by Mary Ann LL. Reyes (The Philippine Star), 20 Jun 2021
Defying predictions, remittance flows have proven resilient during the COVID-19 crisis, with officially recorded remittance flows to low and middle-income countries reaching $540 billion in 2020 or only 1.6 percent lower than the $548 billion recorded in 2019.
According to a World Bank report released recently, excluding China, remittance flows even surpassed the sum of foreign direct investment flows and official development assistance by a wider margin last year.
In Southeast Asia, remittances grew 5.2 percent. Worldwide, the top five remittance recipient countries were India, China, Mexico, the Philippines and Egypt. Meanwhile, the United States was the largest source country for remittances in 2020, followed by the United Arab Emirates, Saudi Arabia and Russia. For the Philippines, around $34.9 billion was remitted from overseas.
In the East Asia and Pacific region, the Philippines ranked second, next only to China ($59.5 billion). The report observed that defying earlier predictions of shrinking flows due to the pandemic, remittances to the Philippines fell just by 0.7 percent in 2020.
The WB said that a key factor for the resilience was the growth of 5.5 percent in inflows from the US, which accounted for the largest source of remittances or around 40 percent for the Philippines last year. However, it noted that the decline from the Middle East reflects the absence of formal safety nets available to migrant workers in the face of the pandemic and the large repatriations of overseas Filipino workers.
The Migration and Development Brief released in May noted that foremost among the drivers of remittance flows and reasons behind their resilience during the COVID-19 pandemic was the migrants’ desire to help their families. To be able to send money home, migrants’ cut their consumption or drew on their savings. Other drivers include fiscal stimulus in host countries, a shift in flows from informal to formal channels, and cyclical movements in oil prices and currency exchange rates, the report revealed.
It also pointed out that counter-cyclical fiscal policies, especially cash transfer and employment support programs implemented in many large economies, cushioned a fall in personal incomes and consumption, and supported businesses in the continuing employment of workers.
The report observed that there was a broad shift in flows from informal to formal channels. In 2020, it said there was greater use of digital remittance channels as hand carry was affected by travel bans and lockdowns. But it said that the true size of remittances, which includes formal and informal flows, may be larger than officially reported.
It said the remittances industry has participated in the rapid acceleration of digitalization. Beginning June 2020, remittance flows through digital channels increased, especially for migrants with access to bank accounts and credit cards.
Meanwhile, the report said that many leading money transfer operators reported double-digit growth in their digital services, in sharp contrast to a fall in their cash remittance services, adding that cross-border remittances processed via mobile money went up by 65 percent in 2020, reaching over $1 billion in transactions sent and received each month.
It expects remittance flows to low and middle-income countries to increase by 2.6 percent per year to $553 billion this year and by 2.2 percent to $565 billion in 2022, with remittances expected to grow twice as fast in South Asia, Latin America, and the Caribbean.
The WB report stressed the need to support remittance infrastructure to keep remittances flowing by reducing remittance fees, which averaged around 6.5 percent in the fourth quarter of 2020. It said that in the fourth quarter, the average cost of sending money to the Philippines was the lowest in the East Asia and the Pacific region at three percent.