Remittances from overseas Filipino workers could possibly post close to a flat growth or even contract this year due to the global COVID-19 pandemic, a bank economist said over the weekend.
Michael Ricafort, chief economist of the Economics and Industry Research Division of the Yuchengco-led Rizal Commercial Banking Corp., said remittances could slow down further especially starting March and April, following a 2.5-percent year-on-year growth in February, the lowest in eight months since June 2019.
Ricafort said the slowdown could be triggered by the lockdowns in many host countries around the world that could have caused some OFWs to stay home, except those that were allowed to continue working in essential industries, especially the frontliners or medical professionals.
Some OFWs in hard-hit industries (especially tourism-related industries including cruise ship industries) were also displaced and repatriated back to the Philippines.
“Thus, OFW remittances could potentially post close to zero year-on-year growth, or could even contract (negative growth) by at least low single-digit levels for full year 2020 (after +4.1% growth in 2019, +3.1% in 2018 and +4.3% in 2017) and any contraction could start by March 2020 or April 2020,” Ricafort said.
However, he said this could be offset by some OFWs who could still send money to the Philippines by tapping their savings for the meantime to tide them over during the lockdowns until the re-start of the economies in various host countries.
“Another offsetting factor is that some OFWs in many host countries worldwide belong to essential industries especially medical professionals who could still continue to work and send remittances during the lockdown periods,” he said.
He said the sharp decline in global oil prices to the lowest levels in nearly two decades amid reduced demand could also adversely affect demand for OFWs and reduce the remittances sent back home, especially in the major oil-producing countries in the Middle East that host large numbers of OFWs.
“OFW remittances could grow again year-on-year if the global economy, especially countries that host large numbers of OFWs, would start to rebound as the lockdowns are eased and eventually ended and gradually re-start their respective economies especially if the COVID-19 is already better contained/controlled, as would be better sustained especially if a cure/vaccine vs. COVID-19 is developed,” he said.
He said positive OFW remittances growth could realistically resume in the second quarter of 2021 largely due to lower base/denominator effects by then, provided the deployment of OFWs also picks up again.
Ricafort stressed a need to increase and diversify OFW host countries to help sustain the growth and resilience of remittances in the long run.