Shake the foundations

Ben D. Kritz

Ben D. Kritz

OFW remittances are a major pillar holding up the Philippine economy, and if the remittance figures for January —released this past Monday—are any indication, that pillar has been severely shaken.

Remittances in January, according to the data published by the BSP, totaled $2.011 billion; that was $548 million less than in December 2014, but $4 million or 0.2 percent more than in the previous January.

To its credit, the BSP did not put a lot of effort into spinning the news into something positive and, instead, provided a very matter-of-fact presentation of the numbers, including a few significant labor statistics from the POEA.

The government outside the BSP, of course, did its best to highlight the “growth” in remittances, a message that some of the media was content to pass along undissected. At The Manila Times—and in one or two of our honored rivals’ newsrooms, too, apparently—there is actually no one on the staff who was born yesterday, so we didn’t fall for the “remittances grew” line. Even so, the stories published probably downplayed the implications of January’s remittance figures, which are alarming.

Since 2010, remittances in the December-January period have followed a reasonably consistent pattern: January remittances are always lower than the preceding December, but year after year exhibit a healthy growth rate; over the past five years it has ranged from a low of 6.4 percent to a high of 9.5 percent.

The negative difference between the amount of remittances to the Philippines in January 2015 and December 2014, $548 million, is much larger than the gap a year earlier of $406 million, and the average difference over the past few previous years of about $240 million. The difference in January remittances this year is considerable, but it is not as far off the expected pattern as the year-to-year growth rate.

Here’s the problem: The difference between January’s remittance growth rate and the GDP growth rate over the past five years has ranged from -0.4 percent to 2.9 percent. What makes the paltry 0.2 percent growth in January remittances so alarming is that it suggests economic growth might be much lower this year than anyone anticipates: A rough calculation suggests GDP growth might be closer to 5 percent than the 6-point-something most forecasters are expecting.

Granted, there is a significant amount of uncertainty to that prediction, but if nothing else it ought to alert economic planners to a potential change in their assumptions. Remittances are seasonally affected so month-to-month variations are not an issue, but on a year-on-year basis they should always increase: They will be driven fractionally higher by wage growth (primarily minor upward adjustments from contract to contract for established workers), and driven higher still by expansion of the overseas labor force. And because remittances are measured in dollars, they are not strongly impacted by exchange rates; in any event, the remarkably stable peso, which appreciated by just over P1 to the dollar over all of 2014, minimizes foreign exchange variances.

According to the POEA, the workforce—“workers with processed contracts”—increased by 6.7 percent in 2014, which means at least 160,000 more workers were remitting in January 2015 than in January 2014, which in turn should have resulted in an additional $144 million in remittances based on the multi-year averages. That would have made this January’s remittance growth rate about 7.4 percent; even if only half that potential was realized, it still would have placed the result within or very near the normal range.

One analyst suggested that the addition of three additional banking holidays in January during the visit of Pope Francis might have been to blame for the downturn, but simple math eliminates that cause. In 21 banking days last year, $2.007 billion was remitted; in only 18 banking days this January, $2.011 billion passed through the country’s financial system—about $16 million more per day.

The real cause of the drastic slowdown in remittance growth was the shrinkage of the average monthly per-worker remittance. Based on the POEA figures, in January 2014, OFWs sent home an average of $896.30. This January, that average dropped to $837.91.

That conclusion should be considered informal, but if it even indicates a direction in which circumstances are moving, that is a serious problem, one which a remittance-reliant country like the Philippines in all likelihood literally cannot afford to face.


Please follow our commenting guidelines.


  1. victor m. hernandez on

    Declning OFW remittance is indeed alarming. On the local front, increasing unemployment and underemployment is also a matter of concern. Underexpended budget is likewise a concern, though it results in reduced budgetary deficit. PPP projects are slow in coming.
    Only productively employed resources create income, thus induce growth. Eastern Visayas is now the poorest region after it has been devasted by Yolanda. ARMM is still very poor, and will become even poorer or the poorest region due to the continuing war despite efforts for peace.
    Election is just around the corner which will bring a short term respite to unemployment. It is desirable that spending will be in infrastructures and utilities tt will bring in more investments and employment. Better to spend the budget as planned rather than underexpend it to show aa surplus or reduced deficit. And spending is preferred if it is for productive and sustainable future rather than as largesse to the masses in a feast and famine affair to prop up electoral gains of politicians who are promising or keep on promising until they forget what they have promised during election campaign.

  2. Crisostomo Ibarra on

    It’s a shame knowing that one of the Pillars of Philippine economy is OFW remittances (No dis-respect to OFWs, I’m also an OFW). This is indeed very sad, this means Philippines main export is it’s people. Damn Shame!!! We should bring together, what’s left of the Filipino great minds and try to reverse this trend.

  3. Ben,

    Thank you for such insightful article! Very useful breakdown of numbers. Were you surprised by seemingly high monthly per-worker remittance number? At least, from USA perspective, it seems much higher than what our Filipino users reporting to us.

    There is actually a very quick way to increase the flow of remittances – OFWs should stop using cash agents in USA and instead link their bank accounts or debit cards. On our site,, they see that they could save 50-80% but continue sending money the old way.

    We spoke to them about reasons for such behavior – happy to share more if you are interested.

    Best regards, Yakov

  4. Didnt you filipinos know how important remittances are to your country. My god im a foreigner &* i know it. Without remittances this country is bankrupt. Your house prices are high because of remittances, your food prices are high also partially because of remittances. Remittances fuels this economy big time.

  5. Amnata Pundit on

    Did I read you right, our economic growth is tied to remittances? I thought all along you were saying it was tied to government spending. The drop in remittances can be the result of the current downturn in the world economy. Europe’s problems are well known, while America’s are merely being covered up by “good numbers” that do not reflect reality. The Middle East will be hurt by falling oil prices in time if not already. The Central Bank should stop defending the peso and just let it rise to attract more remittances, to hell with the importers (read smugglers) who will be most hurt by by it. This is probably the first sign of the coming tsunami and as usual, the government planners are still in denial mode.

  6. E. G. Festin on

    Now will de facto president BS Aquino, Budget Sec Abad and Finance Sec Cesar Purisima cry out to the world that this is the fault of in-hospital-arrest former president Macapagal-Arroyo?
    Even if they don’t–kasi masyadong grarapal na if they do–we know that in Abnoy’s head this scary drop in ouR OFW Heroes’ remittances should be counted against his Punching Bag GMA.