OFW remittances to grow 7% in 2021
Cash remittance flows to the Philippines would again buck the projected prolonged global downtrend this year and grow by as much as 7 percent to support a rebound in household spending, financial giant Morgan Stanley said.
In a Feb. 22 report titled “Why remittances will be better than expected,” Morgan Stanley Research said the revert to growth in 2021 would not only “drive a recovery in household discretionary spending and support the current account to stay in balanced position” but also support the Philippine peso as well as domestic banking, consumer, and property sectors.
Morgan Stanley noted that while most forecasts last year projected a sharp drop in remittances, actual flows held up better than expected as cash sent back home by Filipinos working and living abroad reached $29.9 billion in 2020, only 0.8-percent lower than the record $30.1 billion in 2019.
“For some OFWs (overseas Filipino workers), access to social assistance offered by host-economies likely helped, while OFWs in Asia were likely less affected by lockdown restrictions. Moreover, altruistic motives and border closures likely led OFWs to remit more money home through formal channels. Finally, a sizable portion of OFWs are working as domestic helpers/health-care workers who remain in demand amid the pandemic, which helps to provide downside protection,” Morgan Stanley explained.
For 2021, “to the extent that remittances correlate with global cycles, we think the V-shape global recovery will help drive Philippines’ remittances growth to rebound,” it said.
“Moreover, the oil price recovery bodes well for remittances from the Middle East to see a bounce back. Meanwhile, as vaccination programs get ramped up, more business sectors are likely to reopen and border restrictions on migrant workers, including OFWs, are likely to be relaxed, leading OFW deployment to pick up,” it added.
Morgan Stanley said the remittance rebound this year would benefit big-ticket purchases like housing.
Citing Bangko Sentral ng Pilipinas data, it noted that the share of OFW households that set aside the remittances they received to buy a house fell to 4.8 percent during the fourth quarter of 2020 amid a prolonged pandemic-induced recession, from 13.6 percent in the first quarter of last year or before COVID-19 wreaked havoc on the global and domestic economies. INQ
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