Far from doomsday, but…
When the amount of dollars sent home by Filipinos living or working abroad shrank for three straight months beginning March this year, many analysts predicted a worst-case scenario of foreign exchange inflows falling by as much as a fifth in 2020. In June and July, however, remittances rebounded as expatriate Filipinos sent more money to help families and relatives they left here cope with the economic difficulties of the COVID-19 pandemic.
Last August, the remittances resumed a downtrend, reflecting the wallop of job losses among overseas Filipino workers (OFWs) in countries reeling from the impact of the global health crisis, particularly the Middle East which is now suffering from depressed crude oil prices. Thousands of seafarers have also lost their jobs because of the restrictions on travel and the global economic recession. The Bangko Sentral ng Pilipinas reported that personal remittances from overseas Filipinos declined by 4.2 percent to $2.76 billion last August. This brought the total remittances for the first eight months of 2020 to $21.41 billion, a decrease of 2.6 percent from the $22 billion in the same period in 2019.
A positive note observed by the Bangko Sentral is that remittances for the whole year would be far from the doomsday scenario painted last June when the government projected a minimum decline of 20 percent. Bangko Sentral Governor Benjamin Diokno said that while overseas Filipinos would be sending home fewer dollars this year, the final figure would still not be the worst that government planners were earlier expecting. He said the 2.6-percent decline in year-to-date remittances was “good news” because it was lower than the Bangko Sentral’s revised forecast of a 5-percent decline. Earlier predictions of a 20-percent decline have now become a pessimistic view that is unlikely to happen given the latest numbers, according to Diokno; with four months to go (as far as remittance reports are concerned), the strong likelihood is that remittances would shrink by less than 5 percent for the whole year.
Remittances from the more than 10 million Filipinos living and working abroad have been fueling household consumption, which accounts for two-thirds of the Philippine economy. Last year, the country received from these overseas Filipinos $33.5 billion (about P168 billion at current exchange rates), or the equivalent of 9.3 percent of the country’s gross domestic product (GDP). It is estimated that about 12 percent of Philippine households depend on the remittances that OFWs send.
There appears to be little that the government can do to contain the wave of job losses affecting OFWs, given the global economic downturn. And much of its limited cash resources have been redirected to efforts to contain the spread of COVID-19 and mitigate the impact of the crippling lockdowns, especially on poor households.
Latest reports from the Department of Labor and Employment (DOLE) showed that 637,873 OFWs have sought financial assistance, of which nearly 280,000 have received cash aid from the Abot Kamay ang Pagtulong (Akap) through the 40 labor offices abroad and the Overseas Workers Welfare Administration.
As of Oct. 2, DOLE had disbursed some P2.85 billion in Akap funds to OFW beneficiaries. Those funds, of course, are still inadequate to provide comprehensive relief to displaced OFWs repatriated back home to a country that the International Monetary Fund said will have the biggest drop in GDP (8.3 percent) in Southeast Asia this year.
The significant contraction in OFW remittances, resulting in depressed domestic spending, is responsible in part for that GDP drop, noted the IMF. The loss of remittance support to household consumption is expected to be felt well into 2021.
With millions out of work and hunger pangs across the populace felt more keenly than at any other time according to surveys, the government and the private sector need to work together even more closely to address the bleak situation. In particular, programs have to be put in place to accommodate the tens of thousands of Filipino contract workers now streaming back into the country and swelling the ranks of the local unemployed. They need to be reintegrated back into the domestic economy, and the assistance should be more than just free entrepreneurial and information technology training programs and financial education.
The projections that the number of deployed Filipino workers overseas could fall by about 300,000 this year, to add to the millions already out of work, mean that the country will be facing unprecedented levels of joblessness and want in the months ahead. Reviving the economy to provide work for everyone, especially displaced skilled OFWs, should be the biggest fire lighting up the government’s bum at this time.
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