MANILA, Philippines – In a “worst case” scenario due to the global economic and financial meltdown, remittances from overseas Filipino workers (OFWs) could plunge to as low as $11.4 billion for the whole of 2009, an analysis from the Citibank group for the Asia and the Pacific warned.
If that occurs, Jun Trinidad, the Citibank analyst, expressed fear the reduction could cut the country’s economic growth by two percent as a result of the expected decline in consumption spending by the OFWs and their families.
In 2008, the Central Bank of the Philippines reported that the OFWs remitted a whopping $16 billion which helped prop the country’s economy as the global economic meltdown deepened.
There are about 8.7 million OFWs, representing about 10 percent of the country’s total 90 million population, who are deployed mostly in the Middle East, the US and North America, the United Kingdon, Italy as well as neighboring countries like Hong Kong, Japan, South Korea and Singapore.
However, Trinidad estimates the OFW deployment could drop back to the 2001level of 800,000 compared with the one-million deployed annually since 2006.
Trinidad explained that if the monthly remittances remained constant despite the reduction in the annual deployment, this could result in a total of $13 billion for the whole of this year.
But if the wages were cut by 14 to 15 percent in order to preserve existing jobs, remittances would fall to as much as $11.4 billion in 2009, Trinidad projected.
He warned the projected decline in remittances would have an adverse impact on the economy that has long been dependent on funds sent by the Filipinos who opted to work abroad in the absence of better employment opportunities in the country.
Such worst-case remittance scenario, Trinidad warned, could reduce the growth in the country gross domestic product (GDP).
At the same time, he said, the current account surplus would, at best, fall to $1.36 billion. At worst, he added, the surplus would turn into a $210 million deficit.
But Trinidad warned the bigger worry, beyond the growth slowdown, would be the impact of falling OFW remittances on the country’s fiscal balance.
He pointed out a huge drop in the current account surplus would expand the country’s budget deficit to three percent of GDP, equivalent to as much as $400 million.
In a related development, the Central Bank disclosed that OFW remittances for January 2009 went down slightly to $1.260 billion from the $1.264 billion for the same month a year go as the expatriate Filipinos began to feel the pinch of the global crisis.
Central Bank Governor Amando Tetangco Jr. said the drop was due mainly to a decline in inflow from Filipino workers based in the US.
Tetangco also explained that they had detected a steady decline in the deployment of workers beginning in November 2008. In December, he said, OFW deployment actually declined by 5.8 percent.
But like most officials of the Arroyo administration, Tetangco expressed optimism the drop in OFW deployment would be compensated by the increase in the hiring of Filipino workers in countries like New Zealand, Australia and Guam.
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