Despite the slowdown in the deployment of workers abroad and the anticipated weakening of the US economy, remittances are expected to remain robust, driving consumption for years to come.
HSBC economist Steven Neumann said that data showing ominous slowdown in deployment and even remittances should be approached with care since structural changes have been taking place.
“We believe remittances will continue to propel the Philippine economy, driving consumption growth for years to come,” Neumann said.
While statistical data pointed to a slowdown in remittances as a result of a deceleration in the deployment of workers abroad and the weakening of the US economy, Neumann said these numbers could not be taken literally.
“The extraordinary boom of remittances over the last two years was always a bit of a mirage,” Neumann said, explaining that the jump was partly due to the formalization of remittance channels.
“The money no longer flows back stuffed in pockets and coats but is increasingly wired via the international financial system,” Neumann said.
According to Neumann, the statistical net was capturing inflows more accurately for the first time since the country started deploying workers abroad and these inflows are now being reflected in the official accounts.
“It is likely that while remittances have grown rapidly in recent years, their sudden acceleration was merely a statistical illusion,” he said.
Once the formalization process has run its course, Neumann said the growth rate of officially recorded remittances would appear to slow down.
However, Neumann said the global demographics would continue to fuel labor outflow to developed economies where the population is growing steadily older and economic activities required an increasing number of qualified skilled workers.
Even with the slowdown in the US economy, Neumann said there would be little effect on overseas Filipinos who are deployed in areas OFW remittances... largely unaffected by the US slowdown.
Neumann said statistics indicate that about 48 percent of remittances come from the US but this was only due to the fact that remittances are being channeled through US financial institutions even if they originate from elsewhere.
Moreover, Neumann said overseas Filipino workers are increasingly engaged in jobs that were less cyclically sensitive. Parallels have been made between Filipino and Mexican workers but Neumann said this could also be misleading.
“Unlike Mexican workers who often take on jobs in the US construction industry or similar occupations, a large number of Filipinos tend to be employed in the healthcare and education sector,” he said.
“Detailed data on the breakdown of OFWs in the US or elsewhere are unavailable but the widespread impression is that Filipinos are employed largely in service industries, making them less vulnerable to cyclical slowdown,” Neumann added.
Moreover, Neumann pointed out that even the deployment data might not reflect the actual outflow of Filipino labor since data from the Philippine Overseas Employment Agency only reflect workers who opted to register their deployment.
“There are reasons to suspect that an increasing number of professionals are leaving the country who may seek their own arrangements when taking jobs abroad,” he said. This meant that official statistics might not be capturing the actual deployment of workers abroad.