Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday remittances from overseas Filipino workers may be significantly impacted if the Russia-Ukraine war escalates and involves member countries of the North Atlantic Treaty Organization.
Diokno, however, said based on BSP’s latest assessment, the current geopolitical tensions in Eastern Europe had insignificant impact on remittances as inflows from warring parties remained minimal.
“Should war include NATO [member-countries], this could have a significant impact on the Philippines because the US and EU [European Union] are major trading partners of the Philippines,” he said.
“We are closely monitoring [the situation],” Diokno said.
He said based on available data as of 2021, remittances from Ukraine reached just $121,000 while inflows from Russia stood at $2.3 million.
NATO is an international alliance that consists of 30 member-states from Europe, North America and Asia. Established in 1949, the treaty’s article 5 states that if an armed attack occurs against one of the member states, it will be considered an attack against all members, and other members will assist the attacked member, with armed forces if necessary.
NATO’s members are Albania, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg,, Montenegro, the Netherlands, North Macedonia, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Turkey, the United Kingdom and the United States. Most of these countries host overseas Filipino workers.
Tensions between Russia and Ukraine escalated in 2021 when Ukraine expressed its intention to join NATO. Russia objected to this and demanded for an end to the alliance’s eastward expansion. Russia invaded Ukraine on Feb. 24 this year.
Diokno said remittances were contributing to meeting the foreign exchange requirements of the Philippine economy even as external demand was weighed down by the global health crisis.
“The steady supply of foreign exchange ensures a healthy balance of payments position and an adequate level of gross international reserves amid challenges to the external sector,” he said.
Over the past decade, remittances were equivalent to roughly 8 percent to 9 percent of nominal gross domestic product. They were also equivalent to about 32 percent to 37 percent of income from exports of goods and services, and 26 percent to 37 percent of gross international reserves.
The BSP forecasts a full-year growth in remittances of 4 percent in 2022, consistent with its long-term growth trend. Diokno cited key factors underpinning the strength of remittances.
These include increased global demand for OFWs, particularly medical practitioners and health care workers as well as skilled labor in construction and housekeeping, as these jobs help host countries in the pandemic recovery process.
The Department of Labor and Employment also entered into bilateral labor agreements with host countries to continue allowing entry of OFWs. The BSP also cited the increased use of digital financial services in remittance transfers and the OFWs’ tendency to maintain a proportion of their remittances in Philippine pesos for their families’ upkeep.
“The inflow of remittances is also increased by the accelerated vaccination rollout domestically and in OFW host economies, easing travel restrictions, and the reopening of countries to foreign workers,” Diokno said.
Remittances helped spur consumption during the pandemic. In the fourth quarter 2021 Consumer Expectations Survey, OFW household respondents indicated that remittance proceeds were used to purchase food and other household needs (96 percent of respondents); pay for education (50.5 percent); medical expenses (45.8 percent); and savings (31.7 percent).
“Remittances create demand and push domestic production, providing a substantial boost to economic growth,” Diokno said.
Remittances hit a record $31.418 billion in 2021, up 5.1 percent from the $29.903 billion in 2020.
