If predictions that the peso appreciates to P38 per US dollar by the end of 2008 materializes, then the average OFW household will be losing around P3,710 per month compared to the start of 2007, or a loss over the entire year from P30,000 to as much as P45,000, according to a study on the economic outlook released by independent think-tank IBON Foundation.
The roughly 15% increase in OFW remittances in 2007 compared to the past year was not enough to offset the 16% peso appreciation from January to December 2007, thus OFW families have not been able to maintain their incomes and been hit bad. IBON estimates that OFWs lose roughly P700 per $100 remittance.
From January to December 2007, the exchange rate of the peso to the dollar has strengthened by almost fifteen percent. This means that over the period, the family of an OFW who remitted $100 in January were able to exchange it for P4,891. By December this had fallen to P4,174 or a decline of P717.
Such a reduction is especially painful given the increasing prices of basic goods and services in the country. For example, from January to November 2007 the cost of an 11-kg (LPG) cylinder increased by P76.94 to almost P600. Water also recently implemented a rate hike that will cost consumers who consume 30 cubic meters per month an additional P60 on their bills.
“Overseas workers were forced to tighten their belts and remit more of their income to make up for the lost value,” said IBON research head Sonny Africa. Remittances from January to October grew by 16% compared to the same period in 2006.
The strengthening peso and its effect on OFWs’ incomes reveals the folly of the government’s labor export policy and its continuing reliance on migrant workers’ remittances.