MANILA, Philippines — As the coronavirus pandemic continues to batter global trade and send home thousands of overseas Filipino workers who lost their jobs because of lockdowns, the outbreak is depleting a main line of defense of the Philippine economy: its dollar-generating engines.
For many years, money sent home by OFWs and exports receipts are among the top sources of dollars for the Philippines, helping cushion the country from external shocks that could have interrupted a developing economy’s growth.
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But in a report released Tuesday, the research unit of Singapore-based DBS Bank said the recent spike in demand for locally manufactured electronic products, the Philippines’ top export, seen in the first quarter of 2020 due to easing trade tensions will “likely fade” as orders from virus-hit countries take a heavy beating.
The six-week Luzon lockdown, which began on March 17 and poised to end April 30 unless extended, is also disrupting the operations of Philippine exporters in the main island amid problems with supply chain.
To make things worse for the country, remittances from Filipinos working abroad are forecast to fall this year, a first since 2001, after the health crisis triggered massive job losses around the world, DBS said.
Specifically, cash inflows from the Middle East, where 57% of Filipino workers were based as of 2017, will feel the sting the most as the pandemic sets off a massive repatriation. Tanking oil prices is adding to the problem of oil-reliant Gulf economies, which have began repatriating thousands of foreign workers.
“Remittances growth has moderated in the past 3-4 years, with this to persist in 2020 owing to slow growth in key OFW destinations of US, (Middle) East (low oil prices),” analysts at DBS Bank said.
A meltdown in foreign inflows could deteriorate the country’s external position and deal a major blow on the peso, which so far remains firm amid a global stock market rout. This, in turn, could force the central bank to shift gears and punitively hike interest rates to stem capital flight.
“Growth is likely to be hurt this year due to the COVID-19 outbreak, adding to weaker domestic drivers, particularly investment growth,” DBS Bank said.