Remittance growth vulnerable as virus lingers – EIU

MANILA, Philippines — Despite a miniscule contraction in 2020, growth in remittances of overseas Filipino workers (OFWs) remains vulnerable, the Economist Intelligence Unit said.

In a report, the economic think tank said a further fall in remittances by seven percent this year can be expected due to the lingering effects of the pandemic on the global economy.

“The drop in remittances spells trouble for many emerging economies that have already been hit hard by the global recession,” said EIU.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that cash remittances sent home by OFWs  fell by just 0.8 percent to $29.903 billion in 2020 from $30.113 billion in 2019, defying the two percent contraction anticipated earlier.

This was largely because of the countercyclical nature of remittances in which migrant workers tend to send more money to their families in times of crises.

In the report, EIU surveyed remittance growth in Bangladesh, China, Egypt, India, Mexico, Nigeria, Pakistan, the Philippines, Ukraine and Vietnam.

This year, remittances to the Philippines can be expected to continue to contract until hundreds of thousands of repatriated OFWs regain their jobs overseas.

EIU also said the prevailing pandemic-induced travel restrictions are preventing workers from returning to their jobs overseas.

Along with other countries like Bangladesh, growth in the remittances to the Philippines is among the most precarious considering that many OFWS may have already sent home their entire savings before returning home following the loss of their jobs.

EIU said developing countries like the Philippines that are heavily reliant on remittances to support consumption face a possible financial crisis  that will prolong recovery.

“The fall in remittances, and their expected continued decline in 2021, present significant challenges for these countries—particularly if their reliance on remittances grows in the immediate term,” said the report.

“This places these countries at increased risk of experiencing financial crises that would only prolong their post-pandemic recovery. If one emerging economy experiences such a crisis, financial contagion could ensue and destabilize other developing countries.”