REMITTANCES slipped by 0.8% in 2020, the first annual contraction in two decades, as some overseas Filipino workers (OFWs) lost their jobs while others tightened their belts amid the pandemic. Read the full story.
By Luz Wendy T. Noble, Reporter
REMITTANCES slipped by 0.8% in 2020, the first annual contraction in two decades, as some overseas Filipino workers (OFWs) lost their jobs while others tightened their belts amid the pandemic.
Cash remittances coursed through banks stood at $29.903 billion last year, slightly lower than the record $30.133 billion in 2019, according to data released by the Bangko Sentral ng Pilipinas (BSP) on Monday.
Remittances saw its first annual contraction since the -0.3% seen in 2001 and the worst since the -18.3% logged in 1999. However, the decline was better than the 2% contraction forecast by the central bank for the full year.
For ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa, remittances may have shrank steeper than BSP data when adjusted for exchange rate movements.
“In peso terms, remittances have actually contracted by 4.8% despite OFWs struggling to find a way to send home more dollars to pay for fixed peso expenditures such as tuition or mortgage payments,” Mr. Mapa said in a note.
In 2019, the peso hovered beyond the P50-per-dollar level and even reached P52 a dollar. By 2020, the peso appreciated to reach the P48-a-dollar level, which means OFWs needed to send more to provide for their families during the crisis.
The BSP said inflows from economies such as Saudi Arabia, Japan, the United Kingdom, the United Arab Emirates (UAE), Germany, and Kuwait declined last year.
On the other hand, money sent home by OFWs in the United States, Singapore, Canada, Hong Kong, Qatar, South Korea, and Taiwan increased.
This difference showed the “disparate effects” of policies of fiscal support in host economies in relation to the ability of OFWs to continue supporting their families in the Philippines, Security Bank Corp. Chief Economist Robert Dan J. Roces said.
“For instance, the fiscal support injection in the US allowed OFWs based there to continue sending that contributed to it as the country with the largest source. Contrast this to other traditionally strong origin countries — such as Saudi Arabia — which faltered as lockdowns forced work stoppage and sent workers home,” Mr. Roces said in a text message.
BSP data showed the United States had a 39.9% share of total remittances in 2020. Inflows from the US, along with Saudi Arabia, Japan, United Kingdom, United Arab Emirates, Canada, Hong Kong, Qatar, and South Korea made up 78.6% of the total.
In December alone, cash remittances dipped 0.4% to $2.89 billion from $2.902 billion a year earlier. Inflows, however, reached a 12-month high.
Money sent home by land-based OFWs fell by 0.7% to $2.297 billion, while those employed in ships remitted $593.2 million, up 0.8%.
Personal remittances, which include inflows in kind, dropped by 0.8% year on year to $33.194 billion in 2020. In December alone, personal remittances slipped 0.3% to $3.205 billion.
This year, the BSP projects cash remittance to grow by 4% on the back of an expected global economic recovery.
Mr. Mapa said remittances will see a “moderate growth this year” as the peso strengthens and more sea-based workers are deployed.
“With vaccination rollouts ongoing across the globe, job prospects may brighten for OFWs in the coming months which will be crucial in supporting sagging domestic incomes due to severe job losses and poor consumer confidence,” he said.
Latest data from the Department of Foreign Affairs showed more than 351,000 OFWs have already been repatriated since the outbreak in February last year.
“It [number of OFWs retrenched] sends a strong signal that authorities should offer an alternative source of income to those affected,” Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez said in an e-mail.
THE Philippines’ gross international reserves (GIR) dipped in January as the National Government paid its foreign debt obligations and the central bank adjusted the valuation of its gold holdings.
Data from the Bangko Sentral ng Pilipinas (BSP) released on Monday showed the foreign exchange buffers decreased by 1.19% to $108.799 billion as of end-January, from the record $110.117 billion as of end-December.
This was still, however, 25% bigger than the $86.868-billion level a year ago and also exceeded the BSP’s $102-billion projection by end-2021.
“The month-on-month decrease in the GIR level reflected outflows mainly from the foreign currency withdrawals of the national government from its deposits in the BSP to pay its foreign currency debt obligations and revaluation adjustments from the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the central bank said in a statement.
Partially offsetting factors were inflows from the BSP’s foreign exchange operation and income from investments abroad.
Last year, the government borrowed P2.64 trillion, sourced from both local and foreign entities to support its pandemic response.
Ample foreign exchange buffers protect the country from market volatility and ensure the country is capable of paying its debts in the event of an economic downturn.
At the end-January level, the country’s dollar reserves is enough to cover around 11.6 months’ worth of imports of goods and payments of services and primary income, the BSP said.
It is also equivalent to about 9.4 times the country’s short-term external debt based on original maturity and 5.1 times based on residual maturity.
During the month, the value of the gold reserves dropped 7.86% to $10.692 billion from $11.605 billion as of end-December. It was also 33% higher than the $8.015 billion a year ago.
Gains from investments abroad, which made up the bulk of the GIR, also dipped by 1.2% to $92.527 billion from $93.644 billion a month ago but increased by 24.4% from the $74.364 billion a year earlier.
On the other hand, foreign currency deposits reached $3.532 billion, rising by 25% from the $2.821 billion in the prior month and by 30% from the $2.723-billion level as of end-January 2020.
Special drawing rights, or the amount the country can tap from the International Monetary Fund (IMF) was maintained at $1.232 billion for the second straight month.
Meanwhile, buffers kept with the IMF slightly rose 0.03% to $813.4 million from $813.1 million as of end-December and jumped 38% from the $587.9 million logged a year earlier.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said GIR may again reach a record high in the coming months as the pandemic drags on.
“Proceeds of foreign borrowings and other fund-raising activities amid near record low interest rates by the country’s biggest companies/conglomerates could add to the country’s GIR,” Mr. Ricafort said in a text message. — Luz Wendy T. Noble
THE Philippines may continue to see a lackluster economic recovery, returning only to pre-pandemic gross domestic product (GDP) level by the fourth quarter of 2022, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said on Monday.
In a briefing on Monday, Mr. Mapa said the central bank is likely to provide continued support for the economy by being accommodative and avoiding any further policy actions this year, before going for a 50-basis-point rate cut in 2022.
This year, he said the economy may grow by 5.1% but mainly due to base effects from the 9.5% contraction in 2020. This is a less optimistic forecast than the 6.5% to 7.5% growth outlook by economic managers.
“COVID-19 wiped out three years of economic gains and now we’re sort of operating at that base. The real question will be: What will be the growth trajectory after 2021 when the base effects have been washed out?” Mr. Mapa said.
With the job market still “not looking rosy,” consumption, which fuels 70% of the economy, is unlikely to see hefty recovery. Mr. Mapa said it will be “difficult to expect a strong bounce back” when unemployment remains high.
The jobless rate in October stood at 8.7% representing about 3.813 million unemployed Filipinos.
In terms of capital formation, the decline in bank lending suggests investments may likely to bounce back soon, Mr. Mapa said.
For the first time in over 14 years, outstanding loans by banks declined 0.8% in December following the already tepid 0.5% in December.
“Even though the BSP has cut the borrowing cost, [rates] have not really followed suit in 2020. This has been tied to banks being a little more circumspect in giving out loans as there’s a lot of risks out there,” he said, noting bank lending may remain tepid in the next couple of months.
However, Mr. Mapa said government spending could be a saving grace, but fiscal measures, including the P4.5-trillion national budget, have been modest.
“Yes, it’s the biggest budget in history, however, maybe not commensurate to the drop in GDP,” he said.
On the monetary side, Mr. Mapa is pricing in a pause for the rest of 2021 before the central bank likely goes for a 50-bps rate hike next year.
“This pause allows them to provide stimulus given the low rates but sort of at the same time achieving their inflation targeting price stability mandate,” Mr. Mapa said.
The central bank maintained the key policy rate at a record low of 2% last week.
REBOUND YEAR
Meanwhile, the Philippine economy is expected to post the second-highest growth in Southeast Asia this year, data and analytics company GlobalData said.
In a statement, GlobalData said Philippine GDP is projected to grow by 8.4% this year, after a 9.5% GDP contraction in 2020.
This would be the second-fastest GDP growth among nine ASEAN countries tracked this year.
Sought for further details, GlobalData did not respond to queries as of press time.
GlobalData expects the broader Association of Southeast Asian Nations (ASEAN) region to grow by 6% this year, as the coronavirus infections taper off and international trade picks up.
Fatality rate due to COVID-19 in Indonesia and the Philippines have fallen to 2.7% and 2.1%, respectively as of February. Meanwhile, the death rate in Malaysia, Thailand and Singapore are near zero percent.
“Due to the implementation of non-tariff measures on essential goods among the ASEAN nations, trade is expected to increase in 2021. Trade windows are set to open for ASEAN nations with the signing of Regional Comprehensive Economic Cooperation (RCEP) in November 2020, which will further spur economic integration,” Gargi Rao, an economic research analyst at GlobalData was quoted as saying.
Ms. Rao expects a “sharp recovery” happening in the second half.
Aside from improving the trade environment, she said the region’s manufacturing sector will also bounce back this year given a stronger health sector, the global vaccine rollout and a steady recovery in demand and production.
In the Philippines, factory activity surged to a two-year high in January with a Manufacturing Purchasing Managers’ Index (PMI) of 52.5.
Vietnam is still poised to lead the economic growth this year, according to GlobalData with a projected 8.5% expansion in 2021 from a 1.7% estimated uptick last year.
“GlobalData forecasts Vietnam to be the fastest-growing economy with a real GDP growth of 8.5% in 2021. Vietnam’s growing trade with the EU and its robust fiscal policies have helped the economy to witness an uptick in manufacturing and service sectors growth,” the statement read.
For the rest of the region, Malaysia is estimated to grow by 7.1% this year, Cambodia by 6.7%, Singapore by 5.8%, Myanmar by 5.4%, Indonesia by 5.2%, Thailand by 4.4% and Brunei by 2.5%.
“Increasing investment and recognizing open trade are key to put ASEAN economies on a steady growth path, along with effective vaccination for COVID-19 in 2021. An uptick in retail trade and growing demand for e-commerce will bring in new capital to spur growth,” Ms. Rao said. — Luz Wendy T. Noble and Beatrice M. Laforga
THE Department of Trade and Industry (DTI) may draft an order against installment-only payment schemes for vehicles, including motorcycles.
Consumers must have the choice to pay either the full amount in cash to avoid interest or by installment, Trade Secretary Ramon M. Lopez said during a Senate hearing on Monday.
The DTI has received reports that dealers are encouraging consumers to buy vehicles only on an installment basis, he said. Mr. Lopez added that vehicle dealers should inform the buyers of other options.
In a separate mobile message to reporters, Mr. Lopez said the DTI will conduct a legal review on the matter, after which it could issue a department order or circular, depending on what the law allows.
Mr. Lopez said it is possible that dealers get incentives from financial institutions for insisting on installment-only payment schemes.
“Also, installment facilitates the easier acquisition of motorcycles or even cars,” he said.
Senator Richard J. Gordon said during the hearing the dealers implement installment-only schemes to compete against other dealers that use the same process.
“Bakit ayaw tumanggap ng cash? Babayaran ng tao. Karapatan ba ng dealer na ’di tatanggap ng cash? Ibig sabihin may pinaplanong masama ’yan, (Why won’t they accept cash that people would pay? Is it the dealer’s right not to accept cash? This means they’re planning something bad),” Mr. Gordon said, explaining that those who pay by installment and are unable to pay are forced to restart the payment process.
Those who are willing to pay by cash and in full should be able to do so, the senator said, and should not be required to pay by installment.
The DTI’s fair trade enforcement bureau has received 3,060 consumer complaints relating to motorcycles, Mr. Lopez said, citing reports about defective units and vehicle sales under installment-only schemes.
Around 287 of the consumer complaints have been resolved through mediation, he said. The bulk of the complaints, including those on delays in releasing receipts and certifications relating to plate numbers or transfer of registration or insurance, have been raised with the Land Transportation Office.
Mr. Gordon on Monday led the Senate Blue Ribbon Committee hearing on Alleged Malfeasance and Nonfeasance in the Implementation of the Motorcycle Crime Prevention Act, which probes an alleged delay of the law’s implementation.
Republic Act 11235 was passed in 2019 to protect citizens against crimes done by people on motorcycles by making number plates larger and more readable by witnesses, even from a distance. — Jenina P. Ibañez
