When the Philippine government eased quarantine restrictions throughout most of the country in early May 2020, President Rodrigo Duterte allowed the return of un-repatriated Overseas Filipino Workers (OFWs) so they may return to their hometowns. In light of growing safety concerns amidst delays in booking return trips to the Philippines, the president ordered the utilization of transport craft and other government resources to expedite the repatriation process[1]. For their well-being, OFWs arriving in Metro Manila were forced to strictly comply with tedious safety protocols. The guidelines included self-quarantine in hotels and, in many cases, testing. These measures were viewed as necessary inconveniences before the OFWs could be allowed to return to their respective provinces. And while the OFWs are now together with their families in this time of crisis, their return has had an unintended economic impact.
The global economic recession caused by the COVID-19 pandemic has impaired the country’s foreign reserves inflows. The global job displacement has severed much of the OFW remittances, which contributes to a large part of foreign reserve inflows. As more OFWs return home, the amount of foreign remittances sent from abroad is expected to decline. Remittances from OFWs, along with BPO and tourism receipts, form the backbone of the Philippine foreign currency reserve.
Over the years, OFW personal remittances have become a significant part of the country’s revenues. In terms of its contributions to the overall GDP, it has grown to be a major contributor.
Source: Worldbank
Until 1990, remittances only accounted for less than 5% of total GDP contributions. By the following decade, it more than doubled. It then peaked at 13% in 2005, and has since been stable moving sideways within the 10% range.
Source: BSP
For the past five years, the amount of OFW personal remittances has been consistently growing. According to the BSP, the sustained growth was mostly supported by the land-based workers. Most remittances come from the United States, Saudi Arabia, Singapore, Japan, United Arab Emirates, United Kingdom, Canada, Hong Kong, Germany, and Kuwait[2].
With disruption by the COVID-19 pandemic, not only will the growth streak finally come to an end, it might come to new all-time lows. According to the Worldbank, there will be an estimated 20-30% drop in remittances for the year due to the loss of employment, making it the sharpest drop in recent history[3]. For the Philippines, OFW remittances are the main source of income for 1-in-10 households. The loss of the remittances would place families of OFWs in jeopardy due to loss of the ability to provide for basic needs.
As of June 7th, there have been 36,731 OFWs repatriated according to the Department of Foreign Affairs (DFA). A total of 300,000 are expected to return throughout the year[4]. The total expected repatriates represent 14% of the total OFW workforce of about 2.2 million[5]. This could potentially mean cutting off USD 5 billion from the annual remittances. As OFWs await the world recovery from the pandemic before they can find work overseas, their entry to the local industry is expected. The influx to the labor force would mean increased competition for the local job market.
OFWs are honored as our modern-day heroes because of their contribution to the country’s economy despite personal sacrifices. For many years, our country has relied on them to achieve economic progress and provide a cushion against financial crises with their remittances. It is about time our government must address the impact of the pandemic to these crying heroes around the world. We can provide welfare protection programs for our returning OFWs. This will ease their plights as they continue to strive and sacrifice for themselves and for their families back home amid the covid crisis.
Written By: Fred Mejia
Aviso Valuation and Advisory Corp. is a real estate consultancy firm that offers valuation and business advisory services compliant to international standards such as the International Valuation Standards (IVS) and International Financial Reporting Standards (IFRS). To assure that we only produce high-quality deliverables, as needed, we do tasks beyond the usual appraisal process like verifying pertinent property documents (i.e. land titles, tax declarations, etc.) with the appropriate government agencies for due diligence purposes prior the acquisition of the properties.
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[1] https://www.rappler.com/nation/261885-duterte-orders-ofws-stuck-metro-manila-brought-home-may-25-31-2020
[2] https://www.rappler.com/business/252043-overseas-filipino-workers-remittances-2019
[3] https://business.inquirer.net/295449/world-bank-sees-many-job-losses-due-to-economic-crisis-induced-by-covid-19-pandemic
[4] https://news.abs-cbn.com/news/05/25/20/300000-ofws-to-return-to-philippines-due-to-coronavirus-pandemic-dilg-chief
[5] https://psa.gov.ph/statistics/survey/labor-and-employment/survey-overseas-filipinos
