OFW Remittance Growth may Slow Down Amid Oil Drop
MANILA: As the prolonged slump in global oil prices gnaws sharply on the Middle East, Remittances from about 2.5 million overseas Filipino workers (OFWs) in the region may grow at just half the pace expected by monetary authorities this year, a report has pointed out.
As OFWs have helped fuel the local residential property boom in recent years, the property and consumer banking sectors may also be at risk now that the Middle East is navigating through tough times, Inquirer quoted New York-based Global Source as saying.
In a research note titled “Simian Flu” issued on Feb. 8, Global Source reportedly warned that remittance growth could taper further this year.
While the Bangko Sentral ng Pilipinas (BSP) expects a 4-percent growth rate in remittances this 2016, Global Source thinks the growth rate this year could be much less at around 2 to 3 percent, the report said.
The research note written by economists Romeo Bernardo and Marie Christine Tang underscored how continuing low oil prices had become a double-edged sword for the Philippines, an oil-importing country, it added.
“While it helped last year to drive down inflation, reduce the import bill and fuel a consumption boom, there is now heightened concern about spillover effects from oil exporters’ economic malaise,” the research reportedly said.
Global Source reportedly cited, for instance, the Kingdom of Saudi Arabia (KSA)’s policy to switch away from foreign workers and its pullback from infrastructure projects where contractors include Filipinos.
There are about 350,000 Filipino workers deployed annually on average to KSA in the five years to 2014, about 40 percent of which were new hires, said the news portal.
Of 2.5 million estimated OFWs in the Middle East, 40 percent are in oil-rich KSA, it said.
“A further worry is the tail risk from escalating geopolitical tensions in the region leading to forced repatriation of OFWs with possible repercussions on the real estate sector and on banks’ consumer loan books,” Global Source was quoted as saying.
Januario Jesus Gregorio Atencio, president of leading mass housing developer 8990 Holdings, reportedly said in a separate interview that if there was anything that could impair the collection efficiency of his company, it would indeed be if the situation in the Middle East would turn for the worse.
“The issues in the Middle East are already growing significantly,” Atencio reportedly said in a recent briefing. “We don’t feel it yet but for example, when you hear about the Philippine embassy in Oman issuing instruction to OFWs to have emergency [evacuation] bags, you think that the situation is getting worse.”
Atencio had identified two types of OFWs at risk: Those who work directly in the oil industry and those who work as seafarers in oil tankers.
The seafarers are likewise at risk as when there’s no oil shipment, there will also be job cuts, he said.
“We’re concerned that there may be contagion effect. If KSA implements budget cuts, there will be less people employed in hospitals, where a lot of OFWs are employed as nurses or administrative staff,” he was quoted as saying.
Reportedly, apart from the woes in the Middle East, Global Source said the Philippines must brace for other threats to the health of the global economy, such as: Spillovers from weaker growth in China and second round effects on economies in east and southeast Asia with closer trade and investment linkages to the Philippines; impact of US Federal Reserve rate hikes and exchange rate adjustments worldwide on US economic recovery; growth in other advanced economies particularly Japan, and overall impact on world trade.
“At this time, we are penciling in a 6 percent growth rate for both 2016 and 2017. We will revisit these numbers after the May elections and in the light of the strength of the new President’s mandate and the track record of his chosen team,” Global Source was quoted as saying by Inquirer.