By Luz Wendy T. Noble, Reporter
CASH REMITTANCE inflows to the Philippines may decline by up to 10% this year as source countries feel deepening economic pain from the pandemic, Moody’s Investors Service said.
“We expect that the decline for remittance inflows to the Philippines in 2020 will be between 5%-10%,” Christian de Guzman, Senior Vice-President, Sovereign Risk Group at Moody’s, said in an e-mail to BusinessWorld.
Mr. De Guzman said the diverse employment of overseas Filipino workers (OFWs) will make the inflows more resilient than the 20% drop estimated by the World Bank for global remittance inflows this year.
“Some of these occupations include relatively inelastic jobs such as those in healthcare that may be less susceptible to job losses or wage cuts,” he said.
In April, cash remittances to the country declined 16.2% year on year to $2.046 billion, central bank data showed. The drop is the biggest since the 33.5% decrease in January 2001.
Inflows during the January to April period also slipped 3% to $9.448 billion.
The central bank in June said it expects a 5% decline in cash remittance inflows, reversing its 2% growth forecast in May and the 3% baseline estimate last year.
More than 102,000 OFWs have been repatriated since February due to the coronavirus pandemic, data from the Department of Foreign Affairs showed.
Mr. De Guzman said they estimate most major economies in the G20 that are also remittance sources were hit the most in April but improved in May as restrictions eased.
“We also expect that remittance inflows into the Philippines likely reached a trough in Q2,” he said.
The US remains the top remittance source for the Philippines. Inflows from the country rose 7.1% year on year to $3.743 billion in the first four months of the year. In 2019, remittance inflows from the US reached $11.318 billion.
Meanwhile, inflows from Saudi Arabia, the second-biggest remittance market, shrank 23.2% to $569.39 million in the January to April period. Inflows from the country stood at $2.0998 billion in 2019.
The Philippines is the fourth- biggest remittance recipient in the world, following India, China, and Mexico, according to the World Bank.
In a note sent to reporters on Tuesday, Moody’s said economies that are highly reliant on remittance for consumption will experience heightened “growth shock” due to the outbreak.
However, Mr. De Guzman said this may not be the case for the Philippines as the country has become less reliant on remittance inflows compared to previous crises, including the global financial crisis between 2008 and 2009.
“The size of these inflows relative to gross domestic product has fallen over the past decade as other sources of cross-border inflows have risen in prominence, including those related to business process outsourcing,” he said.
With external demand hitting remittance as well as merchandise trade, Mr. De Guzman said governments should support domestic sectors to limit the damage to credit profile.
“This would likely involve a greater success at containing the coronavirus infection and putting in place targeted support measures for vulnerable households and businesses,” he said.