The world we live in today is highly interconnected and interdependent. In a globalized world, moving from one's own country to a different country is an increasingly common phenomenon known as international migration. Migration can happen for many reasons. Many people migrate, mainly from developing countries to developed countries due to economic reasons, because the labor market in the developed countries tends to have better job opportunities.
Labor migration has shown remarkable improvement in the lives of the migrants and their families. Migrants receive higher income in their host countries and they can send part of their income to families left behind in their home countries. The money sent by the migrant workers to their families back home is referred to as remittances.
Remittances not only increase the recipient's household income but also serve as a stable source of external financing especially in middle and low-income countries, often surpassing foreign direct investments and official development assistance.
Remittance inflows to these countries drive domestic consumption of goods and services, increase foreign exchange reserves, lessen international debt burden, promote economic growth, and poverty reduction.
Migrant workers from the Philippines, also known as Overseas Filipino Workers (OFWs) are regarded as Bagong Bayani (modern-day heroes) for their contributions to the Philippine economy through remittances.
The Philippines is the 4th highest remittance recipient country in the world, only behind India, China, and Mexico, for years in a row as per the World Bank data. Moreover, OFWs tend to send more money to families and loved ones back home during economic hardships or calamities.
OFWs remittances are one of the largest sources of foreign reserves in the Philippines. By December 2020, the country's gross international reserves (GIR) reached a record high of $109.8 billion according to Bangko Sentral NG Pilipinas (BSP).
BSP data showed that the total remittance in 2020 was $33.2 billion, which represented 9.2% of the country's gross domestic product (GDP). However, there is a discrepancy in the total remittance received. $34.9 billion was the total OFW remittances in 2020, constituting 9.6% of the country's GDP, as per the World Bank data.
The country also exports the highest labor to countries like the United States (U.S.), the United Kingdom (U.K.), Canada, Saudi Arabia, Hong Kong, Singapore, and more. Official government data suggest that there are 2.2 million OFWs, both land-based and sea-based workers.
An estimated 700,000 Filipino seamen are deployed in national and international sea vessels. Around 380,000 Filipino seafarers account for one-fourth of all global merchant shipping crews and one-third of the total staff of global cruise ships are Filipinos.
Many OFWs are also in the healthcare sector as frontline workers in the U.S., Europe, Canada, or working in hospitality, domestic help services, logistics, constructions, or oil sector in the middle east. The total number of overseas Filipinos in the world is estimated to be above 12 million. The remittances sent by these huge OFWs population make the country one of the highest remittance-receiving countries.
COVID-19 was a devastating blow to the global economy with mass layoffs worldwide, massive repatriations, lockdowns, and sky-rocketing unemployment rates. The economic crisis induced by the pandemic was predicted to reduce the overall global remittances.
A sharp decline of 20% in remittances in 2020 was projected by the World Bank, mainly due to the fall in wages and job losses of migrant workers who are the first to hit during such a crisis.
However, the global remittances proved resilient despite the projected decline during the pandemic and fell by only 2.4%, from $719 billion in 2019 to $702 billion in 2020.
The repatriation of over 400,000 OFWs workers during the pandemic was concerning and the Philippine central bank projected initially a 5% decline in remittance which was later revised to a 2% contraction. But the actual decline is lower than the contraction of 2%.
The BSP data showed that the total 2020 personal remittances from OFWs amounted to $33.1 billion, only 0.8% lower than the $33.5 billion received in 2019. Cash remittances in 2020 from OFWs also dropped 0.8% to $29.9 billion from $30.1 billion in 2019, defying gloomy expectations by economists.
Cash remittances from Saudi Arabia, Japan, the UK, Germany, the United Arab Emirates (UAE), and Kuwait declined, while those sent from the U.S., Singapore, Canada, Hong Kong, Qatar, South Korea, and Taiwan increased. The U.S. had the highest share of the total remittance at 39.9%, followed by Saudi Arabia, Japan, the UK, the UAE, Canada, Hong Kong, Qatar, and South Korea, which made up a combined remittance of 78.6% of the total receipts.
OFWs remittances for the first four months of 2021 reached $11 billion, 5.1% higher than the $10.49 billion received in the same period in 2020 and a little higher than the $10.8 billion recorded in the first four months of 2019 or pre-pandemic level according to the BSP.
Personal remittances rose to $2.57 billion in April 2021 alone, an increase of 13.1% from the $2.276 billion recorded in April 2020 as lockdowns eased globally, marking the growth for the third consecutive month in 2021.
Cash remittances from OFWs through banks reached $2.3 billion in April 2021, 12.7% higher than the previous year. The year-to-date basis showed a 4.8% increase ($9.89 billion) in cash remittances for January to April 2021.
OFWs remittances reached double-digit growth in May 2021. The central bank data showed 13.1% growth ($2.382 billion) in money transfers through banks from $2.106 billion in May 2020. This increase has been attributed to a 16.2% and 2.7% increase in remittances from land-based workers (from $1.631 billion to $1.84 billion) and sea-based workers (from $475 million to $488 million).
Cash remittances also grew to $12.28 billion, 6.3% higher than $11.554 billion from the previous year. The growth in cash remittances from January to May 2021 largely came from the U.S., Malaysia, South Korea, Singapore, and Canada.
As more economies continue to reopen, travel restrictions are eased, and more jobs are coming back, remittances will recover, further aided by the rollout of COVID-19 vaccinations worldwide.
Even though over 400,000 OFWs have been repatriated since the pandemic started, the demand for OFWs in various sectors abroad remains strong.
The ongoing vaccination rollouts will further enhance the job prospects for overseas Filipinos in the coming months. Filipinos workers will continue to seek jobs overseas as the global economy recovers. The BSP projects a 4% growth in remittances in 2021.
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