Impact of the US credit downgrade on labor, OFWs
Here comes the rains again.
Falling on my head like a new memory,
Falling on my head like a new emotion.
Eurythmics couldn’t have described our situation better. The downgrading of the United States from an AAA credit rating to AA+ by Standard & Poors (S&P) has produced rhetoric and results that remind me of the early days of the global financial crisis in 2008. Everyone is being told to remain calm. The effects on our own economy would be minimal. The Philippine economy is strong.
Magdilang anghel sana kayo.
The economic fundamentals of the Philippine economy are undeniably strong – tremendous dollar reserves, recent and unprecedented credit upgrades, an increase in tourism arrivals, and improved tax collections. The government’s anti-corruption drive has not abated. President Aquino enjoys high trust ratings and good relations with legislators. Overseas Filipino workers spread across various continents continue to remit hard-earned dollars to their families.
But wait. The full impact of the US credit downgrading is just slowly unfolding. Hysteria is the world’s biggest enemy. Reminders to stay calm and not to panic are just as important now as it was in 2008. Still, we need to understand what’s afoot. It’s impossible to stay calm when one is caught, and not in a good way, by surprise.
A much stronger peso (say, at 41:1) will lead to job losses in the export market particularly among micro, small and medium enterprises where the marginalized sectors find jobs. A weaker dollar would encourage flooding of imported goods including agricultural products, but not necessarily to a lowering of prices. A weaker dollar results in more savings for government because the conversion results in less foreign debt to service. However, a stronger peso affects OFW households since a lot of OFWs still exchange local currencies abroad to dollars before sending these monies home.
I asked Thelma, a wife of an OFW based in Miami, Florida about the effects of the debt crisis and credit downgrade on remittances. She said that her husband who works as FB manager of a cruise ship had to settle for a wage cut and longer hours at work. The cruise liner was not getting as many clients as before. As a result, her husband would not be able to send the same level of remittances as he did a month or two ago.
Also in the news was the cutting of 100 jobs for Pinoy nurses in New York City. Due to the recession, the Peninsula hospital is well on its way to declaring bankruptcy. Come November (ironically, the month for thanksgiving), more jobs will be shed in the US once spending cuts prevail as contained in the debt ceiling law. The psychological blow that would come once the axe falls on various states and sectors would be enormous. American investments that rely directly or indirectly on federal requirements in areas of defense, humanitarian aid, and support for international NGOs could be curtailed.
And so yes, it is too early to say how the Philippine economy would be affected by the US credit downgrade. But there is much that we must be ready for; and a great deal that we can do to prepare for both the good and the bad consequences ahead.
To dismiss any effects of the downgrade on our economy this early as minimal can bring short-term assurances, but not long-term gain.
Now more than ever, we need to help our OFWs and workers understand the global situation, encourage them to prepare for what’s to come, and drive home the values of self-reliance, savings, and perseverance. All this we need to do while providing them the space, environment and freedom to dream big, be hopeful, and stay productive, amid so much uncertainty.