OFW remittances up 4.9%, household consumption down 4.8% year-on-year

Despite strong remittance flows, economists said COVID-19 containment would play a bigger role in reviving weak consumer spending.

“Strong remittance flows, in the past, helped support solid household consumption spending but the pandemic has weighed heavily on consumer sentiment. According to the latest BSP (Bangko Sentral ng Pilipinas) consumer confidence survey Report for the fourth quarter of 2020, a proportion of OFW (overseas Filipino worker) households that allotted part of their remittances to purchase big-ticket items declined. Consistent to the consumer behavior shift that happened because of the pandemic, discretionary spending among remittance recipients also declined,” said Metrobank Research’s research analyst Pauline Revillas.

The BSP earlier this week reported that cash remittances from Filipinos working and living abroad rose 4.9% year-on-year to $2.5 billion in March. Household consumption, which accounted for about three-fourths of the pre-pandemic economy, shrank by 4.8% year-on-year during the first quarter.

“Discretionary spending, overall, will remain under pressure from the virus, the weak labor market, and stubbornly high inflation. Remittances are unlikely to come to the rescue anytime soon,” said Pantheon Macroeconomics senior Asia economist Miguel Chanco.

The unemployment rate remained above the historic lows posted before the COVID-19 struck, while headline inflation averaged 4.5% as of April, which is above the government’s 2 to 4% target band, thanks in part to expensive meat products, particularly elevated pork prices caused by the African swine fever crisis.

Chanco also said the strong peso would also temper spending among OFW households.

SOURCE: Inquirer