Phl May Lose Up To $10 Billion In OFW Remittances Amid COVID-19 Pandemic

A big drop of about $6.7 billion to $10 billion in overseas Filipino workers’ remittances is expected this year due to job cuts as the global economy is disrupted by varying degrees of quarantines or lockdowns imposed to halt transmission of the novel coronavirus, a senior administration official said on Wednesday, April 8.

Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) director general Ernesto Pernia said the pandemic could cut OFW remittances by as much as 20 to 30 percent as many sea-based workers, particularly those working on cruise ships that have stopped operations, lost their jobs due to travel restrictions imposed by many countries.

Last year, overseas Filipino workers (OFWs) sent home a record high $33.5 billion – 3.9 percent higher than the previous year, according to Bangko Sentral ng Pilipinas (BSP) records.

The BSP said the bulk of foreign remittances last year or about $25.6 billion came from land-based workers, growing by 3.5 percent, while sea-based contract workers’ remittances went up by 6.5 percent to $7.1 billion.

The OFW remittances were mostly in the form of cash coursed through banks, the BSP added.

The remittance inflows were sourced mainly from the United States, which accounted for the highest share of total remittances at 37.6 percent, followed by Saudi Arabia, Singapore, Japan, United Arab Emirates, the United Kingdom, Canada, Hong Kong, Germany and Kuwait.

Remittances – money sent home by overseas workers to help support their families – have become the single most important source of foreign exchange for the Philippine economy and a significant source of income for recipient families.

The government estimates the number of OFWs at 10 million, accounting for a tenth of the country’s population. About 120,000 of them work on cruise ships around the world, and their jobs could be under threat as the coronavirus disease 2019 (COVID-19) pandemic cripples the industry.

The COVID-19 outbreak early this year is threatening to leave tens of thousands of OFWs stranded abroad, disrupting the flow of remittances.

For instance, Kuwait and Qatar have temporarily banned the entry of foreigners, and have sent home migrant workers not only from the Philippines.

Bernard Olalia, Philippine Overseas Employment Administration (POEA) head, has said up to 3,000 Filipinos would be immediately affected by the ban in two Middle East countries. There are an estimated 400,000 Filipino workers in the two countries.

Saudi Arabia hosts the largest number of OFWs – an estimated 1.2 million. Most Filipinos in the Middle East are women working in the medical and service sectors.

The economic impact of the pandemic could hit the Philippines hard because it depends heavily not only on OFW remittances but also on the earnings of workers within the country.

Call centers that serve many American companies and employ more than a million Filipinos could also be under threat.

The combination of OFWs and business process outsourcing or BPO workers in the country has powered the country’s economic growth, which has been falling since President Duterte came to power in 2016.

Last year, the economy grew by 5.9 percent, down from 6.2 percent in 2018. Due to the COVID-19 pandemic, the Asian Development Bank is forecasting growth this year to slow to just two percent.

Pernia has warned that the Philippines would have negative growth if the enhanced community quarantine (ECQ) in Luzon would be extended beyond June.

He has proposed a “modified lockdown” to ensure smoother delivery of basic goods and allow some businesses to reopen and serve communities.

 This was after President Duterte approved the extension of the ECQ for two more weeks, until April 30, in hopes of flattening the COVID curve or slowing infections. The ECQ began on March 17 and was supposed to end on April 13.

 However, Inter-Agency Task Force spokesperson and Cabinet Secretary Karlo Nograles said on Wednesday that the country is still under a “state of suspended animation” and is waiting for the results of the ECQ and other efforts to prevent the spread of COVID-19.

 More than 90 percent of some 200 entrepreneurs, business owners and executives of large and medium companies operating in Luzon who participated in an informal survey support the extension of the Luzon-wide quarantine for another two weeks, according to presidential adviser for entrepreneurship and Go Negosyo founder Joey Concepcion.

 Government officials, including those from the opposition, also supported an extension of the ECQ. Duterte said the move could drain government resources, adding that the administration would have to find money to aid the poorest of the poor and even the middle class as the ECQ has paralyzed economic and social activities.

 Earlier, NEDA warned that the COVID-19 pandemic may slow economic growth to 4.3 percent or may even contract the Philippine economy by 0.6 percent this year if mitigation measures are not implemented. About 116,000 to 1.8 million jobs in the country may be lost because of the pandemic, it noted.

 NEDA also estimated that a month-long quarantine in Luzon, which accounts for more than 70 percent of the Philippines’ gross domestic product, could result in P298 billion to P1.086 trillion in forgone gross value-added.