OFW remittances plunge further in May

by Lawrence Agcaoili (The Philippine Star), 4 Aug 2020

MANILA, Philippines — Money sent home by overseas Filipino workers (OFWs) contracted for the third straight month, plunging by more than 19 percent in May due to the impact of the COVID-19 pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

Based on data released by the BSP, personal remittances fell by 19.2 percent to $2.34 billion in May from $2.89 billion in the same period last year.

The more than 19 percent decline in remittances in May was the highest in almost two decades or since the 30.1 percent plunge in January 2001.

“This is the third consecutive month that personal remittances posted year-on-year contraction amid the adverse effects of the COVID-19 pandemic on global economic activity, travel, and employment, resulting in the repatriation or deferment of employment of many OFWs,” the BSP said.

Personal remittances from land-based workers with work contracts of one year or more fell by more than 21 percent to $1.77 billion in May from $2.24 billion a year ago, while remittances from sea-based workers and land-based workers with work contracts of less than one year declined by 12.4 percent to $519 million from $592 million.

From January to May, personal remittances decreased by 6.4 percent to $12.83 billion from $13.71 billion in the same period last year.

Cash remittances coursed through banks plunged by 19.3 percent to $2.11 billion in May from $2.61 billion in the same month last year.

“The decline in cash remittances was due to the negative effects of the continued limited operating hours of some banks and institutions that provide money transfer services during the lockdown and the repatriation of many OFWs in March,” the BSP said.

Cash remittances declined by 6.4 percent to $11.55 billion from January to May compared to $12.35 billion in the same period last year. Remittances of both land-based OFWs fell by 7.2 percent to $8.96 billion from $9.66 billion, while that of sea-based workers slipped by 3.6 percent to $2.59 billion from $2.68 billion.

According to the BSP, the US remained the major source of OFW remittances with a share of 39.4 percent, followed by Singapore, Saudi Arabia, Japan, the United Kingdom, United Arab Emirates, Canada, Hong Kong, Qatar, and Taiwan.

Remittances, accounting for about 10 percent of the country’s gross domestic product (GDP), started declining in March. The BSP is now expecting remittances to drop by five percent this year.

Nicholas Mapa, senior economist at ING Bank Manila, said OFW remittances cratered by almost 20 percent in May as the whole world faced lockdowns of their own.

“Most of the world has since re-emerged from the crisis, but the Philippines unfortunately has taken two steps back after pushing to reopen,” Mapa said.

The economy stood still after Malacañang placed the entire Luzon under enhanced community quarantine in the middle of March to slow the spread of COVID-19.

The lockdown was eased in June as the National Capital Region (NCR) was placed under general community quarantine.

However, the government decided to tighten the lockdown and placed Metro Manila and nearby provinces under modified enhanced community quarantine again as cases bolted above 100,000, overwhelming medical facilities and frontliners.

“Consumption will be hit yet again and the former star player is now almost completely hobbled by the virus with job prospects turning even more precariously close to free fall. We are increasingly worried that the Philippines is indeed headed into a severe crash landing with the probability of the economy returning to its former glory any time soon now declining by the day,” Mapa said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the repatriation of more than 100,000 overseas workers dampened the remittances data as well as some disruptions or constraints in the brick-and-mortar remittance operations through physical branches abroad on the sending side and locally on the receiving end.

Ricafort said an offsetting factor is that some OFWs work as frontliners especially in the health or medical sector and other essential industries, enabling them to continue working and sending money to the Philippines.

“For the coming months, further reopening of the economies of most host countries for OFWs from COVID-19 lockdowns could help some further pick up in economic activities as well as OFW employment and remittances,” Ricafort said.