Economists forecast sharp drop in remittances
MANILA, Philippines — Economists expect a bigger drop in remittances from overseas Filipino workers (OFWs) this year due to job losses resulting from lockdowns in host countries amid the coronavirus disease 2019 or COVID-19 pandemic.
Euben Paracuelles, economist at Japanese investment house Nomura, said the amount of money sent home by OFWs to their loved ones in the Philippines may decline by seven percent this year.
“We think the outlook for remittances is grim and the contraction could deepen ahead. We forecast 2020 remittances growth dropping to seven percent versus the central bank’s forecast of two percent,” Paracuelles said
Paracuelles said that deployment in key host countries would continue to slow down just like the severe acute respiratory syndrome (SARS) epidemic in 2003.
Furthermore, the sharply lower oil prices would hurt the largest source of OFW remittances – the Middle East.
Paracuelles said sea-based remittances that corner 22 percent of the total would take a big hit particularly from the battered cruise ship sector.
According to Nomura, the gross domestic product (GDP) of the Philippines would contract by 4.8 percent this year after growing by six percent last year.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said OFW remittances could slow down further especially starting March and April amid the lockdowns in many host countries around the world that could have caused some OFWs to stay home.
Ricaforts said some OFWs in hard-hit industries especially tourism-related industries, including cruise ship industries, were displaced and repatriated back to the Philippines.
“Thus, OFW remittances could potentially post close to zero year-on-year growth, or could even contract by at least low single-digit levels for full year 2020 and any contraction could start by March or April,” Ricafort said.
The US, the major source of OFW remittances, has the most cases of COVID-19, while the sharp decline in oil prices has affected countries in the Middle East that host large numbers of OFWs.
Ricafort said some OFWs could still send money to the Philippines by tapping their savings for the meantime to tide them over during the lockdowns until the restart of the economies in various host countries.
“Another offsetting factor is that some OFWs in many host countries worldwide belong to essential industries, especially medical professionals, who could still continue to work and send remittances during the lockdown periods,” Ricafort said.