Remittances seen shrinking by 7% this year
MANILA, Philippines — Australia and New Zealand Bank sees remittances from overseas Filipino workers (OFWs) contracting by seven percent this year amid the massive displacements arising from the impact of the coronavirus disease 2019 or COVID-19 pandemic on the global economy.
ANZ Research economist Kanina Bhatnagar said the amount of money sent home by Filipinos abroad is expected to decline by 9.7 percent in the second half on renewed pressures from job losses, weak prospects and unfavorable foreign exchange translation.
“On balance, we forecast full-year 2020 remittances to decline by seven percent. As the one-off factors fade into H2, remittances will come under renewed pressure,” Bhatnagar said.
The Philippines last experienced a contraction in remittances at 0.3 percent in 2001.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed personal remittances retreated by 2.6 percent to $21.41 billion from January to August.
Cash remittances coursed through banks likewise declined by 2.6 percent to $19.28 billion.
After two consecutive months of robust growth in June and July, OFW remittances declined by 4.1 percent year-on-year in August.
“We see this weakness extending into Q4. The unanticipated annual rise in remittances coming into the Philippines in June and July can be attributed to a few one-off factors,” Bhatnagar said.
Most economies in the world were under shelter-in-place restrictions from April until the end of May, causing massive joblessness especially in the services sector as well as logistical disruptions.
The BSP reports the remittance figure in US dollars which have steadily weakened against the euro, Japanese yen, Singapore dollar and British pound.
Bhatnagar said the unique geographical diversity of the Philippines’ overseas diaspora has historically lent stability to remittance inflows.
“Slowing remittances from one economy or region have generally been offset by resilient inflows from others. However, the global nature of the COVID-19 pandemic implied that aggregate remittances would decline, as there was no scope to offset them geographically,” Bhatnagar said.
Furthermore, ANZ said 9.7 percent of OFWs have returned to the Philippines and more are on their way back as they run out of savings amid job losses.
Unemployment has risen in economies employing close to 60 percent of OFWs.
“Our estimates suggest a loss of approximately $60 million worth of remitted funds due to repatriations since February. Even upon factoring in a moderating repatriation rate, an additional $18 million will be lost in the coming few months,” Bhatnagar said.
According to ANZ, persistent lack of economic opportunities will drive more Filipinos back home, depressing the flow of remittances.
The BSP is now looking at a smaller two percent contraction in OFW remittances instead of five percent this year.
BSP Governor Benjamin Diokno earlier said some analysts expect the amount of money sent home by OFWs to contract by as much as 20 percent.
“With four months to go before the end of the year, there is a strong likelihood that the 2020 OFW remittances would shrink by less than five percent,” Diokno said.