Global slowdown may hurt OFW remittances

PHILIPPINE STAR/ MIGUEL DE GUZMAN

REMITTANCES from overseas Filipino workers (OFWs) will continue to rise this year, but may fall short of the central bank’s 4% growth projection amid a looming global economic slowdown, analysts said.   

In a research note on Tuesday, UnionBank of the Philippines, Inc. (UnionBank) said remittances may grow by 2.8% this year.

“We maintain our bearish year-end estimate of remittances for a 2022 growth of 2.7% while upholding our sober growth forecast of 2.8% this year. In our updated trajectory, we expect solid gains in the (first half of 2023) particularly during our summer months of April to May,” UnionBank said. 

“Growth turns lackluster in (the third quarter of 2023) perhaps consistent with the timing of offshore recession risk, before resumption of an upbeat pace in November to December during the peak remittance season,” the bank said.   

UnionBank’s forecast is below the BSP’s 4% remittance growth projection for 2022 and 2023.

For the first 11 months of 2022, cash remittances sent through banks rose 3.3% to $29.38 billion, from $28.43 billion a year earlier.   

UnionBank Chief Economist Ruben Carlo O. Asuncion estimated that remittances declined by 3.6% in December 2022 due to the higher base in the same month of 2021.

“We think that (December remittances) is still going to be robust, but the previous year is going to be a higher base. Our expectation for December 2022 is $2.88 billion, while for December 2021 it was $2.99 billion,” Mr. Asuncion said in a Viber message.

In November, cash remittances grew by 5.7% to $2.644 billion but this was the lowest amount in six months or since the $2.43 billion in May 2022.

Meanwhile, Security Bank Corp. Chief Economist Robert Dan J. Roces said remittance levels seem to be back to its pre-pandemic growth rate.

“We expect full-year 2022 (remittances) to may have grown to $32.2 billion given its resilience, which also did much to support the peso in the latter period of the year,” he said in a Viber message.

The peso has rebounded against the dollar in the fourth quarter last year, closing at P55.75 on Dec. 29, 2022, up by P3.25 or 5.8% from its record low of P59 a dollar on Oct. 17, 2022. 

“We also expect 2023 levels to improve year on year, albeit at a much slower pace on the back of a looming economic slowdown in the US and globally,” Mr. Roces said.   

The Philippines may see about $33 billion in remittance inflows in 2023, which Mr. Roces said is “slower because of headwinds, but growing nonetheless.” — K.B.Ta-asan