COVID-19 impact milder than expected
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the contraction in remittances and the slowdown in foreign direct investments (FDI) is not as worse as they originally projected.
“The impact of COVID-19 on the inflows of OF (overseas Filipinos) remittances is milder than earlier predicted,” Diokno said in an online “GBED Talks” Thursday. “This is good news.”
The BSP announced last week that it is projecting remittances to contract by a negative two percent for 2020, an improvement from its previous estimate of negative five percent. The BSP’s revised forecast translates to remittances of $29.5 billion for 2020 compared to $30.1 billion in 2019.
Diokno said he is also more confident of a recovery in remittances and a stronger FDI flows for 2020 and 2021.
The impact of the pandemic on FDI is likewise milder than expected, he added. “The original forecast is that FDIs to emerging economies like the Philippines would be devastating as the world economy goes into recession,” the BSP chief said.
Last May, the BSP projected FDI inflows will shrink by 45.9 percent or from $7.68 billion in 2019 to $4.16 billion this year. Last October 8, the Monetary Board approved a higher projection to net FDI of $5.6 billion. “The revised forecast (is) that FDIs will fall by 27.1 percent from $7.68 billion to $5.60 billion. That’s another good news,” said Diokno. Next year, the BSP forecasts net FDI of $7 billion.
The BSP chief said that when the risks related to the COVID-19 pandemic starts to dissipate and global activities are resumed and show some normalcy, then he expects remittances to regain its growth momentum or back to an annual growth rate of four to five percent.
“The current global health crisis has impacted almost all economies across the globe, hence forecasts need to be reassessed to consider the effects of the pandemic, particularly in countries with high overseas Filipinos deployment,” said Diokno.
He reiterated that the BSP sees a smaller decline to remittances after the June and July numbers showed stronger results and also from the easing lockdown measures in some host countries. He also noted an improvement in the deployment of overseas Filipinos.
Diokno said worker deployment will likely recover as countries where overseas Filipinos are deployed are gradually reopened.
As of end-July, deployment decreased by more than 61 percent year-on-year due to travel restrictions and lockdown measures both here and abroad.
Diokno however pointed out that on a monthly basis, the number of deployed overseas Filipinos increased to 7,631 in June and by another 14,825 in July compared to just 2,500 back in May.
In the meantime, cash remittances or bank-chanelled remittances are still on the downside because of the repatriation of overseas Filipinos, as well as the lower rate of deployment and also since the Philippines and other countries are still in lockdown phases.
Diokno cited numbers from the Department of Foreign Affairs, that as of October 18, some 223,294 former overseas Filipinos have returned home. This is 141,424 land-based workers that have been repatriated, and another 78,870 that are sea-based workers.
Diokno said the labor and employment department estimated some 500,000 of overseas Filipinos were affected by the pandemic. They predict that if the pandemic is not controlled and will worsen by end-2020, another 200,000 overseas Filipinos will be affected by the global health crisis.
As of end-August, which is the BSP’s latest data on cash remittances, these fund transfers sent by overseas Filipinos declined 2.6 percent year-on-year to $19.28 billion.