A bill supported by United States (US) President Donald Trump, currently pending approval in the US Senate, would likely only minimally reduce remittances to the Philippines as more Filipinos who used to work overseas have returned home, according to Deutsche Bank Research.

In a June 20 report, Deutsche Bank Research economist Junjie Huang estimated a 1.4-percent decrease in remittance inflows to the Philippines, equivalent to 0.1 percent of gross domestic product (GDP), once the proposed One Big Beautiful Bill, which proposes a 3.5-percent tax on outward remittances by non-US nationals in America, becomes law.

“The US accounts for 41 percent (three percent of GDP) of total remittance inflows to the Philippines (7.5 percent of GDP). However, we note that this could be an overestimate of the remittances that originate from within the US. By place of work, North and South America (US specifically not available) account for only 9.8 percent (211,000) of overseas Filipino workers (OFWs),” Huang noted.

The Bangko Sentral ng Pilipinas (BSP), which reports on remittance inflows from Filipinos working and living abroad, has been emphasizing that formal remittance channels pass money through their US offices whether sourced from America or not.

Huang also pointed to slowing monthly remittances growth since late last year amid sluggish cash inflows mostly from the US.

But for Huang, “the impact of a tax on remittances is likely to be short-lived; structural shifts are more likely to affect the growth of remittances in the longer term.”

“The share of households with OFWs declined to about 6.5 percent post-Covid from around 10 percent before, as OFWs reintegrated into Philippine society—with government support—instead of working abroad again. This could partly explain why remittance growth post-Covid has been lower at approximately three percent year-on-year on average versus 5.8 percent in the 2010s. Remittances also fell to 7.7 percent of GDP during the same period from 8.4 percent prior to that,” he pointed out.

Huang acknowledged that cash remittances support not only the mainly consumption-driven economic growth that the Philippines has been enjoying in recent years but also the current account balance, or net dollar earnings, which is currently at a deficit.

“Remittances should remain a crucial source of funding for the Philippines, but push-pull factors make the long term more uncertain,” he said.

“On one hand, demand for healthcare workers in many of the world’s rapidly ageing societies could increase the prevalence of Filipinos choosing to work abroad. On the other hand, continued growth of the domestic BPO [business process outsourcing] industry could lead to OFWs in the foreign BPO sector to choose to relocate back to the Philippines,” according to Huang.