THE economy continued to benefit from the cash sent by overseas Filipino workers (OFWs) back home, as it reached an all-time high last year, but experts are increasingly becoming concerned about the impact of the coronavirus disease 2019 (Covid-19) on remittances.
The Bangko Sentral ng Pilipinas (BSP) on Monday reported that the overall cash remittances of OFWs in 2019 rose by an annualized rate of 4.1 percent to a record high $30.1 billion.
According to the BSP, this was fueled by higher flows from both land-based and sea-based workers, amounting to $23.6 billion and $6.5 billion, respectively.
The United States remained the highest remittance sender to the Philippines, accounting for 37.6 percent of the total last year. Other top sources of remittances were Saudi Arabia, Singapore, Japan, United Arab Emirates, the United Kingdom, Canada, Hong Kong, Germany and Kuwait.
“Notwithstanding pockets of political uncertainties across the globe, cash remittances in 2019 remained strong. This is evident in inward remittances from Asia, the Americas and Africa where inflows grew annually by 12.3 percent, 10.6 percent and 4.8 percent, respectively,” the BSP said, adding that the rise in inflows from these regions more than made up for the 9.8-percent decline in remittances from the Middle East.
However, an economist said a repeat of this record may prove to be challenging. ING Bank Economist Nicholas Antonio Mapa said the outbreak of Covid-19 will test the resilience of OFW remittances this year.
“In the past, OFW remittance flows had managed to defy skeptics, posting strong growth even in times of global recession or geopolitical events that caused substantial upheaval of Filipinos in their host countries. OFWs are deployed across the globe in several jurisdictions and in several diversified services professions, making them more able to sidestep economic downturns,” said Mapa.
“However, Covid-19 poses a new and real threat to this stable source of foreign exchange flows and peso purchasing power given the reach and nature of the [virus],” he added.
Deployment, work affected
The economist noted that the virus has spread across the globe and will likely affect both deployment and actual work of Filipinos based abroad.
“Covid -19 also forces people to go into quarantine or affects consumption patterns which could have an adverse impact on the services industry, where most OFWs are employed in,” he added.
Mapa said the recent plight of the cruise ships around the world will likely put pressure on cruise liners and the hospitality industry as a whole, making it difficult for Filipinos to send home remittances should their salaries be curtailed or they lose their jobs altogether.
OFW remittance flows are known to boost the country’s purchasing power and fund household consumption. It also provides a steady dollar stream to cover for the trade gap and supplement current account shortfalls.
“Filipinos have found a way to send home remittances throughout the global financial crisis and despite every economic downturn experienced around the globe,” he said.
“[This year] and Covid-19 pose a new challenging landscape for these flows to continue but given the altruistic nature of these flows, we expect remittances to manage to post modest growth from its average 3-percent to 4-percent growth clip per year,” he added.
However, the economist noted that a “less vigorous” pace of remittance flows amid a projected widening trade deficit could translate to renewed pressure on the peso in the near term.
Data from the Bankers Association of the Philippines (BAP) showed the local currency ended trade on Monday at 50.57 to a dollar, sideways from the previous day’s 50.56