Top international economist says Philippine economy has to grow 14% to stop OFW exodus

MANILA, Jan. 31 (PNA) -- BNP Paribas chief economist Dr. Andrew Freris Wednesday said the Philippine economy has to grow by at least 14 percent for the exodus of Filipino workers abroad to stop.

Invited back into the country by the European Chamber of Commerce of the Philippines (ECCP), Dr. Freris said current economic growth is not enough to stop the brain drain that is happening in the country.

“The Philippine economy can easily grow anywhere between 10 to 15 percent but somehow it is condemned to sub-potential trends,” Dr. Freris said.

Dr. Freris said the impact of the Overseas Filipino Workers (OFWs) is already showing in the country.

“The costs it imposes include the potential loss of educated and skilled workers to the economy, demographic consequences, as well as the social cost of broken families,” Dr. Freris said.

He added: “If they come home now and at the current rate the Philippine economy is growing, they will only find themselves unemployed.”

Dr. Freris also noted that although 58 percent of OFWs are employed abroad as household, factory, or construction workers, their jobs abroad do not indicate their present qualifications or educational attainment.

“Exporting domestics and cleaners does not reflect the skill levels of the workers involved. It reflects the demand overseas for these skills. The resultant mismatch of skills also reflects market consideration as their productivity in a different job is higher outside than inside the Philippines,” Dr. Freris said.

Already, the ECCP’s Human Capital Club last year estimated that local companies are incurring additional costs of at least P1 billion in recruiting and training new staff to replace those who have left to work abroad.

However, Dr. Freris also acknowledged the 10 million strong OFWs will help the Philippine economy post 6.20 gross domestic product (GDP) this year. He said the $ 15 billion OFW contributions in 2007 already represented 9.80 percent of the GDP.

“Rising remittances not only support domestic consumption, they also help maintain the current account surplus at the time when the goods and services account is consistently registering a deficit. Indeed, without these remittances, the current account would have been permanently in deficit,” Dr. Freris said.

Dr. Freris also pointed out that without the OFWs' remittance, the Philippines would be having current account deficits since 2003. Last year, the remittance sent home by the OFWs helped the country post surplus of $ 3.50 billion.

More than half of the remittances sent back to the country came from the United States of America where 44 percent of the OFWs are located.

Dr. Freris however noted that with more dollar inflow from OFWs, the Philippine peso is slowly losing its competitiveness against other currencies in South East Asia

“The strong performance of the peso has helped cap inflationary pressures from imported goods, particularly mitigating the impact of rising oil prices. On the other hand, it has lowered the external competitiveness of exports. The Philippine peso is now nearly 26 percent less competitive than it was in the middle of 2005,” Dr. Freris said.

Last year, the peso appreciated by 16 percent against the dollar from a low of P48.91 in January to P41.74 at the end of last year.

Government data showed the rise of the peso has considerably slowed down exports from $ 5.04 billion in July when the local currency was at P45.62 to the dollar.

Dr. Freris also cautioned the Philippine economy could be affected by the slowdown in the United States economy where 22 percent of the country’s exports are sold.

He also warned on a possible downturn in the country’s electronics export with the G3 economies showing signs of decelerating.

The Philippines, with 67 percent of its exports focused in the electronics sector, currently has the highest concentration rate among Asian countries. (PNA)