Citigroup expects growth in the country's remittance inflows to slow down dramatically from over 13 percent last year to only 3 percent this year as a result of wage cuts and job losses overseas.
In a report, Citigroup said that while remittances as of December looked "decent," the growth rate had actually slowed down and there was a headcount loss of 5.8 percent in the total overseas Filipino workforce.
The government was counting on labor demand in countries like Canada, Australia and Qatar to pick up some of the slack in other labor markets such as the US but Citigroup said this might not be enough.
For 2008, the central bank, Bangko Sentral ng Pilipinas (BSP), had reported remittances of $16.4 billion, with monthly inflows consistently going over $1 billion throughout the year.
The full-year data from the BSP showed that cumulative remittances of overseas Filipinos coursed through banks was 13.7 percent higher than the level recorded in 2007 and slightly above the BSP's growth forecast of 13 percent or $16.3 billion.
But Citigroup said its projection for remittance growth this year was only 3 percent due to an expected slower incremental growth as well as a decline in job deployment abroad.
"We do not rule out potential wage cuts in line with increasing slack globally on the back of US job cuts, oil price lows threatening Middle East growth prospects and global trade collapse in Asia," Citigroup analyst Johanna Chua said.
In June 2008, remittance inflows amounted to $1.45 billion. Following this peak, Chua said monthly remittances hovered between $1.3 billion and $1.4 billion in the second half of 2008.
"Monthly remittance value below this range in 2009 could suggest a combination of headcount loss, overseas wage cuts and less payment from migrant Filipinos for onshore residential purchases," Chua said.
Central bank officials ruled out the possibility that remittances would decline this year but they admitted that inflows would not increase for the first time since the country started deploying workers abroad.
According to deputy central bank governor Diwa Guinigundo, the economic recession experienced by developed economies was costing overseas Filipinos their jobs.
Citing reports from the Philippine Overseas Employment Authority (POEA), Guinigundo said an increasing number of Filipino workers were being sent home as their employers began to cut jobs to lower costs.
Guinigundo noted there was a marked loss of jobs for Filipino workers in the US and Taiwan, traditionally two of the country's biggest market of labor exports since the early 1970s, along with Middle Eastern countries like Saudi Arabia and United Arab Emirates.
Job losses in offshore labor markets have led to projections by some economists that remittances would actually decline this year and some estimates projected a plunge of as much as 20 percent.
But Guinigundo said the deployment of Filipino workers was still rising by double-digit rates, at least for the moment. He said this would partly offset the decline in remittances caused by the loss of jobs in other job markets.
"We don't believe remittances would drop to negative growth," Guinigundo said. "At the very least, we are expecting a zero growth," he said.