15 Nov Reduced migrant remittances impact macroeconomics – and bedtime stories
Philippines is no economic slouch: with GDP at US$ 377 billion in 2019, its 108 millions population is fed by a young workforce of 45 millions people. This includes some 10 millions Filipinos working overseas, generating US$ 37 billion in remittances home in 2019 (the highest in ASEAN) comprising 10% of the country’s economic output. Vocational schools in the Philippines funnel students into merchant marine academies and nursing schools, among others. Throughout Asia, migrant workers provide ready labour for the rich world and vital income for poorer countries. Their remittances have been even higher than FDI in many ASEAN nations. Until COVID-19, that is…
The Philippines government believes up to 1 million of their migrant workers will return home this year, as COVID recession and health restrictions impact employers in their host countries – mainly the U.S., Europe and Middle East. Other workers have stayed overseas but on inferior terms. First-half figures for 2020 show a 20% reduction in Philippine remittance receipts, but this may deteriorate further as the year progresses and the chart looks similar for neighbouring Asian nations.
No-one will shed a tear for the finance houses and banks whose remittances business is down in 2020. But the loss of hard-currency income adversely impacts sovereign exchange reserves and balance sheets; and lower receipts mean reduced domestic consumption. So instead of accumulating wealth, some poor families become poorer. At least more Filipina Mums will be reading a bedtime story at home to their own children instead of to a once-affluent pilot’s kids in Hong Kong.