Impact of job losses, wage cuts, says Citi
Citigroup said it was expecting foreign exchange remittances to the Philippines to grow by only 3.0 percent this year because of the adverse impact of job losses and wage cuts overseas.
Last year’s remittances from overseas Filipinos through banks amounted to $16.4 billion, up 13.7 percent from 2007, according to central bank data.
Citigroup said it would be difficult to sustain such a robust growth this year because of the global economic turmoil. It noted that the year-on-year growth in December was only 0.8 percent, to $1.4 billion, which indicated that growth this year would be slower than in 2008.
“It’s not just incremental growth but the decline in job deployment overseas that could flag remittance weakness,” Citigroup said in its latest publication on the Philippines and other emerging markets.” We do not rule out potential wage cuts in line with the increasing slack globally on the back of the US job cuts, decline in oil prices that threatens Middle East growth prospects, and global trade collapse in Asia.”
Observers quoted by Citigroup said that while recession was concentrated on the United States and the advanced economies in Europe, it affected the profitability of exporters in Asian countries, which partly depend on rich countries for their export income.
Job losses therefore will also be seen not only in Western countries but in Asia as well, they added.
The central bank, Bangko Sentral ng Pilipinas (BSP), earlier said it expected remittances to post a 6.0-9.0 percent growth this year, still enough to support consumption of households.
BSP Deputy Governor Diwa Guinigundo said the fact that more than one million Filipinos were deployed to work abroad last year, as shown in data from the Philippine Overseas Employment Administration, gave a certain level of comfort that remittances would continue to grow at a decent rate this year.
Guinigundo said most contracts of overseas Filipino workers (OFWs) were effective for at least two years, and so the country would continue to receive remittances from the newly deployed Filipinos. Edited by INQUIRER.net