WB sees faster remittance growth

Remittance flows to the Philippines are projected to grow by 5% this year and next year, the World Bank (WB) said, as demand for Filipino migrant workers remains strong.

Data from the World Bank showed the Philippines remained the fourth-largest recipient of foreign remittances in the world this year with USD 40 billion, after India (USD 125 billion), Mexico (USD 67 billion), and China (USD 50 billion).

“Remittance flows to the Philippines — the largest recipient after China in the East Asia and Pacific region — are likely to reach USD 40 billion in 2023, growing at over 5% compared to under 4% in 2022,” the multilateral lender said in its latest Migration and Development brief.

For next year, remittance flows to the Philippines are expected to grow by around 5% to USD 42 billion.

The latest remittance growth projection is faster than the 2.5% growth penciled in by the World Bank in June.

The Bangko Sentral ng Pilipinas (BSP) expects remittances to grow by 3% this year and in 2024.

The World Bank said remittances to the Philippines account for about 48% of the total remittances to East Asia and the Pacific Islands, excluding China.

“The sustained growth in remittances flows to the Philippines was an outcome of a well-diversified set of host destinations across the world,” the World Bank said.

Remittances came from key source countries such as Hong Kong, China, Korea, Singapore, as well as the Middle East.

“The impact of the Filipino government’s proactive stance in negotiating specific deals with foreign governments such as Saudi Arabia to protect its workers also contributed to facilitating emigration to that country,” the World Bank said.

The multilateral lender said that remittances account for up to 10% of gross domestic product (GDP) in the Philippines, which indicates the “growing dependence of the East Asian economies on labor markets in the high-income countries of North America, Europe, East Asia, and Australia as well as the Gulf Cooperation Council (GCC).”

Remittance costs in the Philippines are also among the cheapest, the multilateral lender noted.

“The average cost of sending $200 to East Asia in the leading least cost corridors was generally under 3% in the second quarter of 2023, thus achieving the Sustainable Development Goal (SDG) target. The fees for sending money to the Philippines were the lowest among the least expensive destinations,” it said.

Remittances have become a crucial support for lower middle-income countries, the World Bank said.

“Remittances have become the premier source of finance for lower middle-income countries, exceeding the more volatile foreign direct investment flows in 2023 by more than $250 billion,” it said.

Remittance inflows can also be used to help support the country’s debt management.

“Remittances also can play an important role in improving a country’s ability to repay debt, due to their large size relative to other sources of foreign exchange, countercyclical nature, and indirect contribution to public finances,” the World Bank said.

It cited a 2017 framework by the World Bank and International Monetary Fund that showed the contribution of remittances to debt sustainability.

“Similarly, econometric results show that the inclusion of remittances in the denominator of the debt-to-export ratio in middle-income countries with large remittance receipts would improve the sovereign rating by one notch,” it said.

The World Bank said remittances are one of the few sources of private external finance that are likely to continue to expand in the next decade.

“As debt indicators have worsened in the lower middle-income countries, and sovereign risks increased, countries may benefit from efforts to attract diaspora investors who may view investment opportunities in their countries of origin through a more favorable lens than do institutional investors from the Global North,” it added. 

In the first 10 months of 2023, cash remittances rose by 2.8% to USD 27.49 billion.

By country source, the United States remained the biggest source of cash remittances at 41.5%. It was followed by Singapore (7%), Saudi Arabia (6%), Japan (5%), United Kingdom (4.8%), United Arab Emirates (4.1%), Canada (3.6%), Qatar (2.8%), Taiwan (2.7%), and South Korea (2.5%) — Luisa Maria Jacinta C. Jocson