REMITTANCES may shrink by 7% this year, says Nomura Global Markets Research.

“We think the outlook for remittances is grim and the contraction could deepen ahead. We forecast 2020 remittances growth dropping to -7%,” it said in a note sent to reporters on Tuesday.

While remittances are usually resilient amid global downturns, Nomura Global said “this time is different given the confluence of factors” amid the coronavirus crisis.

Nomura Global noted that overseas Filipino workers (OFWs) from different sectors and countries are now being affected by the pandemic.

“First, sea-based remittances (22% of the total) will take a big hit particularly from the cruise ship sector,” according to the report.

Bangko Sentral Pilipinas (BSP)data showed that cash remittances from sea-based OFWs reached $6.539 billion out of the $30.133 billion total remittances in 2019.

“Second, just like during the SARS epidemic in 2003, deployment to key host countries should slow, and arguably the situation today is much larger in scale.

Another factor affecting remittances is the decline in oil prices, which has hurt Middle East countries.

Cash remittances from countries in the Middle East dropped by 9.7% to $5.972 billion in 2019, from $6.617 billion in 2018.

Previously, Nomura Global said the Philippines was likely to suffer the most during the crisis among other remittance markets. It noted that remittance inflows accounted for 9.9% of the country’s GDP in 2019.

Data from the central bank showed cash remittances of overseas Filipinos coursed through banks stood at $2.358 billion in February, up 2.5% from $2.301 billion a year ago. However, the annual growth rate in February was much slower than the 6.6% year-on-year expansion in January.

“The BSP staff projects that the OFW remittances would shrink by 0.2 to 0.8% from the original 3% growth forecast, hence the revised forecast is a range of 2.2 to 2.8% or a midpoint of 2.5%,” BSP Governor Benjamin E. Diokno said on Friday. “To be on the conservative side, BSP adopted an amended forecast of 2%, which is less than 2.5%.” — Luz Wendy T. Noble