Remittances to fuel private consumption in 2021

MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) are expected to accelerate next year, fueling a private consumption-led economic rebound, according to Barcelona-based think tank Focus Economics.

FocusEconomics said OFW remittances would recover next year as mobility restrictions due to the  pandemic are lifted.

“Next year, remittances should strengthen in tandem with labor markets abroad, which should feed through to stronger private consumption at home,” FocusEconomics said.

The Bangko Sentral ng Pilipinas (BSP) sees remittances rebounding next year, with a growth of four percent after contracting by about two percent this year as hundreds of thousands of OFWs were displaced in host countries due to the global health crisis.

Latest data from the central bank showed 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 one percent to $27.35 billion from $27.61 billion in the same period last year.

Likewise, cash remittances coursed through banks contracted by 0.9 percent to $24.63 billion from $24.86 billion in the same period last year.

“For the remainder of the year, the impact of the strong peso could be partially offset by tighter restrictions globally,” FocusEconomics said.

The peso   gained by more than five percent this year and is nearing the 47 to $1 level due to soft demand for   dollars amid the slump in global trade due to the pandemic- induced recession.

The Philippines slipped into recession, with its gross domestic product (GDP) contracting by 10 percent from January to September as the country imposed the longest and strictest lockdowns in the world to slow the  spread of the virus.

The contraction eased to 11.5 percent in the third quarter from a record 16.9 percent in the second quarter as the National Capital Region (NCR) shifted to general community quarantine in June after Luzon was placed under enhanced community quarantine in mid-March.

Economic managers are looking at a deeper contraction of 8.5 to 9.5 percent   this year before rebounding with a growth of 6.5 to 7.5 percent next year and 8.5 to 10 percent in 2022.

FocusEconomics said private consumption may expand by 5.8 percent in 2021 and 6.3 percent in 2022 after contracting by 9.3 percent in the third quarter.