The impact of the global coronavirus outbreak is mounting as the world fights to keep the spread of infection under control. OECD (Organization for Economic co-operation and Development) warns that this could be the biggest threat to the global economy since the financial crisis of 2008. Despite the coronavirus scare, the Philippine government remains positive and expects the outbreak to have a minimal effect on the remittances from Overseas Filipino Workers (OFW) this year.
Amid the coronavirus outbreak, Philippine President Rodrigo Duterte’s government is still hopeful for another record high in OFW remittances. In 2019, OFW sent US$33.5 billion in remittances which is a record high and an increase from the US$32.2 billion received in 2018. This year, it was projected to increase to US$34.5 billion with a growth rate of 3%.
However, due to the COVID-19 outbreak, the growth projections have been adjusted to 2.2% and the remittances amount now stands at US$34.2 billion for 2020. The threat of the novel coronavirus is slightly going to reduce the remittance inflow to the country as per the government projections. OFW remittances account for two-thirds of the Philippine economy. Read more on how OFW remittances contribute to the Philippine economy here.
The reduction in OFW remittances may be due to lower remittances from China, Macau, and Hong Kong because of the outbreak. By late January, the Philippines had its first three cases of COVID 19 and travel ban to and from China, Macau and Hong Kong were imposed.
The migrant workers from these countries were allowed to return to Hong Kong and Macao on Feb. 18, 2020. But the remittance will likely stay high because the bulk amount will be coming from countries such as the United States, United Arab Emirates, and Saudi Arabia. And in fact, the losses from China, Macau and Hong Kong will most likely be compensated by the remittances coming in from countries other than these three regions, according to a statement given by the Department of Labor and Employment (DOLE). Moreover, the contribution to the total OFW remittances from China, Macau and Hong Kong is 0.1 %, 0.4 %, and 2.7 %, respectively.
The spread of COVID-19
The outbreak that emerged in the Chinese city of Wuhan in December last year has infected more than 127,863 people and killed over 4, 718 so far. The most aggressive spread is in China with over 3,000 deaths reported followed by Italy, Iran and South Korea. It is rapidly spreading and 100 other countries are struggling to cope in its aftermath.
The impact on the global economy is mounting with businesses losing revenue and supply chains getting disrupted due to the shutting down of many factories in China. This is the direct effect of China being the world’s largest economy and one of the largest manufacturers in the world. Travel restrictions and lockdown of cities have also disrupted the travel industry.
How is Coronavirus Affecting OFW Remittances
One reason for the optimistic outlook of the government could be that historically, the OFW remittances have been resilient even in the face of the global recession or even uncertain geopolitical tension. It has defied all odds in the past. However, taking into consideration how the virus is spreading around the world, the high remittance inflow and peso purchasing power may face a threat.
The outbreak could prevent deployment and affect the earning potential of Filipinos working abroad and the subsequent remittance to the home country. Since such an outbreak requires people to be quarantined, it will influence consumption patterns which can negatively affect the service industry, where a majority of the overseas Filipinos are employed.
Sea-based workers like those working in cruise ships remit $7.1 billion worth of funds to their families which constitute around 28% of the Philippines’ remittances. However, the recent plight of cruise ships amid the outbreak will likely affect the cruise liners and even the hospitality industry overall.
Around 59 Filipino crew members on the Diamond Princess cruise ship in Japan have tested positive for the COVID-19 virus out of the total number infected of 696 as of now. This may result in job losses and even curtailing of salaries which will make sending money back home difficult for the OFWs. If this outbreak continues to spread further and ultimately becomes a pandemic, the remittance inflows will suffer a blow as many overseas Filipino host countries have increasing positive COVID-19 cases.
Many of the OFWs are becoming vulnerable to the virus along with the countries and industries that employ them are facing slowdowns due to this global outbreak. This will affect the 10 million Filipino migrant workers and the amount of money they are sending to their loved ones which ultimately helps keep the $330 billion economy strong and secure.
As of today, 52 people in the Philippines have been infected by the coronavirus with one death. Despite the coronavirus threat, the government remains optimistic and reassured the public that COVID-19 effects are most likely temporary and will make a strong recovery and the country’s 2020 growth projection of 6.5 % can be accomplished. And with regards to OFWs remittances, it is expected to remain resilient even in the face of the virus threat.