Remittances save the Philippines
By Joel D Adriano
MANILA - Despite the global economic downturn, foreign remittances have held up
surprisingly well in the Philippines, providing the economy a desperately
needed capital boost as new foreign direct investment (FDI) is reduced to a
trickle.
Rather than returning home and swelling the ranks of the unemployed, Filipinos
continue to find offshore job opportunities amid hard economic times.
Labor Secretary Marianito Roque said overseas Filipino workers' (OFW)
remittances reached nearly US$7 billion from January to May this year,
representing a 2.8% increase from the $6.79 billion recorded over the same
period last year. Although the growth is down substantially from the double
digit expansion
witnessed in previous years, the overall value reached a record monthly high in
May at $1.48 billion.
Roque has predicted that OFW remittances will likely reach a record $17 billion
this year, with the bulk of inflows coming mainly from the United States,
Canada, Saudi Arabia, United Kingdom, Japan, Singapore, United Arab Emirates,
Italy and Germany. An estimated 10 million OFWs sent home $16.4 billion last
year, making the Philippines the world's fourth largest recipient of
remittances, trailing only India ($45 billion), China ($34 billion) and Mexico
($26 billion), according to the World Bank.
At the same time, FDI into the country continues to contract, falling to a mere
$44 million in the first quarter of this year, a staggering 83% decline over
the same period in 2008. The decline marks a disturbing down trend: total FDI
fell from $2.91 billion in 2007 to $1.52 billion last year, marking a 48%
year-on-year decline. Analysts attribute the downturn broadly to waning foreign
investor interest in Philippine manufacturing compared with other low-cost
countries in the region.
Economic analysts had predicted OFW remittances would similarly diminish, based
on expectations that a sagging global economy would lead to greater lay offs,
particularly among industrial and construction workers. Citibank, the
International Monetary Fund, the World Bank and credit rating company Moody's
all predicted remittances would decline this year, ranging from 5% to 7.5%,
dragging the economy to negative or, in the most optimistic case scenario, zero
growth.
Economic growth crawled to just 0.4% in the first three months of the year and
economic officials have downgraded their previous economic growth targets of
between 3.1% to 4.1% to a lower range of 0.8% to 1.8% for 2009. But the local
economy has shown signs of resilience compared to its more export-driven
neighbors thanks to the sustained demand for Filipino workers abroad and the
boost their remittances have provided to domestic demand.
The growing number of Filipinos leaving for work overseas has more than offset
the number that has lost their jobs due to the global economic recession,
officials say. Around 1.38 million were dispatched for work overseas last year,
up 30% on the 1.08 million that left in 2007, official statistics show. This is
part reflects recent hiring agreements the government has signed with Qatar,
Saudi Arabia, Canada, Australia, Japan and South Korea.
Recession-proof jobs
GlobalSource, a New York-based independent research and analysis outfit, said
in a recent report that while it expects remittances to slow in the coming
months, the resilience so far may be attributed to the fact many OFWs are
employed in recession-proof sectors, such as healthcare, education and
government service.
Some big Philippine corporations, ranging from fast-food giant Jollibee to
mobile-phone operators and property developers, remain worried that the slow
rise in remittances will dampen profits. Seasonally adjusted personal
consumption expenditure, which accounts for roughly 80% of GDP in the
Philippines, was down 3.1% in the first quarter after more than 50 consecutive
quarters of positive growth.
Socioeconomic planning secretary Ralph Recto said the global crisis has
encouraged Filipinos to cut back expenditures and increase savings. But that
may be a temporary phenomenon. With the US declaring the worst of the global
economic crisis over, President Gloria Macapagal-Arroyo clearly expects to see
better numbers in upcoming quarters as her government's fiscal stimulus package
is expected to bump up consumption in the second half of this year. Meanwhile,
another surge in spending is expected as the country enters a campaign season
for local and national level seats.
Neither, economists say, offers a long-term solution to the country's
dependence on remittances. Economists have long complained that the government
fails to use the billions of dollars earned overseas and sent home to pull the
fast-growing population out of poverty, generate jobs and ultimately cap
outward migration. The Philippines would have more than 26.5 million poor, out
of a population of 96 million, without the current level of OFW remittances,
according to economist Ernesto Pernia. Regions (of the
Philippines) with more OFWs, his research found, have benefited
economically and helped to reduce poverty.
According to economist and former budget and management secretary Benjamin
Diokno the Philippines must create between 1 million and 1.5 million jobs each
year to keep pace with the high population growth and new job-seeking
graduates. Data from the Employers Confederation of the Philippines, a trade
group, shows that the informal economy accounts for about 70% of the labor
force.
That, according to the non-government organization Migrante, will continue to
force Filipinos to seek greener economic pastures abroad. An IMF-commissioned
study recently said that foreign remittances foster dependency and "moral
hazard", where many people lose the incentive to work because of funds sent by
their kith and kin. It's a dependency that drives the Philippine economy and
one that the current receding global economic crisis has clearly failed to
break.
Joel D Adriano is an independent consultant and award-winning freelance
journalist. He was a sub-editor for the business section of The Manila Times
and writes for ASEAN BizTimes, Safe Democracy and People's Tonight.
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