The Economic and Social Impact of the Global Crisis in

the Philippines:

A Preliminary SnapshotA Preliminary SnapshotForum on Decent Work and Social Justice in

Times of Crisis 22 April 2009

SMX Convention Center Pasay City

BackdropFinancial crisis Global Jobs Crisis Social Crisis

ILO projection: world unemployment could increase by well over 20 million by the end of 2009 while the number of the working poor could rise by more than 100 million

Developed economies are hardest hit

Export-oriented developing economies in Asia experienced drop in stock exchange value, foreign direct investments and exports

The effect on the Philippines remains unclear. Close monitoring needed as the crisis unfolds

The Preliminary Snapshot

Objectives:

• present a preliminary snapshot of the crisis to understand its economic and social impacts on workers

• provide information on government response to the downturn

• identify elements for a Decent Work response

Impact on Macroeconomy

Philippine government remains optimistic

New growth rate projection for 2009 is between 3.1 - 4.1 %, higher than projections of the ADB (2.5%), WB (1.9%) and IMF (2.25%)

Difficult to determine actual impact on the macroeconomy with the varying projections

Lots of uncertainty

Impact on Economic SectorsLabour Market

January 2009 LFS: 1.7 percent employment growth

Jobs generated in 2008: 565,000 compared to 148,000 in 2007

Number of employed persons in 2008 increased to 34.3 million from 33.7 million in 2007

Employment growth led by services sector

Wage and salaried workers grew by 2.8 percent

Underemployment rate improved (down to 18.2% from percent 18.9 %)

Impact on Economic SectorsLabour Market

Despite job increase, unemployment climbed to 7.7 percent from 7.4 percent

Number of jobless Filipinos increased by 180,000 to 2.855 million in January 2009

More males (64.1 percent) were unemployed than females (35.9 percent)

Number of unpaid family workers grew by 2.5 percent

Export Sector

Most severe impact is on the export-oriented manufacturing sector

2009 export growth assumptions reduced further from -8.0 to -6.0 percent

Contributing to falling export growth is declining global prices of coconut products and mineral products

Exports dropped 41% in last 4 months of 2008 compared to same period in 2007

Impact on Economic Sectors

Export Sector

Exports of manufactured products fell by 39.9 percent in January 2009 compared to January 2008.

Bulk of decline is in semiconductors (-52.7 percent)

Most number of displaced workers from export sector: 51,017 displaced workers in electronics 8,351 displaced workers in garments

Total exports to the US dropped by 33.6 percent with Japan following in second with a share of 15.2 percent

Impact on Economic Sectors

Tourism sectorTourism expanded by just 1% in the third quarter of 2008 but rebounded to 4% in the fourth quarter

Domestic tourism expected to be active during the summer season

However, employment in hotels and restaurants expected to go down. In this sub-sector, 516 workers have already been permanently displaced, 368 temporarily displaced and 83 have received notification of flexible work arrangements

Impact on Economic Sectors

Impact on Population GroupsMigrant workers

Remittances forecasted to decline by at least 5% in 2009

January 2009 remittances 0.1 percent higher than January 2008, but lowest in 12 months

January 2009 level is down 9 percent compared to December 2008

6,406 Overseas Filipino Workers (OFWs) displaced

Only 2,000 returned to the Philippines

More than 4,000 chose to remain abroad to seek re-employment

Impact on Population GroupsYouthYoung women and men expected to be severely affected: 800,000 new graduates projected to join labour force this April 2009

Youth unemployment already been high in the Philippines: 5 out of every 10 unemployed in the 15-24 year age bracket and 3 out of 10 in the 25-34 age bracket

Compounding this is skills mismatch problem: available jobs remain unfilled because applicants lack right skills

With some employers preferring short-term and flexible work arrangements, young people may be further disadvantaged

Impact on Population GroupsInformal economy workers

Informal economy expected to expand further due to joblessness, rising returning migrant numbers and increase in number of workers engaged in part-time employment

Children

Enrollment in private schools projected to decline, as families reduce household expenditure

Could exacerbate child labor problem

Impact on Population GroupsIndigenous Peoples

Indigenous persons may not be affected directly but neither are they likely to benefit from recovery when there is an upturn, unless specific efforts are made for their social and economic inclusion.

Gender dimension

Gender dimension remains a challenge due to the lack of sex-disaggregated data related to the crisis

Many women lost jobs though they can’t afford to stop working: women are reported to spend more of their income than men on family welfare and education

Social Impact Measures implemented by some companies in export sector:

- transfer to locations with lower minimum wage

- scale down operations

- reduce work days

- provide fewer benefits

- forced some workers to take leaves of absence or early retirement

- pay some casual workers on a daily rather than monthly basis

- remove allowances (transportation, rice, laundry)

- cut wages to as high as 50%

- no overtime pay

Social Impact Coping Mechanisms

Among Women Workers

- cut leisure activities, shop less frequently

- adjusted expenditure on food, health and education costs

- buy cheaper alternatives for milk

- take children to public health centers instead of private doctors for health care

- some sent their children to the provinces to be cared for by grandparents

Social Impact - reduced financial support to extended families

- withdrew children from private school or deferred their enrollment to the next school year

- look for alternative sources of income, through part-time work or through migration

- some sold property, including cars and appliances, to meet basic needs

- Many had exhausted sources for loans (from the social security system, companies, or from relatives)

Social Impact Coping Mechanisms

Among male workers

- find reduced earnings regrettable, but manageable

- set aside recreation activities

- sold their appliances

- reduce consumption of food, water and electricity

- reduce remittances to parents or provide them less regularly

- for married male workers, would enroll their children in publicschools

- reduce expenditure on food, clothing and medicines

Impact on Social Security Institutions

Social security institutions in the Philippines appeared to remain resilient

SSS has targeted an eight percent collection increase this year over 2008.

Proposal to restructure the computation of pensions to entitle retirees to larger pensions

SSS and GSIS both reported significant increases in net income in 2008

Equally positive outlook for PhilHealth: increasing benefits for members by up to 35 percent.

PhilHealth benefits first increase since 2002 and require no increase in premium contributions

Government Response

Philippine Economic Resiliency Plan (ERP)

- Country’s overall framework to respond to the impact of the global crisis, spearheaded by the National Economic Development Authority (NEDA)

- ERP aims to generate 800,000 new jobs

Comprehensive Livelihood and Emergency Employment Program (CLEEP)

- Major strategy to achieve ERP objectives

- Aims to protect the most vulnerable sectors from threats and consequences of reduced or lost income as a result of the globaldownturn

- Comprises emergency employment and livelihood projects implemented by various government agencies

ChallengesThe Philippines government’s response to the crisis has been immediate and coordinatedEnsuring the coherence and reach of the programmes to the most affected sectors and geographical locations is a key challenge

LGUs in most affected regions will need funding additional to their usual budgets to support effective emergency employment and assistance programmes for the displaced workers

Continuous monitoring of the effects on vulnerable sectors is critical

Preparing for recovery and growth models can already be undertaken during the crisis period itself

The international community can certainly provide technical and financial assistance in both the monitoring and the sustainable recovery efforts

A Decent Work ResponseSocial expenditure should not be compromised and workers’ rights for decent work should not be shortchanged

Frontloading investment in public works

Support to productive enterprises, in particular small businesses

Investing funds at the local level for job creation, rural development, and credit for micro and small and medium enterprises (SMEs)

Interventions to assist the reintegration of returning Overseas Filipino workers (OFWs)

Enhancing social protection systems, social safety nets and conditional cash transfers through basic social security floor

Prepare for longer term recovery by making employment and decent work central to economic planning, implementation and monitoring for results and addressing systemic problems

Strengthening social dialogue: stronger cooperation and dialogue among government, employers and workers

THANK YOU!!!