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‘Second wave’ to bring more pain to developing economies via reduced remittances — IMF

second wave to bring more pain to developing economies via reduced remittances imf 816x445 - ‘Second wave’ to bring more pain to developing economies via reduced remittances — IMF

FURTHER outbreaks in countries hosting migrant workers could deepen the economic downturns there, threatening wages, jobs, and ultimately remittances, according to the International Monetary Fund (IMF).

“A second outbreak of the coronavirus in the later part of the year in host economies, for example, could jeopardize remittance flows further,” it said in a blog post.

Migrant workers may not be able to sustain supporting their families by tapping savings if recessions in host countries deepen further, the IMF said.

Remittances to the Philippines dropped 4.2% year on year to $14.019 billion in the first half due to the pandemic. The Bangko Sentral ng Pilipinas expects cash remittances to decline by 5% this year due to the crisis.

In June, cash remittances rose 7.7% year on year to $2.465 billion.

Cash remittances in the six months to June from Europe declined 15.6% and fell 15.3% from the Middle East, according to UnionBank Chief Economist Ruben Carlo O. Asuncion. These areas account for 12.2% and 18.2% of total remittances to the Philippines.

Inflows from the Americas and Asia, which make up 44.3% and 22.3% of the total, grew 3.1% and 2.4% in the year to date, Mr. Asuncion said.

Mr. Asuncion said signs of a recovery are emerging in Hong Kong, Japan, Singapore, the UK, Germany, Qatar, Saudi Arabia, and the United Arab Emirates, based on purchasing manager indices, a forward indicator of economic activity.

“I found that except for Hong Kong, all countries have experienced improving PMIs between the months of June to August this year, suggesting a positive economic recovery trend for these particular economies,” he said.

More than 164,000 overseas Filipino workers (OFWs) have been repatriated as of Sept. 5 due to the crisis. Further repatriations are difficult to predict due to the altered dynamics of labor markets, according to Asian Institute of Management economist John Paolo R. Rivera.

“(Some) work functions will cease to exist. Will new work functions also demand OFWs?,” Mr. Rivera said in a text message.

The government should focus on ensuring displaced OFWs have jobs at home, which will be difficult, Mr. Asuncion said.

“The only way that the government can help is to create job opportunities here. The main reason why these kababayans left, in the first place, is because of the lack of opportunities here,” Mr. Asuncion said.

The unemployment rate in July eased to 10% from the record 17.7% in April. The July rate is equivalent to 4.571 million jobless workers. — Luz Wendy T. Noble

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