Remittances to bounce back in 2021, say experts

AFTER a year of contraction, remittances to the Philippines will likely bounce back this year as advanced economies, especially those in the Middle East, are expected to recover.

Analysts from the University of Asia and the Pacific (UA&P) and First Metro Investment Corporation (FMIC) said they expect Filipino migrant workers to send more money this year compared to last year.

“OFW remittances will retake the positive territory even as the 2020 record showed only a slight 0.8-percent dip,” FMIC and UA&P analysts said in the latest issue of The Market Call.

Just last month, the Bangko Sentral ng Pilipinas (BSP) announced that overseas Filipino workers’ (OFWs) cash remittances to the Philippines hit $29.9 billion for the full year of 2020, only $230 million short of what they sent when the global economy was not affected by the pandemic yet in 2019 at $30.13 billion.

The 0.8-percent decline in remittances also exceeded the BSP’s expectations that remittances will decrease by about 2 percent.

By country source, cash remittances from Saudi Arabia, Japan, the United Kingdom, the United Arab Emirates, Germany and Kuwait declined, while those from the United States, Singapore, Canada, Hong Kong, Qatar, South Korea and Taiwan increased.

The US posted the highest share of the total remittances at 39.9 percent, followed by Singapore, Saudi Arabia, Japan, the UK, the UAE, Canada, Hong Kong, Qatar and South Korea. The combined remittances from these countries accounted for 78.6 percent of the total cash remittances during the year.

FMIC said the expected recovery of remittances for this year will likely be driven by the recovery of Middle Eastern economies, most of which are havens for Filipino migrant workers.

“The nascent economic recovery in the advanced economies and the Middle East [due to higher oil prices] will provide the boost,” economists said.

While remittances are expected to bounce back this year, FMIC and UA&P analysts said this does not assure a recovery for the Philippine economy this year.

“OFW remittances held on to its upward streak, but headwinds remain. Foremost would be the acceleration of headline inflation to 4.2 percent year-on-year in January 2021 from 3.7 percent a month earlier which promises to persist due to supply-chain disruptions and higher input prices,” economists said.

“Exports will likely take a tad faster pace, while OFW remittances’ growth should remain positive. The exchange rate will tend to flatten in the first quarter with a slight upward bias as the quarter ends,” it added.