Bernardo M. Villegas
Recent Articles
Need to Broaden VAT Base
published: May 30, 2017


Emerging Markets Leading World Growth
published: May 22, 2017




Articles  >> more topics
Advice to Returning OFWs

          I am sure that OFWs all over the world are watching closely developments in the Philippines for the first semester of 2010. They are naturally curious about what will be the results of the May 10 elections. I am sure they have their respective favorite candidates for both national and local offices.

         Even greater must be their interest in the Philippine economy which directly affects the daily lives of their loved ones. Well, I have good news for our “kababayans” abroad: at least for the first semester of 2010, incomes of many Filipinos will be improving while prices will remain stable.

    Consumer-oriented businesses, especially in the sector of small and medium-sized enterprises, should be ready for a strong recovery of consumption spending during the first semester of 2010. Business can really start the Year of the Tiger (which begins February 14, 2010) by hitting the ground running. Even before the official period of campaigning for the May 10 elections began, evidences of big spending could already be seen on TV, radio, and print advertisements; bill boards everywhere, including at the backs of buses; and travel and board and lodging expenses of candidates and their respective entourages wooing voters in the key cities of the country (I recently coincided with hordes of them in Cebu). There are estimates that just one of the more wealthy Presidential candidates must have already spent more than two billion pesos in pre-election campaigning. Rough estimates of total spending by candidates at all levels range from a low of twenty billion pesos to a high of fifty billion pesos, most of them spent during the three-month period preceding the elections. An added gossip is that some of the candidates had to be forced to bring back hoarded dollars abroad and convert them to pesos for spending in the Philippines. This may temporarily strengthen the peso.

          Then there are the hundreds of billions of pesos that will be spent by the Government at all levels on rehabilitating damaged infrastructures (which could be exempted from the election ban) and on new infrastructures, especially in Central and Northern Luzon, Central Visayas and the various regions of Mindanao. These will be at the tail end of the stimulus package that was made necessary in 2009 as a response to the global recession. By the second semester, when the new Government takes over, there will be serious attempts to reduce the fiscal deficit and to fight inflation. Businesses are well advised to take full advantage of the relatively strong growth of the first semester.

          Another piece of good news is the pleasant surprise that greeted the world when the U.S. economy grew by a sizzling 5.7 percent in the last quarter of 2009. Let me point out that this may not be sustainable for the whole of 2010 since some pundits expect a double-dip recession in the U.S. But our exporters should take advantage of even this short-term opportunity. After all, the U.S. is still our largest trading partner, not only because of the goods and services we directly export to the U.S. but also because of the re-export to the U.S. of such products as electronic components and semi-conductor devices by our other major trading partners in China and the ASEAN. Additionally, our direct exports to China could stage a strong recovery because the Chinese economy has gone back to growing at 9 to 10 percent.   France and Germany are also recovering at a faster pace than other European countries. These two are among our largest trading partners. We should see our exports growing at more than 10 percent in the first semester of 2010.

          Finally, we have the always reliable OFWs who are now being deployed in larger numbers and are still quite concerned with their relatives who suffered from the natural disasters of last year. Expect them to continue increasing their remittances, a most significant source of mass purchasing power. In the worst year of the Great Recession, remittances from OFWs increased by 4 percent (contrary to projections of the World Bank and other international institutions of a large decline).   Now that many countries in which our OFWs work have started to recover, we can rest assured that their remittances will continue to increase (I estimate 6 percent) in 2010.

          The consumer industries and services that will be benefited are the traditional Four F's (Food, Fashion, Furnishing and Fun) and the three Ts (transport, telecom, and tourism). Education and housing will also get a boost. Especially during the pre-election period, expect our food and beverage industry to grow at a hefty rate. There could be a short-lived recovery of fashion goods, since Filipinos may take advantage of the euphoria before elections to still splurge on luxuries. Over the medium-term they will become a lot more cautious in spending on non-basic items, just like what is happening to American consumers who have rediscovered the virtue of thrift during the global crisis. Furnishings will boom as there is a strong demand for low-cost and medium-cost housing as well as a need to replace many pieces of furniture damaged by Ondoy and Pepeng. Fun (entertainment) will stimulated by election-related spending as well as by the increase in domestic tourism that usually occurs during the summer months.

            If some OFWs are thinking of returning permanently, the first semester of 2010 would be an opportune time. It would be a good time to start some small businesses that can benefit from the positive work attitudes and enhanced skills usually acquired by our OFWs abroad. I especially recommend the growing of high-value crops, the establishment of bed-and-breakfast facilities in the countryside, early learning centers for children, restaurants and cafeterias, transport services for tourists and other personal services in the tourism sector. For comments, my email address is bvillegas@uap.edu.ph.