OVER the weekend the BSP revised its projection for remittance growth in 2015 downward from 5 percent to 4 percent year-on-year. The central bank now estimates that overseas Filipino workers will send home $25.3 billion (based on the amount coursed through banks) this year, or about $1 billion more than last year.
$25 billion is a lot of money no matter what its provenance, and it tends to disguise the serious flaws in the Philippine policy of reliance on remittances. If one looks beyond the big numbers and upbeat press statements, however, the alarming reality is that the reliability of remittances is very tenuous, indeed.
The actual amount of remittances could hypothetically be as much as twice the estimate provided by the BSP, because remittances are measured in two categories. The headline figures provided by the BSP are “cash remittances,” which pass through normal banking channels and are, therefore, easier to track. “Personal” remittances, which pass through other money transfer channels or consist of in-kind transfers (e.g., purchasing a house or a car for the family back home) average about 10 percent higher, although because of the way the amount is calculated – it does not take cost of living for OFWs into account in its computation of workers’ earnings – the ‘official’ total of personal remittances is always overestimated to some degree.
As of the end of October, the year-to-date total of personal remittances was $22.83 billion, while cash remittances totaled $20.64 billion. An optimistic round estimate of the actual year-to-date total of remittances of all kinds would be about $40 billion, and about $48 billion for the entire year. According to the official data, year-to-date remittances through October totaled $43.473 billion, 3.6 percent higher than the $41.974 billion total for the first 10 months of 2014.
In its press statement about the revision of the full-year remittance forecast, the BSP was characteristically cheerful about the outlook for this rather large cog in the Philippines’ economic engine, but the numbers suggest a situation that is becoming increasingly unattractive. After peaking in 2011, when the number of OFW deployments increased by 14.8 percent over the previous year, the growth rate in deployments has rapidly slowed: It dropped to 6.8 percent in 2012, 1.9 percent in 2013, and just over half a percent last year. In 2015, however, the rate of OFW deployments shot up dramatically. Based on data from the Department of Labor and Employment, OFW deployments averaged nearly 6,100 per day this year, putting the year total on track to hit 2.2 million by the end of the year, an increase of 20.5 percent over last year.
One does not really even need to know algebra to conclude that an increase of more than 20 percent in the number of workers while their remittances are only increasing by about 4 percent means that OFWs are earning less, and the value of overseas jobs is declining, despite what the BSP said in its latest release about remittances being supported by a “shift to higher-skilled types of work.”
Data from last year in fact hinted at the trend: The proportion of OFWs in the ‘unskilled’ job categories increased by 2 percent (from 36.1 percent in 2013 to 38.1 percent of the total in 2014), while the percentage of workers in the various ‘skilled’ categories declined by a corresponding amount.
Given the unfavorable global political situation, the slowdown in remittances is likely to worsen through 2016. The huge movement of migrants – refugees from war in Middle East and Africa, as well as those simply fleeing bad economic conditions in places like Afghanistan, Nepal, Bangladesh, and Myanmar – has provided Europe, and to a lesser degree North America, with an unexpected new labor pool that the Philippines, through no real fault of its own, will have a tough time competing with, even more so in the climate of growing nationalism and anti-immigrant sentiment that has taken hold in most of the developed world.
The last thing the outgoing Aquino Administration or the new government after the middle of next year needs or wants is a sudden large-scale repatriation of OFWs, but that is a distinct possibility. When it happens, it might not be immediately obvious, but it will manifest itself when the number of OFWs begins to exceed the number of new or rehired workers being sent abroad. It may, in fact, already be happening; because of the difficulty in gathering the relevant information, the data releases the government and other analysts rely on to monitor the OFW sector lags by up to four months. In good times, when changes in the momentum of remittance inflows and worker departures are more gradual and positive, the delay does not really make a difference. Now, when things are becoming increasingly unstable, government policy response may already be dangerously behind the curve.