Analysts say decline in share of remittances to GDP is ‘not worrisome’

By Katherine K. Chan, Reporter

THE DECREASING SHARE of overseas Filipino workers’ (OFWs) remittances in the country’s gross domestic product (GDP) signals that the Philippine economy is growing but becoming less reliant on remittances, analysts said.

Security Bank Chief Economist Angelo B. Taningco said the lower remittance-to-GDP ratio is “not worrisome” as it indicates the economy’s sustained expansion. 

“The declining remittance share in GDP suggests that Philippine GDP growth has been outpacing OFW remittance growth,” Mr. Taningco told BusinessWorld in an e-mail.

“This is not worrisome, in my view, because it shows the domestic economy is now being able to absorb more of the country’s labor supply given its sustained expansion, which creates more local job opportunities,” he added.

Bangko Sentral ng Pilipinas (BSP) data showed that cash remittances soared to an all-time high of $35.634 billion in 2025, breaking the previous record of $34.493 billion in 2024.

However, this only accounted for 7.3% of the country’s GDP, the lowest share in 25 years or since the 7.2% in 2000.

Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines (UnionBank), noted that the downward trend of remittance-to-GDP ratio in the last two decades points to a “more diversified and maturing growth base.”

“(H)istorically, the remittance‑to‑GDP share has trended down from mid‑2000s highs to (around) 8.7% in 2024, even as inflows repeatedly hit new records, reflecting a more diversified and maturing growth base,” he told BusinessWorld via Viber.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, attributed the trend to the country’s diversifying growth drivers such as domestic services, investments and trade.

Asked if the remittance-to-GDP ratio slump should raise concerns, Mr. Rivera said: “(It’s) not necessarily a negative signal as it largely reflects that the domestic economy is expanding and diversifying faster than remittance inflows, rather than a weakening of overseas Filipino support.”

“What it does indicate is a gradual structural shift where growth is becoming less remittance-dependent and more driven by domestic services, investment, and trade,” he added in a Viber message.

The Philippine economy posted a 4.4% growth in 2025, the weakest print recorded since the pandemic hit in 2020.

RISKS ARISE
UnionBank’s Mr. Asuncion noted that the economy is now largely dependent on domestic demand, “reducing structural dependence on overseas income.”

In 2025, household consumption, which eased to 4.6% year on year from 4.9%, accounted for over 70% of the country’s total output.

However, such a shift exposes the Philippine economy to local and global risks, said Mr. Asuncion.

“Remittances become a less powerful stabilizer for consumption and the external accounts even as the Philippines continues to run sizable trade deficits, such as the December 2025 gap of about $3.52 billion despite record year‑end inflows,” he said.

Risks likewise emerge from potential gaps in local growth engines as remittances continue to grow modestly, he added, especially as the United States’ new levy on remittances could derail inflows.

The US recently imposed a 1% tax on remittances made via cash payments, money orders and cashier’s checks, a regulation seen to potentially push US-based senders away from traditional formal channels.   

Still, analysts expect remittances to stabilize the economy this year, even as its share in the overall GDP declines.

“This trend is likely to persist if GDP growth accelerates modestly and the economy continues to broaden its base, although remittances will remain a key stabilizer, especially during periods of global or domestic uncertainty,” Mr. Rivera said. 

For his part, Mr. Taningco sees the remittance-to-GDP ratio ending 2026 around the mid to high single-digit mark.

“Overall, the declining ratio signals economic broadening, but it also means the Philippines must rely increasingly on domestic job creation, investment, and productivity to sustain growth as remittances become a smaller relative buffer,” Mr. Asuncion said.

The BSP projects cash remittances to rise by an annual 3% to $36.6 billion by yearend.