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Post pandemic prospects for OFWs

Bernardo M. Villegas

Bernardo M. Villegas

With host countries all over the world posting GDP declines ranging from 4 to 12 percent, especially in North America, Europe and the Middle East, remittances of earnings of overseas workers, especially from the leading suppliers of foreign workers such as China, India, the Philippines and Mexico, are expected to decline by 20 to 30 percent as a result of the pandemic. Most of foreign guest workers are employed in the sectors that require close contacts such as tourism, domestic services, retailing, restaurants, luxury liners and public entertainment, which have been the most adversely affected by business closures or slowdowns. What are the expectations in 2020 and 2021 about the more than 10 million Overseas Filipino Workers remitting more than $30 billion to their home country? Will there be a decline of as much as 20% in these remittances, as forecasted by the World Bank, which will significantly weaken consumption spending because these remittances can account for anywhere from 10 to 12 per cent of Philippine GDP?

BSP Governor Benjamin Diokno has come out with his latest forecast for OFW remittances for 2020 (June 12, 2020). He expects the remittances to drop by 5 percent for the whole year 2020. In monetary terms, this means a decline of US $2.1 billion from the 2019 level. Filipino workers spread out in 200 destinations from all over the world are seen to send home a total of US$ 28.6 billion in 2020 from the original expectation of $30.7. This expected big drop can be explained by a massive repatriation of workers and major economic disruptions in the host countries, especially in the EU and the Middle East. The good news is that the Central Banks forecasts a recovery of 4 % in these remittances in 2021. Let me, however, present a contrarian opinion.

I have followed OFW remittances very closely over the last 10 to 12 years, through all the global crises affecting our Filipino workers abroad. There was the Great Recession that started in 2008, when I was still residing in Europe. There were then fears that the OFWs in countries like Spain, Italy, the UK and France would be rendered unemployed or would suffer large cuts in their incomes. That did not happen. Then there was the Arab Spring in 2010 to 2011, a series of pro-democracy uprisings that enveloped several largely Muslim countries in the Middle East that accounted for a large portion of Filipinos working abroad. There were also fears of a large drop in remittances. Through all these turbulences, there was not a single year during which OFW remittances did not rise by an average of 3 to 5 percent yearly. In fact, even in January and February 2020 when some countries were already starting to suffer high rates of infection of the COVID-19, OFW remittances still rose by 4.8 % and 4.4 %, respectively on a year on year basis, following closely the annual growth registered in 2019, which was 4 %.

I admit that the Great Depression we are now witnessing in the global economy is a once-in-a-century phenomenon and could lead to a very big drop in the remittances the Philippine economy receives from OFWs. Still, the optimist in me considers the roughly 500,000 or so OFWs who have already returned or are expected to return, especially from the Middle East and among those working in luxury liners, as still a relative small number compared to the more than 10 million Filipinos and Filipinas employed in more than 200 destinations all over the world. Another reason to be optimistic is evidence from former global economic crises of what is known as the phenomenon of counter cyclicality of foreign remittances from overseas workers. Historically, countries hit by crisis tended to receive more remittances as the migrants supported their families with bigger amounts. Migrants, new and old, increased the amounts they send during times of crises and hardship in the country of origin. As long as the vast majority of more than 10 million OFWs remain employed—fully or partially—in their host countries, there is a possibility that they will dip on their savings and increase what they send their relatives. Another consideration for optimism is that Filipino workers are highly regarded in the health services sectors, especially in countries like the UK and Canada, in which there is an increase in the demand for nurses, paramedics and other health workers. Considering all these, I would venture an estimate that total OFW remittances for 2020 will not be far from $30 billion, still representing the largest source of foreign exchange earnings and a big boost to consumer spending. Hopefully, our monetary authorities, reacting to the pressure on our international reserves, will allow market forces to lead to a depreciation of the peso from its present levels to a more realistic P52 to P53 level, very much needed to boost the purchasing power of the dollars received by the relatives of the OFWs.

As the whole world recovers in 2021 during which most developed countries are expected to grow by 4 to 6 % in GDP (already employment as of June 2020 was beginning to recover in the US), demand for Filipino workers in all the advanced countries suffering from the demographic crisis (Europe and Northeast Asia in particular) will increase, especially in such service sectors as health care, education and IT-related services. The Philippines is fortunate that it is among the few emerging markets in the Asia Pacific region that enjoy a young, growing and English-speaking population. Youth will have an extra premium in the post-pandemic period because of the perception that older workers are more vulnerable to the Corona virus, which may continue to linger for some time to come. There are already strong demands for health workers in such countries as Japan, Germany, the U.K. and the Scandinavian countries. I know of manpower search companies in the Philippines that have been very active, even during the worst period of the pandemic, in preparing nurses, care givers and other health-related workers for these countries. We have to make sure our educational institutions are focusing on these occupations that will be in greater demand during the so-called New Normal: health, education, the digital industry and food and agribusiness (especially for our local needs).

Despite our great desire to be able to keep as many of our workers in the Philippines, close to their respective families, the harsh reality is that we will continue to have a major unemployment and underemployment problem for at least the decade or so. Our unemployment rate rose to a very high 17.7 % (with underemployment still over 20%) as a result of the pandemic. We expect to address this unemployment (and underemployment ) problem as the economy recovers in 2021 through an even more aggressive Build, Build, Build program of the Government, a major improvement of agricultural productivity, greater investments in health and education and a mobilization of our resources for the Fourth Industrial Revolution through greater investments in digital devices and services. In fact, the IT-BPM sector may rebound strongly as the advanced countries will include in their recovery programs more cost-saving measures that would involve greater outsourcing of consumer and business services to countries like India and the Philippines.

Despite all these opportunities for increasing employment within the Philippines in the post-pandemic period, there will continue to be in the near term a high rate of unemployment because of the continuing increase in our population. That means that there will still be millions of Filipino workers that would seek employment abroad. The OFW
phenomenon will continue to be both a blessing (because of the contribution to our foreign exchange earnings and to a consumption-led growth ) and a curse (because of the social problems resulting from divided families). We can only hope that there will be more countries (at least in Europe, the US and Japan) that will implement the family integration policy that is already prevailing in some European countries) which allows a foreign worker to claim his immediate family to join him in the host country. Whatever may be the case, our Government must continue to fine-tune our own policies in promoting the integral human development of every Overseas Filipino Worker, who is considered one of our real economic treasures. To be continued.


Source: Manila Bulletin (https://business.mb.com.ph/2020/06/22/post-pandemic-prospects-for-ofws/)

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