PH may lose $1.5B in remittances this year

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As overseas Filipino workers (OFWs) are repatriated and displaced due to the new coronavirus disease 2019 (COVID-19) pandemic, the Bangko Sentral ng Pilipinas (BSP) yesterday said remittances are likely to contract by 5 percent this year.

This will bring the cumulative total to $28.6 billion, $1.5 billion lower than the $30.1 billion total posted in 2019.

Remittances, according to economists, have become the single most important source of foreign exchange to the economy and a significant source of income for recipient families.

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Benjamin Diokno, BSP governor, said the impact of the contraction is “estimated at around 0.4 percent of gross domestic product (GDP) but on consumption.”

The 2019 total boosted household income and consumption and accounted for 9.3 percent and 7.8 percent of GDP and gross national income, respectively.

This will be the first year in two decades that remittances will post a decline. The last time was in 2000 due to the Asian financial crisis in late 1990s.

Diokno said the contraction is due to the repatriation of a large number of both land-based and sea-based OFWs and recession in host countries as a result of the health crisis.
But Diokno said the decline in remittances is “expected to be temporary.”

“Remittances are projected to grow by 4.0 percent in 2021 as demand for Filipino workers resumes and as coronavirus-affected host countries recover,” Diokno said.

He explained that OFWs are widely employed in economies that have been badly affected by the global health crisis, including the US, UK, Euro area, Japan and countries in the Middle East.

“The pandemic-induced disruption in economic activity in host countries has led to the repatriation and displacement of OFWs. In addition, travel bans and lockdowns were imposed by host countries and the Philippines has restricted OFW deployment,” Diokno said.

The government has recently allowed OFW deployment, except for health workers.

“BSP fully supports government initiatives to promote the welfare of overseas Filipinos (OFs). The BSP also continues to pursue various initiatives to help improve the OF remittance environment through enhancing transparency and fostering competition in the remittance market; promoting efficient and speedy transfer of funds to beneficiaries particularly in remote areas of the country; encouraging OFs and their families to increasingly channel remittances into savings and investments; and cultivating financial learning among overseas Filipinos and their families,” Diokno said.

Cash remittances that are coursed through banks declined by 4.7 percent to $2.397 billion in March 2020, from $2.514 billion in March 2019.

The decline in cash remittances in March was largely due to the lesser number of Filipinos deployed overseas in the first three months of 2020, relative to the comparable level last year.

The countries that registered the declines in cash remittances in March were mostly from oil producing countries (Saudi Arabia, United Arab Emirates and Kuwait) where demand for workers were affected by depressed oil price in the world market.

Cash remittances for the first quarter of 2020 managed to post a modest increase of 1.4 percent to $7.403 billion, from the $7.299 billion registered in the same period last year.

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