Pace of global recovery to dictate future of remittances – BSP

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Metro Manila (CNN Philippines, August 18) — Filipinos abroad surprised in June and sent home more funds amid the pandemic, but the central bank said it's too early to say if workers have recovered from the slump.

Personal remittances surged by 7.6 percent for the month from the year before, ending a three-month drop at the height of the global COVID-19 crisis. Cash inflows in June were also the highest since January, well before countries had to resort to lockdowns to control local transmissions.

For the Bangko Sentral ng Pilipinas, it's a welcome development but could only be temporary as the global economy continues to suffer.

"We will continue to monitor how soon the world will recover from this pandemic as the pace of recovery will dictate future overseas Filipino remittances. Land-based overseas Filipino workers appear to have recovered but it’s too early to say whether the growth in remittances can be sustained," BSP Governor Benjamin Diokno told CNN Philippines.

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Seafarers, meanwhile, sent home less money as the pandemic cancelled cruises and as world trade remains "sluggish."

The June spike wasn't enough to pull the six-month total higher than where it was a year ago, with the remittance haul settling 4.2 percent lower at $15.6 billion. However, Diokno pointed out that this is better than expected, as the central bank foresees 2020 remittances ending 5 percent lower than last year's tally. 

Remittances are a big source of disposable income among Filipino families, as the dollars that workers overseas send support food, daily expenses, and even luxuries of their loved ones in the country.

Household spending, which has long been the backbone of the Philippine economy, emerged as the biggest dampener during the second quarter as lockdowns kept people at home with less to spend.

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ING Bank Manila senior economist Nicholas Antonio Mapa said separately that Filipinos abroad may have benefited from relaxed business restrictions especially in Europe, as he credited the hard work they put in to make money to support their families here.

"We can’t expect remittances to lift the entire economy back on track but these flows may help cushion the likely impact of widespread unemployment and the substantial drop-off in economic activity," Mapa said in an e-mail, noting that the funds they send will help augment local incomes.

The economy has contracted by 9 percent in the first half, with President Rodrigo Duterte's economic managers expecting better months ahead as stay-at-home restrictions are gradually relaxed.