EIU sees further decline in remittances in 2021

By Ben O. de Vera, Philippine Daily Inquirer, 20 Feb 2021

The prolonged pandemic may also lead to a protracted slowdown in remittances to the detriment of economies which heavily rely on these cash transfers mostly from migrant workers, The Economist Intelligence Unit (EIU) said on Wednesday.

Citing World Bank estimates, the EIU said global remittances likely slid by 7 percent last year amid the COVID-19 pandemic, faster than the 5-percent drop during the global financial crisis in 2019.“Recession in host-countries have made it difficult for migrants to send money home, as they face increasing precarity and unemployment. Meanwhile, lockdowns and travel restrictions have created new obstacles to mobility, preventing would-be migrants from working overseas,” the EIU said in a report titled “COVID-19 and migrant remittances: a hidden crisis looming?”The EIU said remittances worldwide were expected to again decline by 7 percent this year due to COVID-19’s “lingering effects on the global economy.”The Bangko Sentral ng Pilipinas (BSP) this week reported that cash sent back home by Filipinos working and living abroad in 2020 reached $29.9 billion, down by 0.8 percent from $30.1 billion in 2019.

The actual decline in cash remittances last year was below the BSP’s earlier projection of 2-percent contraction.

For the EIU, “the drop in remittances spells trouble for many emerging economies that have already been hit hard by the global economic recession,” citing that “many developing countries rely on remittances as a source of external financing that now eclipses overseas development assistance and even foreign direct investment.”

The Philippines’ gross domestic product shrank by a record 9.5 percent last year—the worst post-war recession as business and consumer activities remained dampened by extended quarantine restrictions.

“For poor countries, a significant drop in remittances represents bad news on top of an already challenging economic and social situation. Notably, it risks further delaying their economic recovery, increasing the likelihood of balance-of-payments issues and placing new pressures on their (sometimes already frail) currencies,” the EIU said. INQ