Remittances seen to end 18-year growth streak

MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) may decline by 2.5 percent this year, ending 18 years of robust growth due to job losses, falling income and severely restricted deployment of new workers abroad due to the coronavirus disease 2019 or COVID-19 pandemic, according to US-based credit rating agency Fitch Ratings.

Fitch said the decline in remittances, which account for about eight percent of the country’s total economic output, would drag private consumption.

“We expect remittance inflows to contract by 2.5 percent, reflecting the impact of the health crisis in overseas locations,” Fitch said.

It added about 20 percent of the country’s remittances last year came from the Middle East.

OFW remittances last declined to $6.03 billion in 2001 from $6.05 billion in 2000 primarily due to the Asian financial crisis and the political controversies during the administration of former president Joseph Estrada..

Remittances have been accelerating since 2002 with cash remittances rising by 4.1 percent to an all-time high of $30.13 billion last year from $28.94 billion in 2018 and personal remittances increasing by 3.9 percent to $33.47 billion from $32.21 billion.

The Bangko Sentral ng Pilipinas (BSP) is also now expecting remittances to shrink by a range of 0.2 to 0.8 percent instead of growing by three percent.

Fitch said private consumption likely to stay muted as a result of the social distancing measures and the Luzon-wide enhanced community quarantine. Private consumption accounts for 72 percent of gross domestic product (GDP).

The debt watcher also said tourism receipts, which contribute 2.5 percent to GDP, would plunge by 70 percent due to the outbreak.

Fitch said the country’s external payments position would weaken with a wider current account (CA) deficit of 1.6 percent of GDP this year from last year’s 0.2 percent of GDP driven by a decline in tourism receipts and remittances.

Likewise, exports are expected to contract by two percent.