_Firstly, reduced demand for exports, which account for 47.3% of the GDP_ , is likely to result in reduced labor demand, particularly in the electronics, textile, and garment sectors. As urban, formal sector workers lose their jobs, they could move to the informal sector, which would tend to depress informal sector wages. Secondly, domestic remittances from urban workers to rural households are likely to decrease. This is problematic in light of the fact that 47% of households in 2006 relied on domestic remittances as a source of income. _Thirdly, a reduction in international commodity prices_ (for example, the price of coconut) may have an adverse impact on the income of agricultural workers.

_Although a reduction in foreign remittances_ could have potentially occurred due to the impact of the crisis in labor markets countries where OFWs are located, the available macro projections do not contemplate such a decline but rather predict a slightly increase in international remittances (Table 1). OFWs account for an estimated 27.5% of the **Table 1: Real output growth projections in Philippines (%)** total labor force, and send remittances to about a quarter of Filipino households, in **Benchmark Crisis** amounts that add up to as much as 10% of **2009 2010 2009 2010** GDP.

|**Table 1: Real out**|**put growt**<br>**Bench**|**h projectio**<br>**mark**|**ns in Philippi**<br>**Cri**|**nes (%)**<br>**sis**|
|---|---|---|---|---|
||**2009**|**2010**|**2009**|**2010**|
|Total GDP (real)|4.7|5.0|1.4|3.1|
|Agriculture|3.0|3.0|1.1|2.2|
|Manufacturing|4.0|4.2|(6.2)|1.0|
|Other<br>Industries|6.7|6.7|12.1|8.6|
|Services|5.3|5.7|2.9|3.2|
|Remittances|||||
|(USD billions|17.9|19.5|17.1|18.0|
|<br>nominal)|||||
|_Source_: World Bank|Philippin|es country|team||

Table 1 shows the aggregate and sector‐ specific growth rate projections for the Philippines, obtained from the World Bank Country team (see Annex 2, Table A.2 for more detailed data). Two macroeconomic scenarios are considered for each of the years (2009 and 2010): (i) benchmark – the scenario that was expected in the absence of nominal _Source_ the crisis; and (ii) crisis – the scenario that is expected (or occurred in the case of 2009) with crisis.

Overall GDP growth is expected to be 3.3 and 1.9 percentage points lower with crisis than in the benchmark scenario in 2009 and 2010 respectively. The biggest shock is expected in manufacturing, primarily due to a fall in demand for manufacturing exports. In 2009, the growth of manufacturing output is estimated to fall by 10.2 percentage points, from a 4% expansion to a 6% contraction. The sector is expected to register a small positive growth rate in 2010, but that will still be 3.2 percentage points lower than what manufacturing growth would have been in the absence of the crisis.

The spillover effect from the decline in manufacturing – including lower domestic demand for goods and services – is likely to have an impact on other sectors as well, especially services. Output growth in the services sector is projected to decline due to the crisis by 2.4 and 2.5 percentage points in 2009 and 2010, respectively, compared to the benchmark (no‐crisis) scenario. Some impact is expected in the agricultural sector as well due to the spillover effect from other sectors and reduced commodity prices. Agricultural output growth projected to be lower by less than 1.9 percentage points in 2009 and 0.8 percentage points in 2010 due to the crisis. It is important to note that all sectors, with the sole exception of manufacturing in 2009, are expected to register positive growth for both years even with 3