Foreign remittances expected to contract this year; better days ahead
MANILA – Over the years, foreign remittances steadily increased and has contributed to domestic economic expansion. This was how Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno looks at the contributions from millions of overseas Filipinos who continuously sent part of their hard-earned money home.
“For the first two months of 2020, cash remittances still grew by 4.6 percent to reach US$5 billion,” said Governor Diokno at this morning’s Wednesday Roundtable @ Lido. He added with the remittances’ contribution to consumption expenditure, he expects the COVID-19 pandemic will impact on future remittances flows to the country.
Governor Diokno said they at the BSP, closely monitors the latest reports from government-run agencies including the Philippine Overseas Employment Administration (POEA), Department of Labor and Employment (DOLE) and the Department of Foreign Affairs (DFA) on overseas Filipinos’ deployment, displacement and repatriation status.
He added foreign remittances could contract this year because of the large repatriation of workers and economic disruptions in host countries.
“The World Bank projects a decline in global remittances by about 20- percent in 2020, with remittance inflows to East Asia and the pacific expected to decline by 13 percent, driven mainly by declining inflows from the US, the largest source of remittances to the region,” he explained.
There’s a great difference about Filipinos abroad who continue to send remittances to their families at home with or without crises situations.
“It would appear that OFW remittances have an altruistic character. Furthermore, the adverse impact of COVID-19 on remittances may be temporary,” he hastened to add.
Governor Diokno said they expect a “U-shaped” recovery for the Philippine economy once the fiscal and monetary stimulus measures gain traction over the best couple of months. He added the BSP instituted a package of “extraordinary measures” to ensure sufficient liquidity in the system and at the same time provide regulatory relief to financial institutions.
These measures include the reduction in the monetary policy rate by 125-basis points since January 2020, reduction in the reserve requirement ratio by 200 basis points, purchases of Government securities (GS) in the secondary market, reduction in the overnight reserve repurchase (RRP) volume offering, engaging in repurchase agreement with the national government amounting to P300 billion and the approval of a package of measures to further reduce the financial burden on loans to micro, small and medium enterprises (MSME), which he said would help hasten the sector’s recovery.
He explained the assistance for MSMEs could capacitate these entities to extend support to displaced OFWs who plan to shift or engage in business operations.
Governor Diokno said the BSP remitted P20 billion as advanced dividends to the National Government (NG) as under the newly-amended charter, the BSP is no longer required to remit at least 50% of its net income as dividends to the National Government but they still decided to do so because they are part of the Government.
He reported the Monetary Board approved the extension of temporary regulatory and rediscounting relief measures to BSP Supervised Financial Institutions which include the relaxation of BSP regulations such as the single borrower’s limit from 25% to 30% to allow supervised financial institutions to lend more, relaxation of penalty for reserve deficiencies and compliance period with the BSP’s supervisory and reportorial requirements to allow banks to focus on delivery of financial services and “know your customer” requirements to facilitate access by the public to financial services.
Governor Diokno said the BSP responded swiftly and decisively to mitigate economic and financial fall-out from the COVID-19 pandemic through monetary instruments and regulatory relief measures.
Speaking of risks, Governor Diokno said the challenge for policymakers “is how to boost the economy through the appropriate mix of fiscal and monetary measures.”
“And even as we enable the economy to gradually regain its footing, we should continue with our efforts to make the economy nimbler to adapt ti the new economy,” he added.
Despite the projected decline in remittances, Governor Diokno said should OFWs send US$27 billion this year, the difference may be filled up with revenues from the business process outsourcing or BPOs as the pandemic brought an increase in digitalization.
He observed overseas Filipinos tend to send more money back home in times of crisis. Of those repatriated workers which reached 30,000, about 20,000 have come from sea-based sector, particularly those in cruise ships with about 10,000 from land-based outfits.
“Once the economy opens up, construction workers may be absorbed by the government’s ‘Build, Build, Build’ while the government needs about 100,000 to do contact-tracing,” he added.
The COVID-19 pandemic would require the Philippines to train more nurses, doctors and other medical professionals and as the world moves towards digitalization, the country needs to train the youth to be computer and data analysts.
“We have they demographic advantage as our median age is 25 and they can find overseas employment after this pandemic,” Governor Diokno concluded. (Melo M. Acuña)
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno (Screen grab from Wednesday Roundtable @ Lido/Melo M. Acuna)
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