Cash remittance flows to the Philippines will grow as much as 7 percent to support a rebound in household spending, financial giant against the projected prolonged global downtrend this year Morgan Stanley said.
Morgan Stanley Research said in a Feb. 22 report titled “Why remittances will be better than expected,” the revert to growth in 2021 would help support the Philippine peso as well as domestic banking, consumer, and property sectors and “drive a recovery in household discretionary spending and support the current account to stay in a balanced position.”
While last year most forecasts projected a sharp drop in remittances, actual flows held up better than expected as cash sent back home by Filipinos working and living abroad reached $29.9 billion in 2020, only 0.8-percent lower than the record $30.1 billion in 2019, Morgan Stanley noted.
“For some OFWs (overseas Filipino workers), access to social assistance offered by host-economies likely helped, while OFWs in Asia were likely less affected by lockdown restrictions. Moreover, altruistic motives and border closures likely led OFWs to remit more money home through formal channels.
Finally, a sizable portion of OFWs are working as domestic helpers/health-care workers who remain in demand amid the pandemic, which helps to provide downside protection,” Morgan Stanley explained.
For 2021, “to the extent that remittances correlate with global cycles, we think the V-shape global recovery will help drive Philippines’ remittance growth to rebound,” it said.
It added, "meanwhile, as vaccination programs get ramped up, more business sectors are likely to reopen and border restrictions on migrant workers, including OFWs, are likely to be relaxed, leading OFW deployment to pick up.”
Morgan Stanley said big-ticket purchases like housing would benefit from the remittance rebound this year.
Citing from the Bangko Sentral ng Pilipinas data, it noted during the fourth quarter of 2020 amid a prolonged pandemic-induced recession the share of OFW households that set aside the remittances they received to buy a house fell to 4.8 percent from 13.6 percent in the first quarter of last year or before COVID-19 heavily damaged the global and domestic economies.