Remittances expected to shrink by 5% — BSP

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects a five percent drop in remittances from overseas Filipino workers (OFWs) due to the economic fallout from the coronavirus disease 2019 or COVID-19 pandemic.

BSP Governor Benjamin Diokno said cash remittances coursed through banks may contract to $28.6 billion this year from a record high of $30.7 billion last year.

“Despite being resilient in past crisis, OFW remittances are seen to contract by five percent, a reversal of the three percent growth in the November 2019 projection. This is mainly due to large repatriation of workers and major economic disruptions in host countries,” Diokno told reporters.

Data showed OFW remittances last contracted 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 Estrada administration.

Remittances have been accelerating since 2002 with cash remittances coursed through banks 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 World Bank expects a 20 percent drop in global remittances this year, with remittance inflows to East Asia and the Pacific expected to decline by 13 percent, driven mainly by declining inflows from the US, the largest source of remittances to the region.

The BSP chief is confident the adverse impact of COVID-19 on remittances may be temporary.

The central bank is closely monitoring latest reports from the Philippine Overseas Employment Administration (POEA), Department of Labor and Employment (DOLE), and the Department of Foreign Affairs (DFA) on the deployment, displacement, and repatriation status of OFWs.

The DOLE reported to the House of Representatives that more than one million OFWs would be displaced by December 2021 due to the pandemic. Actual data showed 323,537 OFWs already lost their jobs as of May and is expected to double to 609,317 by December.

Aside from boosting the country’s foreign exchange buffers to ward off external headwinds, OFW remittances also contribute around eight percent to the gross domestic product (GDP) via private consumption.

The BSP is now expecting travel exports to contract by 56.9 percent instead of growing by 12 percent and earnings of the business process outsourcing (BPO) sector to grow at a slower rate of two percent instead of five percent this year.