Stockbroker SB Equities Inc. sees sustained growth in overseas Filipino (OF) remittances in the medium-term as economies open up and slowly recover from the impact of the coronavirus pandemic by next year.
SB Equities said its review of Philippine remittances data between 2000 and present showed that as economies expand, so do remittances.
The increase in remittances redound to an increase in household consumption, “which in turn augurs well for domestic demand and economic performance,” SB Equities said.
Remittances “tend to bounce back after episodes of downturns,” the stockbroker added.
In the past four decades, it noted there were only three years when overseas cash remittances incurred negative growth – 1984, 1999 and 2001.
“We conjecture that the OF remittance downturn in 1984 may have been a consequence of Philippines’ recession; while for 1999 and 2001, we noticed there was a corresponding sharp decline in overseas Filipino remittances coming from the US – its country share to the overseas Filipinos cash remittance total plummeting from 87 percent in 1998 to 74 percent in 1999 and further to 53 percent in 2001,” SB Equities said.
“From the historical series, we infer that overseas Filipino remittances tend to immediately rebound following episodes of downturns,” it added.
According to SB Equities, remittance figures overshot projections from both the World Bank and the Asian Development Bank (ADB).
In April, the World Bank said a 20 percent decline in global remittances is expected this year due to the lockdowns and pandemic. The ADB announced in August that OF remittances into the country “could contract by as much as 20.2 percent under a worst-case scenario of one year in controlling the coronavirus outbreak and resuming economic activity.”
In August, remittances contracted by 4.2 percent to $2.76 billion compared to $2.88 billion last year, bringing the eight-month remittance figure to $21.41 billion, down 2.6 percent from P22 billion last year.
“Against this backdrop, we believe the expected growth in OF cash remittances next year is likely to be sustained over the medium to long term as both domestic and global economies recover from the pandemic,” SB Equities said.
It expects remittances to rebound to $31 billion by next year on renewed economic activity.