In a pandemic-afflicted year when the country braced itself for smaller remittances from its overseas workers, the Philippines has seen a lower-than-expected fall in such inflows. The OFWs, as they are called, have lived up to their reputations.
Malcolm Cook
28 August 2020
The half-year figures are in for Philippine remittances inflows and they are better than feared and predicted.
The Metro Manila-based Asian Development Bank estimated this month that this key economic, social and political stability indicator for the country may fall by 20.2 per cent for the year due to the coronavirus pandemic. By comparison, real GDP is estimated to only fall by 3.8 per cent. If these predictions are realised, remittances will be transformed from an economic buffer for the millions of recipient families to a vulnerability. The travails of the international cruise industry and international shipping, and stories about the hundreds of thousands of overseas Filipino workers (OFWs) stranded without work in their host countries or returning home jobless amplify this sense of dread in the archipelago.
Fortunately though, from January to June 2020, cash remittance inflows, as recorded by the Bangko Sentral ng Pilipinas, only fell by 4.2 per cent year-on-year to US$14.1 billion, in dollar terms. According to central bank figures, the local purchasing impact has been even less as over the first half of the year the Philippine peso has depreciated by 2.6 per cent against the US dollar, this giving recipients of the remittances more pesos for the buck. Bucking the overall downtrend, cash remittances In June, were 7.6 per cent greater than a year ago. Almost on cue, assiduous Filipinos overseas are responding to the economic distress of their family members back at home. Together, these Filipinos disbursed US$30.1 billion in remittances last year, this amounting to 8 per cent of the country’s GDP in real terms.
For this gloomy 20.2 per cent estimate to be realised, remittance inflows will have to plummet in the second half of 2020 just when key sources of inflows are starting to recover from the pandemic’s economic depths.
These monthly and half-year cash remittance figures are much stronger than other key economic indicators indicating that remittances remain a source of economic, social and political stability. Real GDP growth fell by 0.7 per cent in the first quarter of this year and then plummeted by 16.5 per cent in the April-June quarter. Approved foreign direct investments were down 36.2 per cent in the January-March quarter. Exports have fallen by 6.7 per cent and imports by 23.2 per cent in the first half of the year. In June alone, exports fell by 13.3 per cent year-on-year and imports by 24.5 per cent.
For this gloomy 20.2 per cent estimate to be realised, remittance inflows will have to plummet in the second half of 2020 just when key sources of inflows are starting to recover from the pandemic’s economic depths.
The great diversity of host countries and industries that employ the 10 million-plus overseas Filipino workforce has been key to the resilience of remittance inflows during the peak of the pandemic in developed economies. As expected, cash remittances from sea-based workers have suffered more than land-based ones. However, remittances from some key sea-based nodes have actually increased. Remittances from Liberia have grown by 47.9 per cent and from Greece by 45.4 per cent in the first half of the year. As predicted by the central bank, remittances from oil-exporting countries have plummeted. In the first half of the year remittances from Saudi Arabia were down 24.2 per cent. Remittances from Angola and Brunei also headed south, at 40.8 per cent and 29.5 per cent respectively. Remittance inflows from Europe have also been hit hard, with those from Germany falling 33.8 per cent, from Italy 18.6 per cent and the United Kingdom 13.7 per cent.
There is another silver lining – remittances from key East Asian countries and the United States (the paramount national source of remittances) have increased over the first half of the year. Despite the heavy pandemic toll in the US, remittance inflows from the former metropole have increased by 4.6 per cent. Singapore has taken over from Saudi Arabia as the second largest source of remittances with inflows from the island republic growing by 6.0 per cent. Inflows from Japan increased by 6.3 per cent, this hoisting Japan into fourth place, and from Taiwan by 12.7 per cent. The table below shows the changing geography of remittance inflows, with the United States and East Asia becoming more important and the Middle East and Europe less so.
Changes in share of total remittances from top sources of remittances
| January-June 2019 (in %) | January-June 2020 (in %) | |
| USA | 36.4 | 39.5% |
| Singapore | 6.4 | 7.0 |
| Saudi Arabia | 7.4 | 5.8 |
| Japan | 5.0 | 5.5 |
| United Kingdom | 5.5 | 4.9 |
| United Arab Emirates | 5.7 | 4.4 |
| Canada | 3.6 | 3.2 |
| Hong Kong | 2.8 | 2.9 |
| Taiwan | 2.0 | 2.3 |
| Germany | 2.7 | 1.9 |
| Kuwait | 2.6 | 1.9 |
Overseas Filipino Workers are often celebrated as national heroes due to their hard work and sacrifices for their homeland. So far, they have lived up to their storied reputation, to the great relief and benefit of the Philippines.
Dr Malcolm Cook is a Visiting Senior Fellow at the ISEAS – Yusof Ishak Institute.
ISEAS Commentary — 2020/129
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