Remittances snap fragile recovery to fall anew in August
MANILA, Philippines — Optimism of a sustained bounce-back on remittances was tempered by a return to negative territory of the Philippines’ main dollar source in August.
In a sign that a corner is yet to be turned, cash remittances coursed through banks by Filipinos abroad declined 4.1% year-on-year in August to $2.48 billion, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.
The latest reading snapped two consecutive months of growth clocked in June and July, dashing expectations that remittances were fully recovering from double-digit declines at the height of coronavirus lockdowns in April and May. Analysts were unsurprised by the turnout.
“Pent up flows finally faded while the stock of OFs abroad declined significantly, resulting in the contraction in August,” Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said in an e-mail.
Sanjay Mathur, economist at ANZ Research, agreed with Mapa’s assessment. “The number is quite consistent with the state of the global economy. What had happened in June and July was that lockdowns were lifted in several economies,” Mathur wrote in a separate e-mail.
“As these lockdowns were lifted, remittances that were stuck in April and May were cleared,” he added.
Some glimpse of optimism however remains for the BSP, which just a day before the latest remittance data was released, narrowed decline expectations by yearend to just 2% year-on-year from 5% seen last May. “OF (Overseas Filipino) workers are truly altruistic,” BSP Governor Benjamin Diokno told reporters at the time.
From January to August, cash remittances reached $19.29 billion, down 2.6% from year-ago levels, data showed.
Indeed, the central bank has repeatedly relied on the so-called altruistic nature of remittances, one that banks on Filipinos abroad to keep the families funded and taken care of despite their plight away from home.
Waning holiday inflows?
But such attitude has been put to test by the job-killing pandemic. The labor agency expects to cap the global health crisis to displace 750,000 migrant workers this year, of which nearly 250,000 had already been repatriated as of October 10.
The struggle of migrant workers abroad, and the commensurate impact on their hard-earned cash, was evident on the breakdown of the data. With cruises in a halt, seafarers lowered their remittances 5.3% annually to $4.1 billion in the first 8 months. Their land-based counterparts reduced theirs by 1.9% on-year to $15.18 billion.
By region, remittances from the Middle East, where 57% of migrant workers were located as of 2017, sank 16.1% year-on-year. Kuwait, where inflows plummeted 27.4%, led the area for least amount of 8-month remittance, followed by United Arab Emirates (-26.4%), Libya (-26.3%), Bahrain (-24.4%), and Saudi Arabia (-22.4%).
Cash from Europe likewise shrank 13.2% year-on-year as of August, with repatriated money from France down 44.3%, Germany 27.7% and Italy 15.9%, figures showed.
On the flip side, inflows from Asia partly offset declines elsewhere with 3.9% annual growth. In this region, inflows remained strong in Taiwan up 15.3%, Singapore (8.9%), Hong Kong (2.6%) and South Korea (1.8%). Money from Japan dipped 0.4% from last year.
The US remained the source of 40.2% of remittances as of August, largely because Filipinos elsewhere uses US banks to send money. As Christmas approaches, Mapa said typically strong remittances during the holiday season may see some weakness this year.
“We expect remittance flows to see directional trading, but by the end of the year we expect remittances in 2020 to have fallen by 5-10%...,” Mapa said.
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