The growth in remittances from overseas Filipinos will slow down to as low as six percent in 2009 as the global economy verges on recession, cutting down trade and income in developed countries.
This is the first time since the early 1970s that remittances from overseas Filipinos would grow at single-digit levels since the government started promoting the large-scale export of labor that could not be absorbed by the domestic economy.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the latest projections indicated a slowdown in the growth of remittances from six to nine percent this year from the average 13.5 percent in 2008.
Tetangco said at the weekly meeting of the Tuesday Club at the EDSA Shangri-La Coffee Shop that while resilient, remittances would sustain some damage from the global slowdown.
The new projection downgraded earlier expectations that remittances from overseas Filipinos could be sustained in 2009 despite the economic slowdown.
At this growth rate, remittances in 2009 would reach between $17.9 billion and $18.4 billion. This includes remittances that go through banks and other non-bank channels.
“We still project a growth, but there would be a slowdown in this growth,” Tetangco said. “But definitely, remittances will not decline because we have more permanent residents abroad than we used to. Our workers abroad are also employed in better-paying skilled positions.”
But Tetangco admitted that seafaring, for instance, might be hurt by the decline in global trade as economies buckle under the pressure of declining consumer spending.
Fortunately, Tetangco said Filipino seafarers are favored by shipping companies, giving most of them some security, and Filipino workers would more likely fill up opportunities still left open.
Tetangco said Filipino workers were firmly entrenched in some industries, particularly in the healthcare and medical profession and other high-paying, high-skill positions.
Even at its slower growth rate in 2008, the $16.9-billion level was still the highest since the country started sending workers abroad.
The Bangko Sentral ng Pilipinas (BSP) said remittances that go through banks were projected to reach $16.3 billion in 2008, about 13 percent higher than remittances that went through banks in 2007.
Based on the BSP’s latest available data, Filipino workers abroad sent home $1.4 billion in October, the second highest monthly inflow recorded since 1989, which brought the total remittances to $13.7 billion in the first 10 months of last year.
The BSP expected record inflows to have continued in November and December as workers sent more money home to their families in preparation for the holiday season.
The BSP’s 2009 projection also echoed earlier projections made by foreign banks as early as November last year.
With the global market slowing down further next year, Union Bank of Switzerland said it saw a $800-million decline in remittances from overseas Filipinos between 2008 and 2009.
The UBS said investors’ concerns about remittance flows into the Philippines have jumped, both with the dramatic deterioration in dollar liquidity in Asian markets and de-leveraging flows.
UBS economist Edward Teather said these concerns were heightened by the slowdown in remittance growth from 25 percent in July to just 10 percent year-on-year in August 2008.
“We take a look at Philippine remittance flows in an international context,” Teather said. “Given our projection of the worst global growth environment since the early 1980s, it is quite easy to see how Philippine remittance flows could see some declines in 2009.”
Teather said UBS’s models indicate a $800-million decline in remittances between 2008 and 2009. A decline in remittances, he said, represented a loss of income for the Philippine economy.
“This in turn must mean less consumption and investment, all else equal,” he said. “However, one should not write an x% decline in remittances straight into an x% decline in GDP (gross domestic product).”
Teather explained that the existence of a current account surplus meant that not all-aggregate income in the Philippines was being spent on consumption and investment and that some was being saved.
“Given the remitter has already made the decision not to spend the income on him or herself, remittance flows might be more likely to be saved than income from employment in the Philippines,” he explained.
Moreover, Teather said the reduction in consumption would be partly felt by imported goods rather than domestic production. This meant the money sent home for basic expenses would still be spent on these expenses such as food, education and shelter. Money that would usually be spent on imported consumer products would be reduced or eliminated.
But he said the decline in remittances that would result from an inability to find jobs overseas should mean lower investment and consumption growth than would otherwise be the case.
“And because only a fraction of a dollar of remittances is spent on imports, lower remittances would also have to mean a reduced current account balance in isolation,” he said.–Des Ferriols, Philippine Star