Global debt crisis will further blunt OFW remittances

 Global alliance of overseas Filipino workers (OFWs) and families Migrante International sees the recent US debt crisis as an “irreparable damage that will further blunt OFW remittances and consequently place the Philippine economy in a deeper quagmire”.

According to Migrante International chairperson Garry Martinez, the domestic economy has yet to recover from the loss of remittance inflows from conflict-ridden Libya, Tunisia and Egypt during the first half of the year, and very little remittance inflows have likewise trickled from disaster-stricken Japan. Remittances are also expected to considerably decrease from top OFW-receiving country Saudi Arabia due to the recent imposition of a domestic worker ban and in anticipation of the full implementation of the Saudization policy.

“With the recent global debt crisis caused by the US debt downgrade, our remittance-dependent economy is in a very vulnerable and dangerous place. We see two major effects on our OFWs: massive displacement in crisis-laden host countries and the direct effects of the peso appreciation on remittances,” Martinez said.

He said that combined with the never-ending spate of local price hikes and the continuous swell in the inflation rate, the impact of the global debt crisis on remittances in the macro- and micro-economic levels will be ominous.

“Even before the US debt crisis, OFWs all over the world have been affected by protectionist measures and ‘nationalization’ policies as a result of the global financial crisis. Host countries are finding it more and more difficult to absorb migrant workers despite their offer of very cheap labor. Now, we expect a more tight constriction of foreign markets. To say that the labor export- and remittance-dependent domestic economy is between a rock and a hard place is a serious understatement,” he said.

Moreover, Martinez said that though money sent home by OFWs are still expected to surge this semester, mainly due to the upcoming enrollment and holiday seasons, the peso’s strength will strongly temper the boost of remittances in the macro- and micro-levels. “Ironically, the strong peso will dampen the effects of OFW remittances from acting as a ‘lifesaver’ of the dwindling economy in terms of private consumption.”

“Despite contrary statements from Malacanang, we are very much affected by the global debt crisis because our growth depends hugely on foreign loans, foreign investments and OFW remittances,” he said.

OFW remittances were much larger than the net foreign direct investments (USD$1.52 billion) and exceeded net exports of goods and services (US$11.1 billion) in 2008. Remittances were also higher than foreign aid disbursed (US$1.05 billion, according to the National Economic and Development Authority) and the increase in government foreign debt stock (US$1.78 billion, according to the Bureau of the Treasury). For 2010, OFW remittances had already reached a record-high level of USD$18 billion, according to data from the Bangko Sentral ng Pilipinas (BSP).

Martinez said that it is high time that the government reviews its labor export policy and instead focus on the development of an economy independent of foreign capital and foreign investments.

“Instead of always falling back on the recourse of seeking labor markets for OFWs abroad, government should focus on developing local industries for domestic job generation and providing decent wages, incentives and sustainable livelihood for our workers to cushion the impact of the crisis.” Ultimately, there is a need to decisively deviate from the present economic system that is export-oriented, import-dependent and driven by foreign debt, Martinez said. ###