Potential policy shifts after the US presidential elections could weigh on the growth prospects in the world’s largest economy, a development that can hurt emerging markets (EMs) like the Philippines via the remittances channel, a major lifeline for Filipinos, Fitch Ratings said.
In a commentary, the debt watcher said remittances was a channel for potential contagion from developed markets (DM) to emerging ones, with transfers to Latin American countries from the United States likely to be hit the most if a second Donald Trump term triggers tighter immigration policies.
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As it is, Fitch expects the United States, a major host country of Filipino migrants, to grow at a slower pace of 1.6 percent in 2025, from a projected expansion of 2.5 percent this year.
“The US election on Nov. 5 will affect many EMs. The two main candidates have signaled markedly different policy approaches,” Fitch said.
“Significantly weaker remittance inflows than we anticipate would hurt economic growth prospects, and could have a negative impact on credit metrics in a wide range of sectors in affected EMs,” it added.
Data from the World Bank showed the Philippines was the third largest recipient of remittances in 2023 at $39 billion, behind Mexico ($66 billion) and China ($50 billion).
Predictions
For this year, the Washington-based lender projected such inflows to grow by about 3 percent in 2024 and 2025, consistent with the prediction of the Bangko Sentral ng Pilipinas (BSP).
Latest figures from the BSP showed cash remittances coursed through banks amounted to $2.89 billion in August, up by 3.2 percent year-on-year.
The United States posted the largest share of overall remittances, followed by Singapore and Saudi Arabia.
This brought the eight-month tally to $22.22 billion, higher by 2.9 percent.
Money sent home by Filipinos overseas is a major source of purchasing power in the Philippines, where consumer spending historically accounts for about 70 percent of gross domestic product.
The central bank projects the amount of remittances to reach $34.5 billion by the end of 2024. INQ