Weak global growth would slow remittances to developing countries like the Philippines this year, with inflows from Filipinos abroad expected to increase at the slowest pace in 10 years, the World Bank said Friday.
In a report titled “Trends in Remittances, 2016: A New Normal of Slow Growth,” the World Bank said that across low- and middle-income countries, remittance flows were expected to total $442 billion in 2016, a mere 0.8-percent higher than last year’s $438.6 billion.
In East Asia and the Pacific, the outlook for remittances had “worsened due to weak global economic prospects and de-risking, leading to a decrease in growth of remittances to 2.1 percent in 2016 compared to 4.1 percent in 2015,” the World Bank said.
De-risking is a global phenomenon wherein a growing number of foreign banks are closing the accounts of money transfer operators due to anti-money laundering, counter-terrorism and cybercrime concerns.
In the case of the Philippines, the World Bank said the country was “likely to see the slowest remittance expansion in the past decade, to 2.2 percent, reflecting a decline in overseas worker deployments.” The World Bank’s remittance growth forecast was lower than the Bangko Sentral ng Pilipinas’ projection of 4 percent.
World Bank data nonetheless showed that the Philippines was expected to receive the third biggest remittance flows, an estimated $29.1 billion by yearend, after India’s $65.5 billion and China’s $65.2 billion.
Globally, cheap oil and de-risking were to blame for slowing remittances, the World Bank said in a statement.
“Low oil prices continued to be a factor in reduced remittance flows from Russia and the Gulf Cooperation Council countries. In addition, structural factors have also played a role in dampening remittances growth. Anti-money laundering efforts have prompted banks to close down accounts of money transfer operators, diverting activity to informal channels. Policies favoring employment of nationals over migrant workers have discouraged demand for migrant workers in the GCC countries,” it said.
Despite these challenges, a ranking BSP official had said that they expected the robust business process outsourcing (BPO) sector, a top dollar-earner, to compensate for slowing remittance growth.
“We are seeing the continuing narrative of de-risking, upsetting the otherwise normal flow of remittances. In fact, even the Arab Monetary Fund, International Monetary Fund and the World Bank have documented various cases of de-risking in the Middle East jurisdictions,” BSP Deputy Governor Diwa C. Guinigundo told reporters last month.
A World Bank report last April cited BSP data showing that during the last two years, 84 accounts of 32 Philippine remittance providers— including both banks and money transfer operators—were closed by 33 foreign banks in 13 major remittance-sending countries in compliance with regulations concerning anti-money laundering as well as countering terrorism financing.
“What exacerbates this is the continued weak oil prices dampening the propensity of Saudi Arabia, United Arab Emirates and other oil producing markets to provide jobs to our overseas workers,” Guinigundo said.
The latest BSP data showed that cash sent home by Filipinos abroad in July amounted to $2.13 billion, the lowest monthly amount since February’s $2.1 billion. Cash remittances at the start of the second half were also 5-percent lower than the $2.25 billion recorded a year ago.
The BSP had blamed the slower remittances last July to the year-on-year decline in deployment to jobs overseas.
Remittances are the biggest source of foreign exchange income for the Philippines, helping insulate the domestic economy from external shocks by ensuring the steady supply of dollars into the system.
These cash transfers are also a major driver for domestic consumption.