DUTERTE’S RELIANCE ON REMITTANCES WEAKENS PHL ECONOMY

The administration of Philippine President Rodrigo Duterte should start reducing its reliance on remittances by shifting gears and pushing higher investment in agriculture, industry and start-ups, wrote columnist William Pesek for the Asia Times on August 6, 2020, noting that the COVID-19 pandemic would reduce demand for Filipino workers overseas.

His recommendation comes as the Philippine government beefs up its manpower export industry by creating a Cabinet department or overseas Filipino workers (OFWs) at a time when fears about a huge slash in inward remittances grip the nation. Last year, a record $33.5 billion in cash was remitted from North America, the Middle East and Asia, spurring local consumption and property markets and filling government coffers, Pesek wrote. Nearly 40% of the remittances came from North America, particularly the US, where 40 million people are jobless, including Filipinos. All told, remittances accounted for roughly 10% of gross domestic product (GDP.)

“As these flows evaporate, investors and rating agencies alike will grow increasingly concerned about Manila’s current-account deficit and the peso’s stability. In June, goods exports plunged 13.3%, while imports fell 24.5%. Such data point both to ‘weak global demand and a stalling domestic economy,’ says Nicholas Mapa at Dutch bank ING. “Remittances,” he added, “aren’t expected to recover anytime soon with the global economy likely in recession, adding more heat to an already precarious situation for Philippine domestic growth prospects.” The country’s GDP plunged 16.5% in the second quarter.

Pesek said that since taking over in 2016, Duterte mostly rested on Aquino’s laurels but accelerated infrastructure upgrades through his $180 billion “Build, Build, Build” program that promises to construct hardware — roads, bridges, ports and power grids — needed to compete in Southeast Asia. “Yet he’s invested little in economic software — education, training and regulatory tweaks to support a startup boom. Spending more on the latter would help the Philippines keep more of its best and brightest at home, not toiling around the globe in ways that deplete the nation’s talent,” Pesek concluded.