Returning OFWs bad for economy

Published by rudy Date posted on April 13, 2011

THE crisis in the Middle East areas could worsen the country’s unemployment situation and the overall economy, the National Statistical Coordination Board (NSCB) warned on Tuesday.

Romulo Virola, NSCB secretary general, said that the turmoil in the Middle East has put the lives of many of overseas Filipino workers (OFWs) at risk.

“Many of them have come back or have been repatriated back for security reasons, but many more are still there who might also need to come home if the situation continues to worsen. When this happens, it can create pressure on the labor market, and government with the help of the private sector must be prepared for the challenge,” he said.

Virola added that the Middle East crisis, coupled with the terrible tsunami that hit Japan and exacerbated by the upward volatility in commodity prices, particularly food and oil, is indeed a challenge that the country cannot be complacent about.

“And while Saudi Arabia has been spared so far from the troubles that plague the other countries in the Middle East, potentially, we could have to deal with a double whammy of the loss of billions of pesos in remittances, and a spike in unemployment due to the addition of 1.3 million OFWs to the labor force,” Virola said.

He projected that if the 49,000 Filipino workers deployed over two years in Bahrain, Libya and Yemen all come home to the Philippines, the unemployment rate would reach 7.5 percent from the current 7.4 percent.

The country’s total labor force was 32.9 million as of January.

But Virola said the worst-case scenario is if 1.3 million OFWs in the Middle East come home without finding a job in the local market, which will push the unemployment rate up to 10.4 percent.

Impact on GDP
In the case of remittances, Virola projected a reduction of about P26 billion, or 0.3 percent of gross domestic product (GDP), if the 49,000 OFWs deployed in the Middle East return to the Philippines.

GDP refers to the total value of final goods and services produced in a country in a year.

In a worst-case scenario, Virola said OFW remittances would be cut by P693 billion, or 8 percent of GDP.

The Bangko Sentral ng Pilipinas had projected an 8-percent growth in OFW remittances this year.

The NSCB said that worker remittances as a percentage of GDP averaged 1.9 percent among developing countries and 1.5 percent among developing countries in East Asia and the Pacific for 2004 to 2009.

For the Philippines, Virola said that OFWs contributed much bigger shares of 13.9 percent, 17.6 percent, and 17.1 percent to GDP at current prices in 2008, 2009 and 2010.

“Our OFWs make a substantial contribution to our economy, and so despite the social cost of the Pinoy diaspora, we have come to hail them as our heroes. But with the current threat to the demand for their services, they can also pose a problem to our domestic economy,” he noted.

Virola said that if Filipinos come back from the Middle East and Japan or from other destinations, the country must build the necessary social and economic infrastructure to accommodate and absorb them back.

“This includes creating local jobs, providing the needed social services and tapping emerging markets like China and India,” he said.

Based on Philippine Overseas Employment Association (POEA) data, China and India attracted only 8,771 and 1,010 landbased OFWs, or 0.83 percent and 0.10 percent, of the total deployment in 2009.

Based on the 2009 Survey on Overseas Filipinos, the number of OFWs stood at 1.9 million, 47.2 percent or 901,000 of which were women.

For the same year, POEA estimated the number of deployed landbased workers at 1.1 million of which 64 percent, or 669,000, were in the Middle East. –Darwin G. Amojelar, Senior Reporter, Manila Times

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