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Page added on February 5, 2016
Ten Million Reasons Why Cheap Oil Might Hurt The Philippines
Cheap oil should be a good thing for a country like the Philippines that imports almost all of its fuel, but there are 10 million reasons why that may not be the case.
That’s how many Filipinos work overseas, many of them on rigs, tankers and as domestic help or construction workers in oil-producing nations in the Middle East. Together they sent home $22.8 billion in the first 11 months of 2015, around 10 percent of gross domestic product. The potential for a slowdown in remittances is being closely monitored, the central bank said last week.
A prolonged period of oil at less than $30 a barrel could create an economic headache for the successor to President Benigno Aquino, who steps down in June, and may further weaken the peso, which has fallen the most in Southeast Asia this year. The negative impact on remittances and less revenue from fuel taxes will outweigh the positive effects, according to Benjamin Diokno, the country’s budget secretary from 1998 to 2001.
“We’re heavily dependent on overseas Filipino workers,” said Diokno, who is now an economics professor at the University of the Philippines in Manila. “Some of them are coming home also in part due to war, which only magnifies the problem.”
More Widespread
The share of remittances coming from the Middle East could be as high as 40 percent, compared with 23 percent in the official data, according to a Jan. 27 research note by Michael Wan, a Credit Suisse Group AG analyst in Singapore. Remittance growth slowed to 3.6 percent in dollar terms last year through November, from 5.8 percent in 2014, central bank data show. Volumes have held up reasonably well so far, said Wan.
That could change as the impact of a 29 percent drop in Brent crude over the past six months forces Saudi Arabia to cut generous subsidies to its citizens, while the United Arab Emirates’ Etihad Rail suspended a major rail project this week after firing almost a third of its workforce. Brent recovered to around $35 on Monday after falling to a 12-year low of $27.10 a barrel on Jan. 20.
“Before, when the trouble would be concentrated in one of the countries in the Middle East and North Africa, the workers could just simply move to a neighboring country and find employment,” central bank Governor Amando Tetangcosaid Jan. 25. “Now the trouble is more widespread.”
The Department of Labor is monitoring the situation in the Middle East in the light of the possible retrenchment of Filipino workers there, although has yet to see any major job losses, Communications Secretary Sonny Coloma said in a statement on Monday. The department “is prepared to assist workers that may be affected in securing alternative employment and livelihood opportunities,” he said.
Job Losses
As well as declining oil prices, a more general slowdown in global trade is affecting the job prospects of Filipino seamen. Many drillers and oil-service companies have suspended operations and shipping companies are also hurting, said Nelson Ramirez, the president of United Filipino Seafarers.
“I have talked to one of the biggest crew suppliers of offshore vessels,” he said in Manila. “They have many laid-up ships. There will be more job losses.”
That could take a toll on the Philippines’ current-account surplus,which narrowed to $5.6 billion in the nine months through September from $6.8 billion in the year-earlier period, according to the central bank. Gross domestic product, already rising the fastest among Southeast Asia’s major economies at a 5.8 percent pace in 2015, will increase 6 percent this year, a Bloomberg survey shows.
While there’s already a slowdown in remittance growth from the Middle East, the current account will remain in surplus, said Joey Cuyegkeng, an economist at ING Groep NV in Manila. He forecast the peso, which dropped 7.5 percent over the past 12 months, will fall another 2.3 percent by the end of the year.
External risks are on the rise, but the Philippines has enough buffers in place including $80.6 billion of foreign- exchange reserves and growing revenue from its business-process outsourcing industry, said Paulo Magpale, treasurer at BDO Private Bank Inc. in Manila.
Bigger Cutbacks
“We won’t be shaken easily during bad times,” said Magpale, who forecast the peso will strengthen 1.4 percent by the end of the year. The peso fell 0.1 percent to 47.68 a dollar as of 12:25 p.m. in Manila on Monday, according to Bankers Association of the Philippines. The currency has dropped 1.1 percent this year.
Slowing remittance growth is unlikely to have a major impact on Philippine GDP, according to Credit Suisse’s Wan, who is forecasting expansion of 6.2 percent this year. Weaker private consumption usually leads to expatriate Filipinos sending more money home to help families through tough times and savings on fuel costs will spur domestic spending, he said.
“The real test might be yet to come,” said Wan. ”If oil prices continue to head lower, we could see bigger cutbacks by Middle East governments, which will weigh on remittance prospects.”
25 Comments on "Ten Million Reasons Why Cheap Oil Might Hurt The Philippines"
onlooker on Fri, 5th Feb 2016 8:24 am
A general story in keeping with the slowing down of the world economy since 2008. This is just a foretaste. It is hard to really fathom how the world in general will react once the STHF for real. I have to imagine that the immediate reaction will be in some countries that are better off to close the borders and for the govt. to gain more power. In other countries, a type of martial law with a wartime focus to get needed provisions to the people. Then finally in the worst positioned countries all hell can break loose and four horseman of the apocalypse can ride in.
Davy on Fri, 5th Feb 2016 9:01 am
An economy based on “remittance prospects” is going to be an economy poorly placed for the collapse of globalism especially when that country has a population of 100MIL and growing rapidly. This size population in such a relatively small land area with the prospects of less current account funding from remittance will surely amount to increased food insecurity. All this at a time that the Philippines is in the number one slot of a country in the crosshairs of climate change. I would not be bragging on the Philippines like some do here with these conditions facing them.
Kenz300 on Fri, 5th Feb 2016 9:09 am
Too many people……….create too much pollution and demand too many resources….
China made great progress in moving its people out of poverty…….one reason was slowing population growth….
.
If you can not provide for yourself you can not provide for a child.
CLIMATE CHANGE, declining fish stocks, droughts, floods, air water and land pollution, poverty, water and food shortages all stem from the worlds worst environmental problem……. OVER POPULATION.
Yet the world adds 80 million more mouths to feed, clothe, house and provide energy and water for every year… this is unsustainable… and is a big part of the Climate Change problem
Birth Control Permanent Methods: Learn About Effectiveness
http://www.emedicinehealth.com/birth_control_permanent_methods/article_em.htm
How Is Climate Change Affecting the Philippines?
http://ecowatch.com/2016/01/22/climate-change-affecting-the-philippines/?utm_source=EcoWatch+List&utm_campaign=da3a287be1-Top_News_1_22_2016&utm_medium=email&utm_term=0_49c7d43dc9-da3a287be1-86023917
makati1 on Fri, 5th Feb 2016 9:18 am
RIGPORN… While the stats in the first paragraph are pretty much facts, it then devolves into fear mongering, guesses and what if’s. Typical Western propaganda bullshit.
The last paragraph has one accurate quote:
“Slowing remittance growth is unlikely to have a major impact on Philippine GDP, according to Credit Suisse’s Wan, who is forecasting expansion of 6.2 percent this year. Weaker private consumption usually leads to expatriate Filipinos sending more money home to help families through tough times and savings on fuel costs will spur domestic spending,”
The article seems to suggest that the ME can bring down the Philippines by sending home the very people who run their countries infrastructure and resource recovery, not to mention their healthcare workers and their Nannies.
There are over 2 million Filipinos working in the US alone and sending money home. Those dollars are now worth more Pesos than before. About 7% more than only two years ago. By the time the world economy can affect the OFWs, the rest of the world will be in a great depression or worse. At least the Filipinos will have a place to live and food to eat. The rest of the world should be so lucky.
As for oil, few Filipinos will miss the pint of oil they ‘use’ per capita daily.
“The Philippines could be considered a world leader in renewable energy, with its 30 percent of its power generation being powered by the renewable energy sector. The Philippines is the world’s second largest generator of geothermal energy and was the first Southeast Asian nation to invest in large-scale solar and wind technologies.” WIKI
If I were in a Western country, I would be prepping at super speed for the coming pain.
“The Final Blueprint for the Enslavement of the American People: “Obamavilles, Food Shortages, Riots, Martial Law…”
“In A Crisis, Your Paper Dollars Are Worthless: “Real Goods Are The Real Money”
“Retail Collapsing in America As Shoppers Tighten Spending: “Entire Malls Now Completely Abandoned”
“When The Economy Collapses The Government Will Implode : “The Support Mechanisms On Which We Depend Will Break Down”
“How Do You Know When Your Society Is In The Midst Of Collapse?”
http://www.shtfplan.com/
And, for your weekend reading:
“One of the great dangers of the life indoors, is the anesthetizing effect it has on a person. When we aren’t out in the world, we aren’t present to watch the dying. Attempting to talk about this via an electronic medium, even via the written word at all, is near futile because it requires the symbolic recreation of the tragedy unfolding around us, and the recreation will never carry the weight or the pain of the real thing….”
http://www.doomsteaddiner.net/blog/2016/02/03/finding-true-north/
It was a beautiful day here in the 3rd world, where the sun shined all day and it is about 82F outside at 11 PM. I hope your day was as good.
makati1 on Fri, 5th Feb 2016 9:24 am
BTW: The Us can only wish for a real, positive GDP growth. 6.2% would be an American Economist’s wet dream. LOL
penury on Fri, 5th Feb 2016 11:40 am
Having lived in various countries around the world, including the P.I. my conclusion is that the developed world spends an inordinate amount of time worrying about money. In the “third world” the majority do not have any money and do not spend time wworring about it. Life is different in societies which fail to worship mammon, but you would have to live it to understand that.
Boat on Fri, 5th Feb 2016 12:36 pm
mak,
The US does not need 6.2% growth. In fact if it were not for immigration it would do well with no growth.Which is where the growth is coming from anyways.
ghung on Fri, 5th Feb 2016 12:45 pm
Wrong, Boat. Even a so-called steady state economy requires growth. Things wear out and need to be replaced. Entropy takes it’s share, and growing debts must be serviced. A waste-based economy reliant upon finite resources must grow or contract.
GregT on Fri, 5th Feb 2016 12:57 pm
When is Boat not wrong?
Boat on Fri, 5th Feb 2016 1:06 pm
Ghung,
Take cars of instance. They are replaced but they last longer and driven further and more efficient. So the net effect is less energy per mile and less energy needed for each generation of improvement. This is not growth but still a better product. So products can be improved replaced without growth during decline. This is why the growth theory is flawed.
GregT on Fri, 5th Feb 2016 1:12 pm
Boat,
“This is why the growth theory is flawed.”
It isn’t a theory Boat. It’s common sense. Something that you routinely display a complete lack of.
ghung on Fri, 5th Feb 2016 1:32 pm
Boat says; “This is not growth but still a better product.”
Funny, that. You can’t replace and improve products in a waste-based system without growth. That would ignore entropy and other losses due to waste. In an environment of declining finite resources, growth in energy consumption is required. Seems you’ve redefined growth to fit your narrative. Then, again, you told Greg on another thread; You do love to make up the rules and what definitions mean. This is why it is impossible to have a discussion with you.”
Boat on Fri, 5th Feb 2016 1:56 pm
Ghung,
I guess you misunderstood. I was poing out how a product could be replaced even when there is no growth or even in contraction and the buyer comes out ahead.
“You can’t replace and improve products in a waste-based system without growth”
I disagree with you entirely. Even in recession products are bought and sold. In fact this is where the big money gets troubled assets cheap.
Buying a product or asset during a recession is not called growth.
GregT on Fri, 5th Feb 2016 2:02 pm
“Buying a product or asset during a recession is not called growth.”
Unless you happen to be the one buying that product or asset.
Apneaman on Fri, 5th Feb 2016 2:08 pm
pen, there is also a subset of white western boys who spend an inordinate amount of time worrying about, arguing over and counting barrels of oil. Like it’s gonna fucking matter.
Unlike the “third world” the west and especially America is already starting to find that all the oil in the world will not matter since they have left the infrastructure to rot.
ASME – The American Society of Mechanical Engineers Infrastructure Report Card: America’s GPA: D+
Estimated Investment Needed by 2020: 3.6 Trillion Dollars.
Just to bring it up to speed. Not happening and getting worse. In addition to the regular wear and neglect it’s getting hammered ever more frequently by billion dollar AGW jacked “weather events”. I like to keep an eye on Miami – it’s turned into a giant infrastructure money pit due to sea level rise. There will come a point in the next 5 years when the real estate race for the exit starts there and I’m predicting a cascading effect. Major panic nation wide – American style. Why more folks don’t pay attention to this weak link, I do not know, but simply do a bit of research pretty much in any city, county, state or federally and it becomes glaringly obvious that the money will never be there to address it. Many can barely afford the band aid fixes cause they already broke and in deep debt.
Desperation time approaches
Obama to propose $10-a-barrel oil tax to fund rail and highway projects
https://www.washingtonpost.com/business/economy/obama-to-propose-10-a-barrel-oil-tax-to-fund-rail-and-highway-projects/2016/02/04/49b3ec5c-cb7f-11e5-88ff-e2d1b4289c2f_story.html
Waiting for Collapse: USA Debt Bombs Bursting
“It’s been so easy the past 15 years for local governments in the USA, state governments, government authorities, corporations, banks, hedge funds and the US Federal government to simply say how many millions, billions or trillions of dollars they wanted, pay some high priced call accountants to fill out some paperwork with fine print and voila, millions, billions and trillions of dollars in borrowed money simply appeared. It has been that easy!
Now, the government in the USA owes $46 trillion, US corporations owe $15 trillion, US individuals owe $13 trillion plus there are $315 trillion in outstanding Wall Street derivatives. (Few Americans know what a derivative is, but we as a nation are on the hook for up to $315 trillion in additional debt because of these derivatives.) These debt figures continue to escalate with each passing month.”
http://www.counterpunch.org/2015/09/23/waiting-for-collapse-usa-debt-bombs-bursting/
Analysis: 61,000 U.S. bridges ‘structurally deficient’
http://www.usatoday.com/story/news/2015/04/01/61000-bridges-structurally-deficient/70730956/
Boat on Fri, 5th Feb 2016 2:25 pm
apeman,
“Unlike the “third world” the west and especially America is already starting to find that all the oil in the world will not matter since they have left the infrastructure to rot”.
Every now and then we can agree.
Overall, Americans experienced 6.9 billion hours of traffic delays in 2014 compared to 6.6 billion in 2007 and 1.8 billion in 1982.
There would be less demand for oil if traffic was managed. Another reason to stop population growth through immigration. Any and all growth is the result of immigration. Contrary to what most think the US does not need growth. In population or in traffic.
Apneaman on Fri, 5th Feb 2016 2:28 pm
Every now and then you see the light boaty. Keep it up pardner.
GregT on Fri, 5th Feb 2016 2:31 pm
OMFG!
onlooker on Fri, 5th Feb 2016 2:36 pm
Bravo Boat!
penury on Fri, 5th Feb 2016 4:18 pm
If you want a preview of collapse look to Michigan, Illinois, just to mention a few million people who are already aware of collapse.
onlooker on Fri, 5th Feb 2016 4:27 pm
Or Detroit Michigan. They’re was even a quote about that area and people ” Now, now, lay off Detroit. Them people is living in ‘Mad Max’ times.”
Davy on Fri, 5th Feb 2016 6:24 pm
“If you want a preview of collapse look to Michigan” :BS meter movement: The Northern half of Michigan is wonderful and doing great.
makati1 on Fri, 5th Feb 2016 9:37 pm
Boat, the US is not in a recession, it is in a depression. Look behind the bullshit the US MSM shovels out to the sheeple and you will see reality.
Over half of the working age population are jobless, with no hope of future employment. 45+ million people in the food lines daily. 2+ million children living on the street, homeless. And on and on.
Apneaman on Fri, 5th Feb 2016 11:10 pm
Mak getting worse by the day.
<bYAHOO TO CUT 1,700 WORKERS AS CEO TRIES TO SAVE HER OWN JOB
“Yahoo’s fourth-quarter report provided fresh evidence of the company’s deterioration. After subtracting ad commissions, revenue plunged 15 percent to $1 billion compared with the previous year – the biggest drop since Mayer became CEO in July 2012. Things continue to look bleak, as Yahoo forecast a net revenue decline of 12 to 17 percent this year.
The Sunnyvale, California, company reported a fourth-quarter loss of $4.4 billion, reflecting the eroding value of its services. The amount included a $1.2 billion hit for acquisitions made under Mayer, including a $230 million decrease in the value of blogging service Tumblr, which the company bought for $1.1 billion in 2013.”
http://hosted.ap.org/dynamic/stories/U/US_YAHOO_SHAKE_UP?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT
Core Employment (Age 25-54) Still Below January 2000 Level, 3 Million Below 2007
“With the mainstream media going gaga over the headline unemployment rate of 4.9%, let’s put a spotlight on actual employment with a focus on those aged 25-54.
Age group 25-54 ought to be out of school, not retired, not on disability, and working somewhere. Here are some charts that show what has actually happened.”
http://mishtalk.com/2016/02/05/core-employment-age-25-54-still-below-january-2000-level-3-million-below-2007/
makati1 on Sat, 6th Feb 2016 3:50 am
Ap, the real, unadulterated unemployment rate in the Us is north of 12% and probably closer to 25% if the truth be known. You cannot replace $40/hr manufacturing jobs with minimum wage ‘service’ jobs and call it equal.