MANILA–A US-generated financial crisis is testing overseas Filipino workers’ ability to send cash home, an economist said using government data on remittances.
“If OFWs persist in sending more money, it will not be physically sustainable for them,” Alvin Ang told the OFW Journalism Consortium before monetary authorities reported on August 15 that OFWs sent home a record $1.5 billion in June.
The Bangko Sentral ng Pilipinas linked the 30-percent year-on-year remittance growth rate to an increase in the number of Filipinos who left for work abroad from January to June.
The BSP cited government recorded more than 600,000 Filipino workers left the country using official channels during the first six months of the year. That figure just above to the total number of oversea contract workers deployed in 1991: 615,019.
While acknowledging the increasing rate of remittance from these Filipinos, Ang warns that remittance flows especially from the United States and the Kingdom of Saudi Arabia are entering a “plateau.”
Using year-on-year total formally-sent cash remittances on a six-month period ending May, Ang said if the growth rate of remittances is below and up to three percent, “that for me is a plateau.”
He cited as example cash from land-based OFWs in the US grew by less than a percent (0.66) to $2.462 billion in the first six months ending May as against the same six-month period in 2007 of $2.446 billion.
Likewise, Ang noted money credited as coming from land-based OFWs in Saudi Arabia in the five-month period ending May this year hit $528.013 million. That amount represents a 1.12 percent growth rate from the $522.156 million sent from Saudi Arabia in the first five months of last year.
While remittances from land-based Filipino workers in these major host countries still rose, Ang said growth rates year-on-year are “not significant increases”.
EVEN the Philippines’s total monthly remittances are either touching plateau levels or are experiencing negative growth rates, according to Ang (see related story “Monthly remittance data shows downward spikes”).
The country received $1.396 billion in December 2007 but the following month’s remittance declined by 9.52 percent to $1.264 billion and to $1.258 billion in February this year.
Ang said the declining rates may be due to several factors including US inflation and higher oil and commodities prices.
He, however, said the effects on remittances from these economic aberrations are not immediate.
“Give it one to one-and-a-half years before we really feel the full effect.”
He noted that cash from OFWs in countries other than the US and Saudi Arabia have been contributing more to the growth rates and helping arrest the decline in cash flow.
Land-based OFWs in Singapore, for example, sent home $0.175 billion during the first five months, or an 81.98-percent growth year-on-year from $95.985 million in the same period last year.
Filipinos in Canada sent $0.46 billion during the first six months, achieving a year-on-year 70.65-percent growth rate.
Filipinos in Europe, such as Italy (22.11 percent growth rate), Germany (27.22 percent), and the United Kingdom (19.01), also saw their year-on-year five month remittance volumes grow (see Table 2).
ANG said his prognosis on the Philippines’s plateau-level remittance growth rates recalls a basic economic concept: the law of diminishing returns.
There will come a time that remittances from OFWs, whether it’s the overall total or the per-continent or per-country totals, “will go down somewhere,” he said.
Given the weakening dollar, World Bank economists Dilip Ratha and Sanket Mohapatra said rising inflation rate and oil and commodities prices “further (eroded) the purchasing power of remittances” received by Mexico, India, and the Philippines (see Table 1).
In particular, Ratha and Mohapatra noted that while Philippine remittances increased by nearly 50 percent between 2004 and 2007, “[a] large part of this increase has been simply to preserve the purchasing power of recipients since the Philippine peso appreciated by 33 percent against the US dollar.”
OFW remittance to the Philippines hit roughly $14.5 billion last year. It was at $8.5 billion in 2004.
After accounting for the peso’s appreciation and domestic inflation, Philippine remittances increased by only three percent [in the three years beginning 2004],” Ratha and Mohaptra wrote in Remittances Dispatch.
India’s and Mexico’s remittance growth rates after accounting for inflation were 13 and 19 percent, respectively.
While the effects of the world price adjustments are yet to sink in, Ang said he expects Filipinos in many countries would be sending lower amounts of money home.#