Were we just late for the party?

The good news is, according to the BSP cumulative remittances of OFWs coursed through banks last year summed up to $16.4 billion. This was 13.7 percent higher than in 2007. For December alone, remittances were at the level of $1.4 billion.

The bad news is, we could be facing an unprecedented 25-percent decline in remittances from overseas Filipinos in the third quarter of 2009 as economies worldwide plunge deeper into a recession. Headline remittance numbers have so far held up, an economist from HSBC said, but this would not be sustained this year despite its history of resilience even through the global slowdown in 2001.

In fact, other third world countries dependent on such remittances have already started to feel the impact of the world economic crisis. The money sent back home by Mexican immigrants in 2008 fell for the first time since record-keeping began 13 years ago. The remittances dipped 3.6 percent, from $26 billion in 2007 to $25 billion, according to Mexico’s central bank. Remittances are Mexico’s second-largest source of foreign income, behind oil.

Indeed, with unemployment in the developed economies expected to reach 50 million this year, countries like the Philippines would find it impossible not to feel the impact of the prevailing economic downturn. According to Citibank, rising unemployment is a political nightmare the Arroyo government will experience this year, apart from the country’s weak external account and declining exports.

Suggestions of an actual decline in remittances have been repeatedly rejected by Philippine monetary officials. In his latest press statement, BSP Governor Amando M. Tetangco Jr. insists that remittances from OFWs will remain a dependable source of foreign exchange for the economy.

While there are expectations that the number of Filipinos deployed overseas could contract in the coming months due to the global economic slowdown, there are some reasons for optimism, the BSP statement said. It cited POEA indications that labor demand could remain strong in Canada, Bulgaria, Australia, UAE, and Qatar.

The BSP is also banking on nurses and caregivers being hired in Japan under the controversial Japan Philippines Economic Partnership Agreement or JPEPA that’s supposed to start by May. They are also looking at the potentials in the rapidly expanding New Zealand dairy industry, spurred by rising milk prices, which has created demand for dairy farm workers.

But the BSP also acknowledged that the number of workers deployed last December declined by 5.8 percent compared to the figure a year ago. The BSP made no mention of the number of OFWs already losing their jobs in the Middle East and Europe as reported by ABS-CBN bureaus in those regions and may be on their way home, adding to local unemployment. As a rule of thumb, Citibank said in its report that the local jobless rate rises by 1.4 percent, equivalent to about 470,000 laid off workers, for every one percent drop in gross domestic product.

The HSBC economist has pointed out that while remittances in the Philippines have historically proven resilient in the face of tumbling growth elsewhere, “the slump in economic activity across the globe is unprecedented and its likely severe impact on remittances will become gradually apparent.”  

The economist also said the Middle East is particularly vulnerable in recent years given the region’s exposure to slumping oil prices. The deceleration of growth in the oil-rich regions would ultimately affect Filipinos working there, the economist observed, although it would depend on how long oil prices would remain depressed.

I had the occasion to ask a senior officer of a large retail conglomerate about how local retail sales are doing. I was assured that they are still doing well but they are bracing for a decline in the second half of this year. Only our government officials are still saying that we will be able to escape the ill effects of the world economic slowdown.

During a meeting with Lakas party leaders at Clark Freeport last Jan. 30, Ate Glue insisted the country has remained outside the sphere of the worldwide financial turmoil, attributing this to her administration’s unpopular fiscal policies. She said: “Two-thirds of the world is in recession but we should all be proud that our country is growing at six-percent GNP and 4.6-percent GDP in 2008.”

But a leading economist has pointed out why we have so far not been affected as badly as other countries. It would seem, former NEDA Chief Ciel Habito observed, that we’re now in a situation where smaller is better, and largeness is a liability that brings greater vulnerability to the financial meltdown.

First of all, we have a relatively much smaller export market compared with for example, Singapore which is suffering greatly as the level of global trade falls. And the major part of our exports, electronics, does not have high local value added. Dr. Habito clarifies, “it’s actually not so much smallness per se, but the underdevelopment of our economy that has, ironically, become a saving grace for us in the current crisis.”

The other thing Dr. Habito cited as a blessing in disguise is the underdevelopment of our financial capital market. When the financial markets fail as has happened in the US and other large economies, the real economy grinds to a halt.

What is the Philippine situation? Dr. Habito pointed out: “In the survey of Philippine enterprises done for the Global Entrepreneurship Monitor in 2006, one of the striking findings was that only one out of three (34 percent) Philippine enterprises make use of the banking system, whether for maintaining deposits or borrowing capital. In fact, only five percent of the surveyed firms sourced any financing from a bank, with the bulk preferring to use borrowings from friends and relatives (46 percent) and personal savings (41 percent) to run their business.

“With the bulk of Filipino productive enterprises having no dealings with the formal financial sector, it follows that problems in the latter will not have much impact on the former. And so, the financial sector may run into all sorts of difficulties with the Wall Street meltdown, but life will go on for the bulk of Philippine firms.”

So, we are ironically blessed by Ate Glue’s failure to expand our export sector and the failure of our financial capital market to modernize under her almost 10-year watch. That’s how we were able to escape the early hits from the meltdown. Her failures became our blessings… for now. We are just late for the party!

Hooray for nothing. Although giving her credit where credit is due, her efforts to achieve fiscal balance at least didn’t make the situation worse for us today. But her claims that we owe our good fortune today for something she accomplished is simply not true…

Ronnie C

Ronnie Concepcion called to clarify that he did not advocate putting LPG under price control nor did he effectively advocate a return to an oil regulated environment with its fiscally disastrous subsidy regime. He said it is unfortunate Press Secretary Cerge Remonde picked it up without fully understanding the issue.

What Ronnie said was that the DOE has enough information to manage the supply and distribution of LPG. If it needs help, it can call on other government agencies. Ronnie agrees that DOE could have managed the crisis better.

And DOE better get the knack of managing this kind of crisis. I understand that our ASEAN neighbors no longer export LPG in significant quantities because they use the fuel themselves. Most of our supply will have to come from the Middle East where competition for this product in high demand is stiff. Expect more shortages unless the DOE fine tunes its supervisory function over private sector companies responsible for supplies.

Valentine wish

Here’s a delayed Valentine joke from Rosan Cruz.

Husband and wife are celebrating Valentine’s Day with a romantic dinner. A fairy suddenly appears saying “for being faithful to one another, I will grant each of you a wish.”

Wife: “I want to travel around the world with my dearest husband.”

Tickets for two came out.

Husband: “I am sorry my love but I wish to have a wife 30 years younger than I.”

The fairy made a circle with her wand, lo and behold… husband became 92 years old… It was stupid of the husband to trust the fairy who after all was a woman… the old witch!

Boo Chanco’s e-mail address is [email protected]