The Philippine economy’s best bet to shore up consumption and boost the economy—overseas Filipino worker (OFW) remittances—could remain weak until next year due to projected job losses and slow global economic recovery.
Ateneo Center for Economic Research and Development (ACERD) Director Alvin P. Ang told the BusinessMirror that, at best, remittance growth could remain flat next year.
This also means that another 400,000 OFWs could lose their jobs in 2021. This, he said, is the same number of OFWs expected to come home this year.
“With less new hires and more going home, remittance at best will be flat but basically will decline if global recovery is slower than expectations,” Ang told BusinessMirror over the weekend.
Ang added that other factors such as a strong peso and oil price issues in the Middle East where most of OFWs work, could further compound the problems of remittance-receiving families and the Philippine economy.
He explained that if oil prices remain erratic next year, there is a chance that remittance growth could contract in 2021.
Institute for Migration and Development Issues (IMDI) Executive Director Jeremaiah M. Opiniano also said this is part of the reason for the call to “not expect too much from Pinoys abroad.”
According to Opiniano, who is also assistant professor at the University of Santo Tomas, OFWs are already feeling the stress of their limited financial capacity, especially given the state of the global economy and the pandemic, as well as the appreciation of the peso.
Earlier this year, Ang and Opiniano released two policy briefs which stated that lockdowns imposed on various host countries have reduced the financial capability of OFWs.
This has caused many OFWs to be laid off from their jobs and forced to go home to the Philippines while others may have suffered pay cuts and forced to ride out the current crisis where they are.
“Months of remittance data reveal rising dollar volumes while the peso is appreciating. That is another stressful point: They had to send more, and we’re in a pandemic,” Opiniano told this newspaper.
“We now see the real cost of this continued but surprising efforts of Pinoys abroad: how long can they, their physical and mental health, and their money hold on during this pandemic?” he added.
These local views lend credence to the report of the Asean+3 Macroeconomic Research Office (AMRO) that the recent increases in remittances were only temporary.
The report stated that temporary boost received by remittances from the availability of digital services such as mobile wallets and internet banking could just be “hiding ongoing weaknesses.”
The Amro noted that with mobility restrictions and closed borders, migrants are expected to send remittances through formal channels which may cost more compared to informal channels.
Further, the jump in remittances in the past few months, the Amro said may also speak of returning migrants who were repatriated due to job losses. The Amro added that in the region, it is expected that continuing “outbreaks and stop-go economic activity” in destination countries may not help the cause of migrants in the region, including OFWs.
“Remittance receipts could remain sluggish if economic conditions in key sources outside and within the region need time to recover and resurgences in infections continue,” the Amro said.
“In addition, ongoing travel restrictions suggest that migrant deployment and re-migration will likely remain depressed for some time to come and might even have a more permanent dampening effect on remittances,” it added.
Last month, the Bangko Sentral ng Pilipinas (BSP) reported that cash remittances from OFWs hit $2.6 billion in September, growing by 9.3 percent from the $2.34 billion they sent in September 2019 last year.
The 9.3-percent growth was the strongest monthly data seen for remittances since April 2018. The 9.3-percent growth in September also comes at the heels of a 4.1-percent contraction in the money OFWs sent in August.
The September inflow of remittances pushed the nine-month total money sent home to $21.89 billion. This is 1.4 percent lower than the total money they sent in January to September last year. This is significantly better than the BSP’s forecast of a 5-percent decline in remittances on average by the end of the year.
By country source, Filipino migrant workers from the United States, Singapore, Qatar, Hong Kong and Taiwan sent more money in the first nine months of this year compared to the same period last year. Their higher remittances compensated for the declines in remittances from Filipinos in Saudi Arabia, the United Arab Emirates, Germany, Kuwait and the United Kingdom.
The US posted the highest share to total remittances at 40.1 percent, followed by Singapore, Saudi Arabia, Japan, the UK, the UAE, Canada, Hong Kong, Qatar and Taiwan. The combined remittances from these countries accounted for 78.8 percent of total cash remittances.