Remittances rebound as economies reopen

MANILA, Philippines — Remittances from overseas Filipino workers (OFWs) bounced back strongly in February after a two-month slump as more host countries reopen their economies in line with the global rollout of COVID-19 vaccines, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno said personal remittances went up by 5.3 percent year-on-year to $2.76 billion in February, reversing the contraction in December and January.

Personal remittances covers all current transfers in cash or in kind as well as other household-to-household transfers between Filipinos who have migrated abroad and their families in the Philippines.

Diokno attributed the increase in personal remittances to the 7.8 percent growth in remittances from land-based workers with work contracts of one year or more to $2.15 billion, offsetting the 4.6 percent decline in remittances from sea-based workers and land-based workers with work contracts of less than one year to $540 million.

Diokno said this pushed personal remittances to inch up by 1.6 percent to $6.65 billion in the first two months of the year compared to $5.57 billion in the same period last year.

The BSP chief also reported cash remittances coursed through banks went up by 5.1 percent to $2.48 billion in February from $2.36 billion in the same month last year.

Cash remittances from land-based workers grew by 7.8 percent to $1.98 billion in February, while the amount from sea-based workers declined by 4.6 percent to $495 million.

The US emerged as the major source of remittances with a share of 41 percent in the first two months of the year, followed by Singapore, Saudi Arabia, Japan, the United Kingdom, United Arab Emirates, Canada, Malaysia, Taiwan and Qatar.

The BSP sees OFW remittances recovering this year with a four percent growth after slumping by 0.8 percent in 2020 from record levels in 2019.

ING Bank Manila senior economist Nicholas Mapa said the higher-than-expected growth in remittances could be attributed to the continued reopening in host countries as well as the pickup in global trade that benefited sea-based OFWs.

Although remittance flows would likely remain positive in the coming months, Mapa said upside gains would be limited given the substantial drawdown in the stock of OFWs due to repatriation and recent shutdowns experienced in selected countries around the world.

The Overseas Workers Welfare Administration (OWWA) expects the repatriation of 80,000 displaced OFWs this year after the government brought home 391,709 OFWs who lost their jobs in host countries last year due to the impact of the COVID-19 pandemic.

“In 2021, we expect remittance flows to adequately cover the more modest trade deficit, a development that should help lend appreciation pressure to the peso in the near term.  However, despite the boost to the currency, the impact of remittances on domestic consumption will likely be muted with the peso-equivalent of remittances actually down 3.6 percent for the year,” Mapa said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said slower economic conditions and higher inflation locally in recent months could have necessitated the sending of more OFW remittances to local beneficiaries.

He said remittances could mathematically post relatively larger positive year-on-year growth rates in the coming months, especially from April and May, amid the low base effects a year ago in view of the anniversary of the hard lockdowns in major host countries around the world.

However, Ricafort said the growth could taper off thereafter as the base stabilizes starting June.