This certainly is good news to our economic managers. They say that ‘the sustained rise in the gross international reserves was due to robust inflows of foreign investments, remittances by overseas workers, income from investments abroad, and the central bank’s earnings from its foreign exchange operations’.
But what may be good news for the macro-economy may not be the case for socio-economic groups like the families of overseas Filipino workers (OFWs).
As of end-December 2004, Php 56.27 was equivalent to US$1. As of end-June 2007, the US dollar was already equivalent to Php 46.33. The Philippine peso has appreciated by nearly P10 or 18 percent, in 2.5 years.
I call your attention to an editorial of BusinessMirror entitled ‘Thanks, but no thanks’. I have excerpted some paragraphs from the insightful editorial. [See http://www.businessmirror.com.ph/0629&302007/opinion01.html for the complete version.]
‘It is good of the President to direct Socioeconomic Planning Secretary Romulo L. Neri to find ways to help millions of overseas Filipino workers (OFWs) cope with the increasingly painful impact of the strengthening peso on their families’ pocketbooks. Finally, officials have seen the irony of the OFWs’ situation: as recently pointed out in a front-page story in this paper, the more dollars they remit home, the bigger the gap that has to be filled in their families’ usual budget—given that with the peso appreciating in the flood of dollars, their dollar earnings here fetch an increasingly lower peso equivalent.
A couple of OFW dependents interviewed for that Associated Press story said that in a matter of a few months, the difference in the peso equivalent of the dollars sent home by their OFW loved ones had reached P3,000 to P5,000. To make up for that decline, some OFWs have thus had to remit more, thus perpetuating the cycle. We’re talking here of about eight million overseas Filipinos whose aggregate remittances as of April were up 26.08 percent to $4.681 billion.
The President was presumably reacting to some comments that the government was quick to react to the whining of exporters hurt by the strengthening peso, even giving them a hedging facility through the Development Bank of the Philippines. Exporters have become increasingly worried by the diminishing returns and declining competitiveness of their business with the steady appreciation of the local currency.
And yet, in the same breath, those who noted the government’s response to such exporters’ concerns had also pointedly observed that it had overlooked the other economic pillar that’s also bearing the brunt of the impact of a strong peso—the OFWs.’
If that figure of 8 million overseas Filipinos is correct and stated in terms of the number of families, estimated in the 2003 Family Income and Expenditures Survey conducted by the National Statistics Office at 16.5 million, nearly one out of two families has a member working abroad and sending remittances to their families regularly. The nearly 18 percent appreciation of the Philippine peso during the past 30 months can be translated into an equivalent 18 percent erosion in the incomes of about 8 million ‘unhappy’ families. No wonder this administration remains unpopular inspite of its reported gains in its macro-economic targets.
It is ironic that the recently reported higher-than-expected budget deficit may just be the ‘unpleasant’ development that would dampen foreign money inflows, decrease the international reserves, depreciate the peso and provide relief to about half of the Philippine population, those supported by OFW remittances…
After about 2 months since the above post, analysts see the currency breaching P47 to 1 US$. From a news report of the Philippine Daily Inquirer (30 August 2007), ‘[a] double whammy caused by reports that consumer confidence in the US has fallen to its lowest level this year and another report showing that excess US housing supply had reached its highest in more than 15 years in July again spooked investor sentiment on emerging markets.’ So far, external market forces fuelled by unfavorable developments in the US housing market are giving the OFWs more pesos to their hard-earned dollars. Let us wait and see.