Foolproof engine of growth

Last year, total personal remittances from overseas Filipino workers (OFWs) to the Philippines reached $38.34 billion, representing a 3% increase from the $37.21 billion recorded in 2023. Cash remittances (sent through banks) totaled $34.49 billion, up 3% from $33.49 billion in 2023.

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These remittances constituted some 8.3% of GDP and 7.4% of GNI in 2024. There are unofficial estimates that the total remittances annually can reach $40 billion or more if we include what the returning workers do not channel through banks but actually carry them in actual currencies or goods (pasalubong).

The sources by country of these remittances in 2024 were the United States (40.6%), Singapore (7.2%), Saudi Arabia (6.4%), Japan (4.9%), the United Kingdom (4.7%), Canada (3.6%), Qatar (2.8%) Taiwan (2.7%), and South Korea (2.5%). The large amounts coming from the US can be partly explained by the practice of OFWs, especially those from the Middle East, of routing their remittances through US-based correspondent banks. Over the last 20 years, the annual increase of OFW remittances has averaged 3% to 5% despite global crises. In fact, during the pandemic, when hundreds of thousands of Filipino workers were sent home from the Middle East, the decline in OFW remittances was less than 1%, demonstrating how resilient this source of GDP growth for the Philippines is.

Once again, this year, there are threats to OFW remittances as a result of the expected slowdown in the global economy emanating mainly from the anti-trade policies being implemented by the Trump Administration of the US. As mentioned above, the mere slowdown of the global economy in the past hardly affected the flow of OFW remittances to the Philippines. Growth every year averaged at least 3%, with a high of 6% during some years. One explanation given for the resilience of this sector is the positive response of the OFWs to the financial difficulties their relatives face during challenging times. The OFWs become more generous and dip into their savings when times get more difficult for their relatives, increasing their remittances.