MANILA, Philippines—If there is one single factor to which we can attribute the relative resilience of the Philippine economy through the different economic turbulences it has undergone since the 1990s, it must be remittances.
The Bangko Sentral announced last week that monthly remittances in March reached an all-time high of $1.47 billion, 3.1-percent higher than last year’s figure for the same month, and 11-percent higher than that for the previous month. With the current global economic turmoil, the common expectation has been for a dramatic slowdown and possible downturn in this valuable source of foreign exchange
inflows. And yet the dreaded reversal has not happened, eight months after the Lehman Brothers collapse, widely regarded as the key trigger for the financial meltdown. Have the naysayers been wrong all along, and the “prophets of boom” been right on this one?
Half right
Actually, both sides have been half right, so far. Compared to the 14-percent annual increase posted for the full year in 2008, the March figure brings the cumulative 2009 growth to a mere 2.7 percent. Still, these inflows from overseas Filipinos increased significantly, indicating some degree of resilience in the face of global economic challenges. And this is in spite of the fact that the traditional host economies to our OFWs have actually been hit harder. A recent paper by the Migration and Remittances Team of the World Bank cites five reasons why global remittance flows have historically been resilient during economic downturns in host countries.
First, remittances do not just come from new migrants, but from the cumulated flows of migrants over the years. Thus, they argue, remittances will continue to increase as long as migration flows continue. However, this seems to presuppose that most migrants stay on a long-term basis. But OFWs are still mostly contract workers under time-bound contracts. It would thus be useful to examine how the proportion of our permanent vs. temporary migrants has been changing through the years, as half of our remittances now come from the US, where Filipino migrants tend to stay put, unlike in, say, the Middle East. In any case, what matters is whether net migration (new deployments minus returnees) continues to grow, especially lately—and available data are not very clear or up-to-date on this.
One-shot rise?
Another reason cited is related to the above: Because of rising anti-immigration sentiments and tighter border controls, especially in the US and Europe, migrant workers appear to stay longer—and they are likely to continue sending remittances.
A third reason given is that migrants continue to send remittances even when hit by income shocks, inasmuch as remittances are a small part of migrants’ incomes. This may be true in the case of permanent Filipino migrants, especially in the US and Europe. But OFWs on contracts and separated from their families probably send the bulk of their incomes home, making their remittances much more sensitive to income shocks. Again, the net outcome would depend on the relative proportions of permanent vs. temporary Filipino migrants.
The fourth reason cited is that when migrants are in fact forced to return due to economic difficulties in their host countries, they take back their accumulated savings, leading to a one-shot rise in remittances. The authors believe this to have been the case in India during the Gulf war of 1990-91 which forced a large number of Indian workers there to return home. And even when they stay on, the “safe haven” or “home-bias” factor can lead them to send home more remittances for investment purposes during an economic downturn in the host country. This is a plausible explanation for permanent Filipino migrants, who have in fact been buying up more condos and other real properties lately, explaining why the real estate industry continues to boom.
Fiscal stimulus
This raises the question on whether the surge in March (uncharacteristic for this time of year, by the way, as March has traditionally been a seasonally slow month for remittances) may simply be the effect of repatriated savings of returning displaced Filipino migrant workers. If true, it would be premature to rule out a fall in remittances based on the positive March figures. Thus, the outlook for the year remains highly uncertain.
Finally, the paper argues that the large fiscal stimulus packages being undertaken by several high-income host countries in response to the financial crisis could actually benefit migrant workers along with native ones. The BSP cites data indicating that 756,000 job orders had been placed with POEA in the first two months of the year alone. Others point to the special attractiveness of Filipino workers abroad compared to other nationalities, as an argument why Filipino jobs abroad are not likely to be hit as hard as those of migrant workers from other countries.
So where does all this lead us, in terms of outlook for the year? I’d say it remains up in the air, and as I keep saying lately, the best we can do is be prepared for the worst while praying for the best.
Source: Inquirer May 17, 2009