Experts see worsening of US economy to hit OFWs

Overseas Filipino Workers (OFWs) and their families will likely bear the brunt of a possible worsening of the US economy, experts have noted following the historic credit rating downgrade the world’s biggest economy received from Standard and Poor’s (S&P). US-based consumers, including OFWs there, will have to shoulder higher costs of goods and services because of possibly higher interest rates, an expected consequence of the credit downgrade, said stock analyst Jomar Lacson in an interview on GMA News TV’s “News to Go" newscast Tuesday.
For the latest Philippine news stories and videos, visit GMANews.TV Lacson explained that US lenders will possibly raise interest rates due to the perceived difficulties of the US government in paying its debts. “Kung posibleng hindi ka makabayad, dapat i-charge kita ng mas mataas na interest rates," the analyst said, explaining the mindset among lenders. Such factor could help worsen the situation considering that American consumers are frequent credit card users. “‘Yan ang pinaka-unang matatamaan… credit cards," Lacson said. In an unprecedented reversal of fortune for the world’s largest economy, S&P on Friday axed the US’ top-notch Triple-A sovereign credit rating due to concerns about the US government’s budget deficit and domestic debt burden. The US now has a long-term rating of double-A-plus, according to Reuters. Lower remittance levels If the problem worsens, the US can dive into a double-dip recession, which in turn could impact on OFW remittances, Lacson said. “Ang concerns ng Standard and Poor’s ay ‘yung American economy. Kung hindi kayang malutas ang problema ng gobyerno, pupunta sa recession. Ang ibig sabihin ng recession, panghihina ng ekonomiya. So, panghihina ng ekonomiya, mababawasan ang mga trabaho… hihina ang kita," Lacson said. He said this can then result in lower OFW remittances to the Philippines, or foreign exchange flows that have buoyed the Philippine economy in previous years. The credit downgrade per se, however, does not pose a direct and immediate impact on the Philippine economy, Lacson said, noting that S&P is only one of three credit rating agencies that assess the worthiness of world economies. The two other agencies are Moody’s Investor Service and Fitch Ratings. “’Yung dalawa, actually, sinasabi nila na hindi namin babaguhin ang aming pananaw sa Amerika. So, hindi naman automatic na ‘pag ida-downgrade, tataas ang interest rates. Pero kung ‘yung dalawa, mag-agree na babaan din nila ang kanilang ratings, then automatic na talagang tataas ang interest rates," Lacson explained. Fr. Graziano Battistella, director of the Scalabrini Migration Center, confirmed Lacson’s assessment on the downgrade’s immediate effects. “Migrants will be affected by the downgrade only if, as a consequence of that, the US will go into another economic recession," Battistella said in a telephone interview with GMA News Online. Even during 2007-2009 financial crisis, however, OFW remittances remain “more resilient and more stable" than other foreign exchange inflows, Battistella noted. He said a possible reason is that OFWs are spread in other countries that may not be as affected as the US. A number of OFWs also work in industries that are relatively insulated from economic crises, such as domestic work, Battistella added. The priest said many OFWs also tend to sacrifice their personal needs to be able to remit consistent amounts to their relatives. However, Sonny Africa, research head of think-tank IBON Foundation, said in a statement that a worsening of the US economic recovery “will quickly impact on the Philippines in terms of weaker remittances, lower exports, and more problematic investments." Monitoring impact on OFWs In another statement Tuesday, the Department of Labor and Employment (DOLE) said it is now monitoring the impact on OFWs of the US rating downgrade. Labor Secretary Rosalinda Baldoz noted that Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. has downplayed the effects of the US downgrade on the Philippines. Baldoz, however, said it is too early to tell. Bangko Sentral ng Pilipinas (BSP) data show that OFW remittances rose in 2008 and 2009, the height of the global financial crisis that spawned the US recession. OFWs remitted $17.35 billion in 2009, or approximately P737.29 billion using the current exchange rate, according to BSP data. This was 5.6-percent up from $16.43 billion (P737.38 billion) in 2008. This is in sharp contrast to the remittances from the US, which plunged by 70 percent in 2009, to $7.83 billion (P332.78 billion) from $2.32 billion (P98.6 billion) in 2008, according to the BSP. Remittances from the US accounted for 13.37 percent of the money sent by OFWs to the Philippines in 2009. In 2008, 47.66 percent of remittances came from the US. Austerity measures To curb the possible effects of the US economic debacle on the Philippines, government must implement austerity measures and carefully assess the national budget, said economist Leonor Briones in an interview with GMA News TV’s “State of the Nation" on Monday.
For the latest Philippine news stories and videos, visit GMANews.TV “Tingnan ang lebel ng paggastos natin. Saan tayo nagwawaldas ng pera?" Briones said. Meanwhile, IBON’s Africa said government should now turn its eyes to “building the domestic economy." “Job creation and poverty reduction will not happen if the same failed globalization policies of previous administrations are retained," he explained. — VS, GMA News