Remittances not enough to revive spending, economists say

Despite resilient remittance flows ensuring dependent households have money to spend amid a prolonged pandemic, economists said COVID-19 containment would play a bigger role in reviving weak consumer spending.

“Strong remittance flows, in the past, helped support solid household consumption spending but the current pandemic has weighed heavily on consumer sentiment. According to the latest BSP (Bangko Sentral ng Pilipinas) consumer confidence survey Report for the fourth quarter of 2020, a proportion of OFW (overseas Filipino workers) households that allotted part of their remittances to purchase of big-ticket items declined. Consistent with the consumer behavior shift that happened because of the pandemic, discretionary spending among remittance recipients also declined,” said Metrobank Research’s research analyst Pauline Revillas in a report on Wednesday.

Household consumption—which accounted for about three-fourths of the prepandemic economy—shrank by 4.8 percent year-on-year during the first quarter.

The BSP early this week reported that cash remittances from Filipinos working and living abroad rose 4.9 percent year-on-year to $2.5 billion in March. For his part, Pantheon Macroeconomics senior Asia economist Miguel Chanco said that “discretionary spending, overall, will remain under pressure from the virus, the weak labor market, and stubbornly high inflation, while remittances are unlikely to come to the rescue anytime soon.”

The unemployment rate remained above the historic lows posted before the COVID-19 pandemic struck, while headline inflation as of April averaged 4.5 percent—above the government’s 2 percent to 4 percent target band, no thanks to expensive meat products, especially elevated pork prices due to the African swine fever crisis.

Chanco said the strong peso would also temper spending among OFW households. —Ben O. de Vera