THE government’s estimate of the decline in remittances from overseas workers is 2-3%, far more optimistic than the World Bank’s own view of a 13% average drop in funds sent home to low and middle income countries (LMICs) in East Asia and the Pacific.
Citing Bangko Sentral ng Pilipinas (BSP) estimates, Finance Undersecretary and Chief Economist Gil S. Betran told BusinessWorld that OFWs remittances could contract by 2-3% this year.
“BSP has an estimate — 2 to 3% decline. The reason is that most of OFWs are in socially necessary industries including health and education,” Mr. Beltran said in a mobile phone message Thursday.
“The forecast is negative 2 to negative 3% year-on-year, lower contraction than World Bank forecast for global remittances,” he said.
Cash remittances to the Philippines were at a record $30.133 billion in 2019, up 4.1%. As recently as early April, the BSP projected OFW remittances to grow by 3% this year.
Nicholas Antonio T. Mapa, senior economist at ING Bank Philippines, expects OFW remittances to post a year-on-year contraction of 2.5% in 2020 as Filipinos working abroad “may not have enough income” to send cash to their families here with lockdowns imposed in several countries, forcing businesses to suspend operations.
“Remittances from abroad will likely experience a 2.5% contraction due to COVID-19 which could affect both growth prospects and the external position of the Philippines. Impaired remittance flows in 2020 forced us to drop our growth estimates while we believe that peso will come under pressure once remittance support fades when lockdown measures are relaxed,” Mr. Mapa said in a note Thursday.
He projects the Philippine economy to contract by 2.2% this year in the worst-case scenario following the expected decline in remittance flows, which support domestic consumption, and the Luzon-wide lockdown which was extended until April 30.
In a report, “COVID-19 Crisis Through a Migration Lens,” the World Bank projected remittances to LMICs worldwide to decline 19.7% to $445 billion this year. The lost remittances could spell “loss of a crucial financing lifeline for many vulnerable households.”
Growth is expected to bounce back to 5.6% to $470 billion next year.
For LMICs in the East Asia and Pacific, including the Philippines, the World Bank projects remittance flows to drop 13% to $128 billion this year before bouncing back in 2021, growing 7.5% to $138 billion.
“This is not so much due to a decline in the stock of international migrants, but largely due to a fall in wages and the employment of migrant workers in host nations due to COVID-19,” the World Bank said.
The bank said if the country of origin is in crisis, migrants tend to increase the money they send back home; if the host country is in crisis, remittances can decline.
It said lockdowns and travel bans have a direct effect on employment and wages of foreign workers due to business closures and disrupted travel.
“The outlook for remittances for 2020 remains as uncertain as the impact of COVID-19 on global growth and may depend to a large extent on the measures taken to restrain the spread of the disease. In the past, remittances have been countercyclical during times of disaster in the recipient economy. This time, however, the pandemic has affected all countries, and the economic fallout is likely to vary due to country-specific characteristics,” it said. — Beatrice M. Laforga