As US Economy Tanks, Philippines Gets Set for Downturn

They are also the primary engine of the real-estate growth here in the past several years, with property companies aiming their marketing strategies directly at them. Most of the buyers are OFWs in the US, Europe and the Middle East. Last week, Jaime Augusto Zobel De Ayala, chairman and CEO of Ayala Corp., which owns some of the largest shopping malls and property developments in the country, called these migrant workers the Philippines’ “new middle class.”

But many expect remittances to fall in the next months. The central bank projects that the inflow of OFW money for the remainder of the year would probably slow by 3 percent.

“Taking into account the possible slowdown of remittances, it might only grow about 15 percent which is still not bad given that 10 percent was the original projection to begin with,” said Nestor Espenilla, the deputy governor of the central bank, according to Reuters.

Others are not as optimistic. UBS said earlier this month that OFW remittances in 2009 could fall by as much as US$800 million, or nearly 6 percent of the $14 billion that flowed into the country last year.

As to the economy in general, the government has reduced its forecast for next year, from between 6.1 and 7.1 percent gross domestic product growth to 3.7- 4.7 percent. Earlier, the International Monetary Fund projected GDP growth next year at less than 3 percent.

The government also estimates that unemployment next year will likely increase to 9 percent, from 7.4 percent in January this year.

All of these contribute to a sense of gloom among many Filipinos, as reflected in recent surveys in which most consider themselves worse off than before. An October survey by Ibon Foundation, for instance, found that 75 percent of the 1,494 respondents “had difficulty buying enough food” during the preceding three months. The figure was no different from a similar survey in April.

In the October survey, 64.5 percent said they had difficulty paying for their children’s education, 68 percent said they didn’t have enough money for transportation, nearly 73 percent said they had trouble paying their bills, and nearly 69 percent said they had problems paying for their medical expenses.

In the same survey, 78.4 percent of the respondents rated themselves poor, up from 74 percent last year.

The government, meanwhile, says it is doing its best to mitigate the impact of the crisis. The department of labor has said it is putting together a contingency plan for the expected return of OFWs and those who lost their jobs domestically. Last month, President Gloria Macapagal-Arroyo announced that money has been set aside for this purpose.

“For returning expatriates should there be, we will have constant monitoring of job orders of foreign principals, we will have an expanded livelihood and business formation program with a P250-million livelihood fund,” Arroyo said in a speech in October. She also pushed through a measure that would give indefinite visas to foreign investors who can employ 10 workers or more.

While many analysts and economists are not as worried as the others about the state of the economy, with JP Morgan saying last week that the Philippines is in a position to weather the crisis, many Filipinos are not holding their breath. Some, like Eduardo Castillon, are, at the very least, cautiously optimistic.

Castillon, a 27-year-old engineering graduate, is considering applying for a job at a call-center company, the common fallback among many Filipino graduates who cannot immediately find a job after graduation.
“Does the news that the US economy is in trouble bother me? Of course it does,” he said in a phone interview.

Applying for a call-center job used to be easy, he said, pointing out the high turnover rate of call-center agents in the Philippines, as employees hop from one company to another looking for better salaries, benefits and working conditions. “I’m not so sure if that is something that we can continue to do.”

(This article first appeared in the Asia Sentinel on November 21, 2008)