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WB: Low remittance fees kept Filipinos overseas sending money home

By: - Reporter / @bendeveraINQ
/ 05:53 PM May 13, 2021

MANILA, Philippines—Remittance fees kept low despite tougher times wrought by the COVID-19 pandemic allowed Filipinos abroad to send money back home, resulting in only a minimal decline in remittance flow in 2020, the World Bank said.

The Washington-based multilateral lender’s latest migration and development brief titled “Resilience: COVID-19 Crisis Through a Migration Lens” showed the Philippines in 2020 still ranked fourth among top remittance destinations, as it received $34.9-billion from overseas Filipinos, equivalent to 9.6 percent of gross domestic product (GDP).

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Although 0.7-percent lower than in 2019, 2020’s actual inflows beat the World Bank’s earlier expectations that remittances to the Philippines would drop to $33.3 billion from 2019’s $35.2 billion as hundreds of thousands of overseas Filipino workers (OFWs) returned home due to the global recession.

As in previous years, the Philippines’ remittances were only exceeded by India’s $83 billion, China’s $60 billion, and Mexico’s $43 billion. Egypt remained in fifth spot, with $30-billion worth of remittances in 2020.

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The World Bank noted that across the globe, remittances fell during the second quarter of 2020 at the onset of stringent lockdowns that closed down not only global borders but also businesses and jobs. The lender said remittances recovered in the third and fourth quarters of 2020, aided by digitalization.

“Starting June 2020, remittance flows through digital channels increased, especially for migrants with access to bank accounts and credit cards. Many leading money transfer operators reported double-digit growth in their digital services, in sharp contrast to a fall in their cash remittance services,” the World Bank noted.

In the case of the Philippines, the World Bank said that on top of a weaker Philippine peso which allowed recipients to get more local currency for their US dollars, another “key factor for this resilience was the growth (by 5.5 percent) of inflows from United States, by far the largest source of remittances for the Philippines (almost 40 percent in 2020).”

“Positive growth in remittances from the US and Asia helped to mostly offset declines from the Middle East and Europe, which fell by 10.6 percent and 10.8 percent, respectively, in 2020,” the World Bank said.

It also helped that remittance costs to the Philippines remained relatively lower.

“The average cost of sending $200 in remittances to the East Asia and Pacific region decreased slightly to 6.86 percent in the fourth quarter of 2020, compared with 7.05 percent in the third quarter of 2020,” World Bank said.

“In the fourth quarter of 2020, the five lowest-cost corridors in the region averaged 3 percent for transfers primarily to the Philippines,” it added, referring to OFWs remitting money from Kuwait, Singapore, Spain, and the United Arab Emirates (UAE).

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While remittances fees from Spain and the UAE inched up, those from Kuwait declined, while those from Singapore were flat compared to 2019 levels, World Bank data showed.

Remittances from Singapore accounted for 7.2 percent of 2020 flows to the Philippines; Saudi Arabia, 6.1 percent; Japan, 5.3 percent; the United Kingdom, 4.6 percent; and the UAE, 4.3 percent.

As remittance flows dropped from oil-rich countries in the Middle East, like Saudi Arabia, which struggled to keep their Filipino employees when prices plunged due to weak global demand last year, the World Bank said this “reflected the absence of formal safety nets available to migrant workers in the face of the pandemic and the large repatriation of OFWs.”

The World Bank noted that remittances from Saudi Arabia fell 36 percent from its 2015 peak of $2.8 billion to $1.8 billion in 2020. The 14-percent drop from 2019 levels was also the fastest year-on-year decline.

Deployment of Filipino workers to Saudi Arabia and other Gulf Cooperation Council (GCC) countries dropped by more than 70 percent in 2020, a similar pace as the 70-75 percent decline in total OFW deployment in 2020, the World Bank noted.

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TAGS: Dollars, economy, Foreign Exchange, overseas Filipinos, Remittances, World Bank
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