GIVEN the severity of the global economic downturn, remittances from overseas Filipino workers (OFWs) may fall by 10 percent to 20 percent this year even if many of them are in recession-proof sectors and in countries that are unlikely to plunge into recession, according to Moody’s Investors Service.
“Compared with the government, we are more pessimistic on OFW inflows this year,” said Thomas Byrne, Moody’s senior vice president and regional credit officer.
Moody’s forecast was more grim compared with the World Bank’s projection of a 4-percent drop in remittances this year.
The Bangko Sentral ng Pilippinas (BSP) recently said remittances this year might still match the $16.4-billion inflow seen last year, noting the double-digit growth in the number of deployed OFWs in January that it expects should add to the base of potential remitters.
Latest BSP data showed growth in remittances decelerated to 0.1 percent in January, but the figure was still above the $1-billion mark. The increase was modest due to the slowdown in deployment in November, followed by a contraction in December, and the reported displacement of some land-based workers.
Growth in remittances, a key pillar of the Philippine economy since it helps boost private consumption that accounts for almost 70 percent of the gross domestic product (GDP), has slowed since November.
Despite the slowdown, banks expect the amount of money to be sent home to remain substantial, and some of them appear to be in a rush to get more remittance partners here and abroad to boost—or at least maintain—their market share during a time of recession.
“The diversity in the skills and geographical location of workers would buffer such remittances from regional economic recessions, but not from a global recession,” says a Moody’s report authored by Byrne. “In 2001, when the recession was limited to the US, OFW remittances fell only very slightly, 0.3 percent, but that downturn was not global, or as severe as the current one.”
Moody’s noted, however, the shift in the composition of OFWs toward higher-skilled and higher-paid jobs, such as those in the health-care industry. This should help cushion the “inevitable downturn” in remittances from the global recession.
Given its pessimistic outlook for remittances and a “sharp” decline in investment and exports, the debt watchdog expects the Philippine economy to grow 2.0 percent this year, lower than government forecasts of 3.7-4.4 percent.
It said exports will likely fall between 20 and 30 percent this year, but the country’s current account will remain in surplus in 2009 and 2010—somewhere around 1 percent of GDP—extending a string of surpluses since 2003.
The strong 13.7-percent growth in remittances last year, which accounted for 20 percent of current account receipts and about 10 percent of GDP, fortified the country’s external payments position, it said.
“Despite the slowdown, the Philippines’s growth performance will probably be better than most other countries in the Asia region, which are more heavily dependent on exports, with the exception of Indonesia, India, and Vietnam,” the Moody’s report says.–Erik de la Cruz / Reporter, Businessmirror