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July 17, 2020

PHILIPPINES: Numbers paint a weak outlook for migrant workers

BY Bob Herrera-Lim

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  • Remittances have dropped for a second straight month and a total of about 250,000 migrant workers are expected to have returned home in the next few months since the start of the pandemic, with possibly more awaiting repatriation.
  • The availability of savings and assets may help these workers cope with several months of unemployment.
  • This group has for the past few years provided disproportionately high support for the administration, but that may be tested if they are unable to return abroad and find employment opportunities domestically to be comparably weak.

The central bank reported a few days ago that remittances from overseas workers dropped 16% in April from a year ago, following a 4.7% decline in March. So far, for the first four months, remittances are down 3% compared to a year ago. Unlike in previous years, when a decline in some months were offset by increases in previous or succeeding months – possibly the result of cash management by workers — the decline in remittances is expected to persist for several months more as Filipinos abroad continue to lose their jobs and, unlike in the past, find re-employment prospects weak.

Not surprisingly, the largest drops were recorded in cash flows from the Middle East, with Saudi Arabia down 23%, Kuwait lower by 24% and United Arab Emirates declining 17%. The region hosts the greatest number of contract workers, with about 1 million estimated to be in Saudi Arabia alone. Remittances from Germany also dropped 32%, possibly due to the job losses of seafarers operating from European ports who work both cargo and cruise ships. Flows from the US were up, which may reflect the increased cash from the stimulus program being sent to the Philippines to compensate for the weaker economy.

Overseas worker remittances totaled about USD 30bn last year, equivalent to slightly less than 10% of GDP. However, even with how much the money they contribute to the economy, the data on how many Filipinos work abroad are very limited. The official government count is about 2.2 million — a clear underestimate. The data also likely counts more of the workers with fixed employment contracts who return to the country at regular intervals and still have direct family in the Philippines. Including those who may be working illegally abroad as well as those who have acquired legal residence or citizenship, the number is likely to be significantly higher, possibly up to twice the official number (with some estimates being 3x or 4x).

Questions about what to do next

According to the government, around 82,000 Filipinos have returned so far as of mid-July, with another 50,000 expected in the next few weeks. An additional 117,000 thousand await repatriation after that. Therefore, at a minimum, about 250,000 Filipinos, or more than 10% of the government’s formal estimate, are expected to have been repatriated by the start of the fourth quarter. The final number is likely to be higher. Anecdotally, the number may also be suppressed by capacity limits in terms of the country’s ability to absorb returning workers: clearances for chartered repatriation flights are processed slowly and facilities for their quarantine, which can range from a few days to two weeks depending on the speed of their testing, still have to be procured.

In fact, government agencies are now complaining that their funds are running out. According to the department of foreign affairs, only a third of the country’s budget for repatriation of workers remains, and that this could be exhausted by the fourth quarter. The office charged with overseeing the welfare of overseas workers (OWWA) has warned that it could run out of money by next year; not only are its collections down, but it has had to spend for the quarantine facilities and medical needs of returning workers.

Many overseas workers are supporters of President Rodrigo Duterte — possibly a higher percentage compared to the overall Philippine population — as they draw comfort from his anti-crime message to keep their families and communities safe while they are away from home. However, they may now pose a special problem in terms of public disgruntlement, especially for those from the Middle East and Europe, or have worked on board ships. These workers are unlikely to be able to find jobs that offer incomes domestically comparable to what they earned abroad, and at the same time their families have been accustomed to slightly higher standards than their cohort for years — home ownership, maybe a private vehicle and enrollment in a private school, access to technology, or even some real estate investments. These factors will allow them to endure job losses for a slightly longer period, especially if they dispose of some assets, but if they find economic opportunity to be lacking beyond the end of the year, then they and their families’ disenchantment with the government may increase

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