Philippine President Benigno Aquino III held an emergency meeting with cabinet members and officials of the country’s Department of Foreign Affairs on Wednesday as concerns mount in Manila over the safety of Overseas Filipino Workers (OFWs) in the Middle East and the effect of the rising tensions between Saudi Arabia and Iran on Filipino employment in the region and their remittances, which form an important part of the country’s foreign currency income.
The meeting comes after growth in remittances from OFWs already slowed down in the recent past in the wake of lower oil prices and less labour demand in the Middle East due to delay or cancellation of exploration and construction projects. Together with the Saudi-Iran row, the situation could lead to a further drop in the employment of Filipinos in the Middle East and particularly in the Gulf Cooperation Council countries, and thus adversely affect the Philippine economy in general, should the situation persist or even worsen, experts warn.
Currently, about 2.5mn Filipinos are working in the Middle East, mainly as construction workers, engineers, nurses and domestic helpers. Saudi Arabia alone is hosting around 1.2mn of them, while there are at least some 4,000 in Iran, according to data from the Philippine Overseas Employment Administration. Together, they makes about one fourth of the total overseas Filipino workforce globally and also contribute about $6bn of the total remittances from OFWs back home of a total of about $26bn in 2015, which makes up nearly 10% of Philippine GDP.
“2016 is a very uncertain year. Definitely, the Philippine economy and the labour market will be adversely affected by all these developments,” Dr Rene Ofroneo, OFW expert at the University of the Philippines’ School of Labour and Industrial Relations, told Filipino news broadcaster GMA Network.
The Philippine Department of Foreign Affairs said it is “monitoring the situation very closely.”
“Our embassies are prepared to assist our OFWs under any contingency,” the department’s spokesman Charles Jose said in a statement issued on Tuesday. He emphasised that the Philippine government had already demonstrated to be capable of successfully repatriating thousands of OFWs from Libya, Iraq, Syria and Yemen during crises in recent years. 
Measures would also include ensuring that alternative jobs are in place for those OFWs who may lose their employment due to an escalating conflict, Jose added. The government said it has “already anticipated the necessity of such support” because of the decline of oil revenues that started to affect the job market in the Middle East.
While the Philippine Overseas Employment Administration still believes that 2016 will bring with it a small growth of OFW remittances despite all the woes, some economists are not so sure about that and feel that record-high remittances might become a thing of the past. This is because adding to low oil prices and regional conflicts is the rise of the US dollar valuation as a result of the gradual lifting of interest rates by the US Federal Reserve, which automatically puts pressure on other major global currencies which OFWs are remitting back home, such as the Japanese yen, the Australian dollar or the euro. Those currencies have all weakened sharply in recent months, including against the Philippine peso, factually devaluating foreign exchange sent home by OFWs, according to Jun Trinidad, country economist for the Philippines of Citigroup. 
“A portion of remittances, particularly from OFW earnings in non-US dollar currencies, faces material downside risk,” Trinidad said. In fact, the negative trend already became apparent last year when, for the first time since 2003, OFW remittances dropped in absolute value terms by 0.6% in the month of August, according to a surprise announcement by the Philippine central bank back then. 
Under the current circumstances, more such announcements are likely to follow, and this slowdown in combination with a continuous drop in foreign direct investments to the Philippines, weak exports, the worsening impact of weather phenomena on the agriculture sector and a looming power crisis cut put the Philippine economy to the test in a crucial election year.