Remittances to the Philippines hit hard by COVID-19

In an effort to control the spread of the COVID-19 pandemic most countries closed their borders. Businesses shut down and employees lost their jobs. Among these millions were overseas Filipino workers (OFWs). The loss of OFW jobs adversely impacted remittances to the Philippines.


A steep decline


The Filipino economy is reliant on remittances. OFWs send money online to their families. A report by the central bank of the Philippines reveals that 10 million OFWs sent $33.5 billion home in 2019. This amounts to 7.8% of the country’s GDP. The Ateneo Centre for Economic Research and Development in Manila forecasts that this year remittances to the Philippines might plummet to $6 billion. This would be the sharpest decline in recorded history.


OFWs return home


Ateneo also estimates that 10% of Filipino households have at least one OFW working abroad. For this reason remittances are a “major economic helpline” for Filipino families. However these lifelines may no longer exist, as thousands of OFWs are forced to return home. The chief of the Overseas Workers Welfare Administration (OWWA), a government body, predicts that up to 45,000 workers may return in June and July. About 26,700 OFWs have already come back.


Returning OFWs are tested for COVID-19 and quarantined for 14 days before being allowed to rejoin their families. The Philippine Coast Guard tested 14,418 returning workers between May 2 and May 10. According to the Philippine Department of Foreign Affairs 2,179 returning OFWs were infected, out of which 253 have died.


Impact on families


The small percentage of OFWs who were able to keep their jobs suffered salary cuts. As per a former editor of Arab News the salaries of nearly 900,000 OFWs in Saudi Arabia were reduced by up to 40%. These cuts have put OFW families under immense financial pressure. Many of them find it difficult to get government compensations. The OWWA chief said that of the 170,000 OFWs who applied for cash benefits, only 52,000 were approved. The aid is being given only to those OFWs who lost their jobs or were infected by COVID-19.


There are other efforts to help unemployed OFWs who are stranded overseas due to travel restrictions. The Philippines Overseas Labor Office runs a food and cash distribution program in Saudi Arabia. However the efficacy of these programs is limited.


The Philippines has taken an Emergency COVID-19 Response Development Policy Loan from the World Bank in May. This would allow the government to provide greater financial aid to OFWs and their families.


An optimistic view


The Filipino government’s remittance forecasts contrast sharply with the projections of other researchers, such as those at the Ateneo University. In late 2019 the government forecasted that remittances to the Philippines would increase by 3% to $34.5 billion in 2020. After the pandemic it adjusted the forecast to $34.2 billion. The government’s optimism is based on trends from 2008, when remittances to the country were quick to recover from the global recession. The World Bank explains the real reasons for the rapid recovery of remittances to the Philippines right after the global crisis of 2008. During that time the OFWs who were laid-off were able to find other jobs. For instance engineers worked as electricians and mechanics. These were lower skilled and lower paid jobs, yet they kept the all-important remittances coming in. This time around the situation is very different. Many OFWs have been forced to return home. Finding new jobs is much tougher because businesses everywhere are suffering.


In summary


In the past remittances to the Philippines swiftly bounced back, even during severe economic downturns. OFWs are quick to adapt to new economic situations, even taking up lower-paying jobs so that they can continue sending money back home. Their innate resilience will enable them to overcome this crisis too. Remittances to the Philippines will surely recover. Even though experts are divided over how long this would take, eventually it is only a matter of time.


Latest news