Remittances shrink by 2.6% in 8 months

MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) contracted by 2.6 percent to $21.41 billion from January to August compared to last year’s $21.99 billion amid the massive displacement caused by the impact of the pandemic on the global economy, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

For August alone, personal remittances including personal transfers as well as household-to-household transfer between Filipinos who have migrated abroad and their families in the Philippines declined by 4.2 percent to $2.75 billion from $2.87 billion a year ago, ending the rebound in June and July.

Personal remittances from land-based workers with work contracts of one year or more fell by 4.6 percent to $2.12 billion in August from $2.22 billion a year ago, while remittances from sea-based workers and land-based workers with work contracts of less than one year slipped by 2.2 percent to $580 million from $593 million.

The BSP said cash remittances coursed through banks declined by 2.6 percent to $19.28 billion from January to August compared to $19.81 billion in the same period last year.

The decline was traced to the 1.9 percent decrease in remittances from land-based workers to $15.18 billion in the first eight months from $15.47 billion as well as the 5.3 percent drop in remittances from sea-based OFWs to $4.1 billion from $4.33 billion.

The US accounted for 40.2 percent of total remittances in the first eight months where most correspondent banks are located. Other major sources of remittances are Singapore, United Kingdom, Japan, Saudi Arabia, United Arab Emirates, Canada, Hong Kong, Taiwan and Qatar.

“The combined remittances from these countries accounted for 78.9 percent of total cash remittances,” the central bank said.

Cash remittances for the month of August decreased by 4.1 percent to $2.48 billion from $2.59 billion a year ago, ending two straight months of increase in June and July.

The BSP said decline in remittances was noted from Saudi Arabia, Japan and the United Arab Emirates, partly offset by the growth from the US, Singapore and Malaysia.

ING Bank Manila senior economist Nicholas Mapa said remittances would decline by five to 10 percent this year as OFWs still face challenging labor markets with the rise in COVID-19 cases in the US and Europe.

Mapa said the number of OFWs fell by roughly 300,000 amid wide-scale repatriations by the government.

“The loss of remittance support to household consumption will likely be felt well into 2021, weighing on growth rebound prospects. Meanwhile, the peso may finally come under some pressure by the first half of 2021 with import demand expected to bounce at a time wherein structural flows from remittances and business processing services remain fragile,” Mapa said.

The peso has been the strongest performing currency in the region, appreciating more than four percent as it breached the 48 to $1 level amid strong inflows from remittances and foreign direct investments,as well as less demand for dollars amid the sharp drop in imports.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, OFW remittances is seen contracting by three to four percent this year as the slight uptick recorded in June and July was due mainly to household requirements for school-related expenses such as tuition, technology upgrade, among others.

“We may see the succeeding months to be soft as well and probably expect an inflows bonanza this coming month of December. Growth may be at the level or even higher than that of either June or July,” Asuncion said.

Asuncion also said December is seasonally a big month for OFW remittances, like June or July.