ever 20% fall on pandemic
By Darlene Basingan
MANILA, NNA – After hitting a record high of $33.5 billion in 2019, personal remittances of overseas Filipino workers (OFWs) are likely to fall sharply by as much as 20 percent this year.
The double whammy of a devastating economic fallout from the coronavirus pandemic and plunge in oil prices has impacted on the deployment and earnings of land and sea-based workers. Filipinos working abroad have sent less money home while some had lost their jobs in the past few months.
The central bank or Bangko Sentral ng Pilipinas (BSP) said in February that the continued growth of personal remittances in 2019 was driven largely by land-based workers sending back a total of $25.6 billion or 3.5 percent higher year-on-year.
But recently, the World Bank has estimated total remittances to fall by 20 percent this year.
A study published by the Ateneo De Manila University sees remittances shrinking by between 10 and 20 percent in 2020, to about $24 billion to $27 billion. It estimated that the country received $30 billion in total remittances in 2019.
“Considering that this current pandemic is worldwide, the projected base-to-worst case scenario of a 10-to-20 percent decline in remittances will become the steepest drop of remittance inflows in Philippine migration history,” said the university in its report.
Ruben Carlo Asuncion, chief economist at the UnionBank of the Philippines, recalled that during the SARS pandemic in 2003, remittances from affected countries and regions like Hong Kong, Singapore,Taiwan and Canada declined by 18 percent.
However, the impact would be much worse now as the latest pandemic is far more widespread.
Inflows from about 2.3 million Filipinos based abroad had contributed to around 9 percent of the country's gross domestic product, forming a resilient pillar of the economy over the years.
Figures of those working abroad could be much higher as the latest government data does not capture undocumented Filipino workers, many of whom are believed to work in the service sector.
The last time remittances suffered a massive drop of 18.2 percent was in 1999, according to the university study, which also noted that the ongoing pandemic is the worst crisis to have hit overseas Filipinos too.
Already, host countries are struggling to tackle the economic brunt of severe lockdowns to curb the highly contagious coronavirus from spreading.
“Sharp decline in most economies around the world, with some risk of recession, especially in the biggest host countries for OFWs, could fundamentally reduce the demand for OFWs worldwide,” Michael Ricafort, an economist at the Rizal Commercial Banking Corp., told NNA in an email.
ING Bank senior economist Nicholas Mapa, said any shortfall in remittances from regions in a recession or slowdown could be compensated by money sent in by Filipinos from less affected countries usually.
But he noted that the pandemic has negated the “boon of remittances” since the deadly virus that causes a respiratory disease called Covid-19 has hit almost all parts of the globe.
The recent crash in oil prices may also hurt the economies of oil-producing countries like those in the Middle East, which employ 1.2 million Filipinos.
The Ateneo study said those countries might be forced to stop oil production and lay off many workers should the trend of falling oil prices continues.
Remittances are not only the major source of foreign exchange for the Philippine economy, but they also fuel the purchasing power of Filipinos. This has helped spur consumption that accounts for about 70 percent of the country’s GDP.
Ricafort pointed out that remittances are also major sources of funds for many sectors like real estate, automotive, appliances and home furnishing.
Between 20 and 40 percent of consumption may be lost because of the crisis, warned the Ateneo study.
“The Philippines will be missing the support from remittance flows, which will take the wind out of consumption momentum,” said Mapa.
Any sharp fall in remittances will likely contribute to the country's negative growth this year.
Before the pandemic, the Philippines had been enjoying an GDP growth of over 6 percent yearly on the average, thanks to robust consumption, capital formation and government spending.
But the Bangko Sentral ng Pilipinas has now forecast the economy to shrink by 0.2 percent in 2020 before recovering back to the delayed target of 7.7 percent in 2021.
Local economists also foresee a contraction this year as consumer spending is expected to drop drastically even after lockdowns imposed in various parts of the country are lifted.
About 100,000 overseas Filipino workers have lost their jobs due to the pandemic, according to latest data from the Philippine Department of Labor and Employment, while around 230,000 OFWs have sought cash handouts from the government.
More are expected to lose their jobs. But integrating them in the domestic workforce even after the end of shutdowns might not be an easy task as around two million Filipinos have already been displaced locally as of last week.
Alvin Ang, economics professor at the Ateneo De Manila University who co-authored the study, told NNA he doubted foreign countries would want to hire more migrant workers even after the health crisis is over because they themselves are also grappling with high unemployment.