BSP sees softer decline in remittances, sharper drop in tourism revenues for 2020

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Metro Manila (CNN Philippines, October 14) — Easing quarantine rules will usher in more dollar inflows for the Philippines, but tourism and trade will suffer bigger declines than expected for this year, the Bangko Sentral ng Pilipinas said.

The central bank released its updated economic forecasts on Wednesday, where it expects increased dollar receipts through foreign direct investments and cash remittances than previously expected.

Remittances are seen to slow down by 2%, softer than the 5% slump projected in June as Filipinos based abroad are expected to show some resilience despite the global COVID-19 crisis. The push mainly comes from a "strong rebound" seen in June and July as workers' host economies start to reopen.

Remittances fund the spending needs and even luxuries of millions of families in the country. By 2021, cash inflows from overseas Filipinos is seen to grow by 4%.

BSP Governor Benjamin Diokno said OFWs appear to be "truly altruistic" despite tougher times abroad.

Meanwhile, tourism will record the steepest crash, projected at 65% or just one-third of 2019 revenues, the BSP said. A 12% recovery is seen for 2021.

Tourism Secretary Bernadette Romulo-Puyat said in a media briefing that while she cannot give exact figures on sectoral losses, some 4.8 million tourism workers have been affected by the COVID-19 crisis. Foreign tourist arrivals have also plunged, spelling a 77% drop in travel receipts.

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"As we are learning more about the virus... Some people were thinking na hintayin muna natin ang vaccine, but hindi [let's just wait for the vaccine, but we can't]. We believe that we can restart the economy, we can restart tourism as long as minimum health and safety protocols are in place," Romulo-Puyat said, adding that she is counting on domestic tourism and staycations for now to revive the industry.

Meanwhile, inflows from the business process outsourcing sectors is seen to muster a 2% increase, although slower than in 2019, before growing by 4% next year.

However, services exports are seen to plummet by 17%, while goods exports are also seen to suffer a 16% fall. Imports of goods are expected to drop by a fifth, owing to depressed consumer demand as people grapple with lower incomes and job losses during the pandemic.

A recovery is seen in 2021 with a 5% growth projection in product exports and 8% for imports.

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The picture is looking better for foreign investments, with the BSP seeing a $5.6 billion haul in terms of direct inflows – better than the previous $4.1 billion forecast which was just half of 2019's $7.7-billion haul. However, recovery to pre-pandemic levels is not seen anytime soon, with the central bank seeing a $7 billion net inflow for 2021.

Hot money or portfolio investments will manage a $2.4 billion net inflow by yearend and $3.5 billion in 2021, according to BSP estimates.

This will leave the country's balance of payments position at an $8.1 billion surplus, significantly larger than the $600 million projected back in May. The BSP attributes the larger surplus to signs of recovery in the global economy and the Philippines "slowly lifting its way out of containment measures."

"The external sector outlook for 2021 reflects more favorable growth prospects as the global economy proceeds from an earlier restart of economic activity in the second half of 2020," the BSP said, pointing out that the threat of a resurgence in infections remains a key risk to the global scene.

Gross international reserves will surge to an all-time high of $100 billion this year and will rise to $102 billion in 2021, providing ample cushion for external shocks.

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