FILIPINO migrant workers are expected to sustain the growth in the remittances they send for the rest of the year, but a local economist warns that key developments related to the pandemic may temper the volume of dollar inflows the country will receive from them.
In his analysis of the recent overseas Filipino workers’ (OFW) data, Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said remittances are expected to be one of the “bright spots” in the local economy amid the pandemic.
“Growth in OFW remittances has been, somewhat defying the pandemic, as some OFWs are economic and medical frontliners, as well as essential workers, in various host countries worldwide, especially those with aging populations, thereby a sign of resilience,” the economist said.
Earlier this week, the BSP reported that remittances that coursed through banks in June rose 7 percent to reach $2.64 billion. This is the highest monthly value of remittances to the country for 2021.
Remittances to the country first plunged to contraction territory in April 2020 due to the global economic disruption caused by the pandemic. It slowly recovered throughout last year and climbed back to the growth territory starting February this year.
Philippine remittances from overseas workers have consistently been the fourth largest in the world after India, China, and Mexico, amounting to about $35 billion in 2020.
Ricafort said sustained growth in OFW remittances would support recovery in consumer spending, which accounts for nearly 70 percent of the economy, as well as supporting recovery of the country’s gross domestic product (GDP).
Risks ahead
Ricafort, however, warned of risks that may weaken the inflows of remittances to the country in the coming months.
The economist particularly cited increased OFWs repatriation as an offsetting risk factor at more than 640,000 workers since the pandemic started last year.
“Threat of the more contagious coronavirus variants such as the Delta and Lambda variants that entail risks of lockdowns and restrictions could slow down global economic recovery as well as OFW remittances data in the coming months,” he added.
Ricafort also said any delay in the rollout of Covid-19 vaccines in some of the major host countries for OFWs amid tight global vaccine supply could have slowed down economic recovery prospects and OFW remittances data. This could fundamentally create a “soft patch” on OFW remittances.
Earlier this month, Fitch Solutions—the think tank arm of Fitch Group—said remittances to the country are expected to be steady throughout the year and give support to the economy.