THE PHILIPPINES and Bangladesh are the most exposed to a decline in remittances during the pandemic, in terms of number of households dependent on the inflows, a dependency which has increased due to the weak labor market, according to Fitch Ratings.
“This shock is likely to strain the incomes of the already vulnerable households, reducing their ability to meet basic consumption needs,” it said in a note.
Fitch cited a study from the Asian Development Bank which found that 8% of households in the Philippines receive remittances.
In June, cash remittances bound for the Philippines increased 7.7% year on year to $2.465 billion, rebounding from declines between March and May.
However, inflows were down 4.2% in the first half at $14.019 billion. The Bangko Sentral ng Pilipinas expects cash remittances to fall by 5% this year due to the worsening impact of the pandemic.
Fitch said migrant workers that have been displaced due to the crisis will likely remit their full savings before returning to their home countries.
“In this case, the impact of the pandemic on remittances would not be immediate, but would filter through in the coming quarters as migrant workers return to their home countries,” Fitch said.
More than 164,000 overseas Filipino workers (OFWs) have been repatriated due to the crisis, according to the Department of Foreign Affairs.
These OFWs have come home to a weak labor market with many jobless Filipinos competing for positions. The unemployment rate in July was 10%, much lower than the 17.7% in April but higher than the 5.4% from a year earlier, according to the Philippine Statistics Authority. The July rate represents 4.571 million jobless Filipinos.
“Labor markets are also unlikely to be able to absorb a large influx of returning migrant workers, which will further dampen incomes and present possible social challenges,” Fitch said. — Luz Wendy T. Noble