The Philippines is seen as among the emerging markets to be hit by an up to 30-percent drop in remittances, based on the projection of Washington-based Institute of International Finance (IIF).
“In host countries, COVID-19 shutdowns have disproportionately affected sectors where migrants are more likely to be employed, including certain services (food and hospitality, retail and wholesale trade, tourism and transportation). Migrants also tend to be employed in sectors that may have stayed [partially] open, but where the infection risk is significantly higher (agriculture, food processing and health care),” the IIF said.
It added that migrants’ ability to shift across sectors or gain access to government support was likely curtailed.
While electronic cross-border flows can continue unabated by COVID-19 lockdowns, carrying cash remained the preferred method of remittance transfers in many cases, the IIF said in a June 3 report titled “The Emerging Market/Frontier Market Remittances Challenge.”
“As the COVID-19 recession affects even more countries simultaneously, especially host-countries in the emerging market universe, a drop of 20-30 percent [in remittances this year] seems possible,” the IIF said, noting that the global financial crisis of 2008-2009 saw cash sent back home by migrants decline by 5 percent.
“This will be particularly challenging for countries with high external funding pressure where remittances help reduce otherwise large current account deficits, including most of Central America, Caribbean nations, as well the Philippines and Egypt,” IIF said.
In 2018, remittances from Filipinos working and living overseas accounted for about 10 percent of the Philippines’ gross domestic product the IIF noted.
Among key recipient countries, important emerging markets such as India, China, Mexico, the Philippines, Egypt and Nigeria account for about 40 percent of all remittances in dollar terms,” the IIF added.
Remittances were the country’s biggest source of foreign exchange income, insulating the local economy from external shocks by ensuring steady supply of dollars into the financial system.
Also, these cash transfers were a major driver of consumption, hence contributing to domestic economic growth.
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