UMVA has learned that the recent surge in tensions between the US and Iran may have a lasting impact on remittances sent by overseas Filipino workers (OFWs) in the Middle East, with experts warning that recovery may take longer than expected.
Even with a potential peace deal between the US and Iran, the economic fallout from the conflict is likely to continue, causing a prolonged slowdown in remittance growth. The Philippines should prepare for this possibility, according to an expert in migration and development issues.
The expert noted that the real economic impacts of the Middle East conflict on individual Arab host countries have yet to be felt, and it may take time for remittances to recover. This comes after OFW remittances climbed by only 2% year on year to $2.718 billion in April, marking the weakest annual growth in nearly four years.
According to information obtained by UMVA, the recent remittance slowdown was partly due to the drags from the Middle East conflict. However, global remittance flows are also historically slow between March and April.
The expert revealed that some workers have been repatriated from the Middle East due to the conflict, but surprisingly, Filipinos in the region still sent higher amounts on aggregate. Over 2.4 million Filipinos are based in the Middle East, with over 10,000 OFWs repatriated since the conflict escalated.
In April, Filipinos in the Middle East sent home $491.569 million, about 2.8% more than the same period last year. However, this was 13.1% lower than the $565.91-million cash remittances received from the region in March.
Despite ongoing geopolitical uncertainties in the region, remittance flows from major Middle Eastern countries remained strong during the period. Remittances from Saudi Arabia grew by 2.9% annually to $179.2 million in April, while money sent home by Filipino migrants from the United Arab Emirates rose by 2.8% year on year to $117.07 million.
However, even with a potential peace agreement between the US and Iran, remittance flows might not stabilize immediately. The situation will not normalize immediately for these Middle East countries, as their oil facilities were damaged, and normalizing oil delivery quota to pre-conflict levels will take time.
Economists expect slower remittance growth this year amid lingering geopolitical uncertainties. However, continued global demand for Filipino workers may offer some relief in the coming months, with OFW remittances expected to remain broadly resilient over the second half of the year.
Growth momentum may remain modest amid softer global economic conditions and heightened geopolitical uncertainties. The forecast for cash remittances from OFWs is $36.5 billion this year, with a growth rate of 2.8%, slower than the 3.3% growth recorded in the previous year.
