THE CONTINUED GROWTH in overseas Filipino worker (OFW) remittances will likely be sustained, although a potential slowdown in developed economies could weigh on this outlook, GlobalSource Partners said.

“The prospects for OFW remittances appear promising given the recovery of many advanced economies,” GlobalSource analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in a report.

“A reversal of fortune in the advanced economies, however, could be ominous for overseas employment and corresponding remittances, as well as their mitigating impact on both the real sector and the external payments position of the Philippines, and for that matter, other labor-exporting economies.”

The latest data from the Bangko Sentral ng Pilipinas (BSP) showed that cash remittances jumped by 2.9% to $16.25 billion in the first half from $15.8 billion in the same period a year ago.

The central bank expects cash remittances to grow by 3% this year.

GlobalSource said that growth prospects for remittances “remain positive” as multilateral institutions like the International Monetary Fund expect a “slight acceleration” in the growth of advanced economies.

“In the last decade, the number of Filipinos leaving for abroad has continued to rise, resulting in… sustained growth in their remittances,” it said.

From 2014 to 2023, remittances stood at $323.7 billion, equivalent to an annual average of $32.4 billion or a growth rate of 3.9%, GlobalSource said.

“OFW remittances trended upward for this period, except in 2020, when remittances declined by 0.8% as a result of the COVID-19 (coronavirus disease 2019) pandemic. Funds sent through the formal banking channels made up the bulk of total remittances, comprising about 90% of the total,” it said.

GlobalSource said remittances contribute “substantially” to the Philippines’ foreign exchange coffers.

“The Philippines now relies heavily on OFW remittances as a major source of foreign exchange earnings,” it said. 

The country’s gross international reserves (GIR) jumped to $105.65 billion as of end-July, its highest level in over two years or since the $107.3-billion level recorded in March 2022.

“In many ways, OFW remittances help stabilize volatile capital flows and the peso-dollar exchange rate,” it added.

“Diversified across the globe, OFW remittances have provided a natural hedge against specific regional recessions until today, as weak remittance flows from affected areas have been mitigated by remittances from less affected parts of the world,” GlobalSource said.

Remittances also help mitigate the current account deficit and fuels personal consumption expenditures, it added.

The latest data from the central bank showed that the current account deficit stood at $1.7 billion in the first quarter, equivalent to -1.6% of GDP.

“The consistency of remittance flows also derives from the altruistic nature of these transfers, with Filipinos sending home money to finance their families’ daily expenditures, housing payments, tuition fees and even expenses for milestone celebrations,” it said.

“All these reasons combine to cause remittance flows to steadily rise over the years, even against the backdrop of severe economic downturns such as the global financial crisis in 2008-2009.”

GlobalSource said there is “relative stability” in OFW employment as most are employed in industries such as services, sales, crafts and other related sectors.

“Many of them are also professional engineers and architects, accountants and IT experts. A handful of them are in management,” it added.

The United States accounted for nearly half of overall remittances in the first half of the year. This was followed by Singapore (6.9%), Saudi Arabia (6%), Japan (5%), the United Kingdom (5%) the United Arab Emirates (4.1%), Canada (3.4%), Qatar (2.9%), Korea (2.8%) and Taiwan (2.7%).

The World Bank earlier said remittances to the Philippines, which was the third-largest recipient of remittances in 2023, are projected to grow by about 3% this year and in 2025. — Luisa Maria Jacinta C. Jocson