GCC remittances remain resilient
Monday, 29 March 2010 08:48
Source: Emirates Business
By: Dr Ayman Ali
Cash outflows from Gulf countries continue to grow. Remittances from expat workers to their countries are expected to start revive this year, after a small drop last year due to global economic crisis, according to different estimates. Global remittances declined slightly last year, but are expected to grow modestly in 2010 even though economic recovery is still fragile.
The worst case scenario predicted at the start of the economic recession – mass exodus of expatriate workers from developed and developing economies – didn't happen and such workers sent even more remittances from certain regions like the Gulf Co-operation Council (GCC) countries.
According to World Bank (WB) estimates, based on official figures from central banks of relevant countries, the drop in remittances in 2009 was at about six per cent to reach $317.2 billion (Dh1.16 trillion).
Though the drop was not severe, taking into consideration the global economic crisis, it was significant to countries relying on remittances inflows. Compare last year to the year before and significance becomes evident: in 2008 global remittances totalled $337.8bn out of less than $300bn a couple of years before. The halt of upward trend in itself could have significant impact on certain labour-exporting countries.
Remittances outflows from GCC countries continued to grow anyway, rising by almost eight per cent last year. That of course is far less than growth in 2008, when remittances from the region grew by more than 30 per cent to reach $40bn, with UAE and Saudi Arabia sharing the bulk of it. That trend is expected to continue, as Gulf economies return to healthy growth.
Various estimates suggest that GCC countries have about 12 million expatriate workers, most of them from Asia and Africa – where remittances didn't decline as much as other regions such as Central Asia or Latin America.
For example, remittances inflows to Pakistan grew by 22 per cent annually to $5.2bn in the first seven months of the current financial year, buoyed by rapid growth in transfers from UAE (up 127 per cent), UK (up 90 per cent) and Saudi Arabia (up 19 per cent). While Bangladesh's remittance inflows rose 21 per cent in the seven months to January to $6.5bn.
Remittances and GDP
Philippines is seen by WB and other institutions as an important example for understanding the remittances picture because its inflows are both large in absolute terms ($17bn) and comprise a relatively large share of its GDP (about 11 per cent).
Data from its central bank indicate that remittances grew 5.6 per cent last year. This marked a significant slowdown after seven straight years of double-digit growth.
But it was still a strong performance in the circumstances, enabling private consumption to grow by 3.8 per cent in real terms, which is a much faster pace than the overall economy.
As the impact of economic slowdown on remittances was not even globally, some parts of the world bore the brunt of the negative effects. Though China and India receive the most in remittances in absolute terms, remittances inflows constitute very small as a share of their GDPs (about one per cent and four per cent, respectively). But for very small economies, remittances can be hugely important. According to WB the value of remittance flows in 2008 was equivalent to 50 per cent of GDP in Tajikistan, 38 per cent of GDP in Tonga and 31 per cent of GDP in Moldova. Official data show that Tajikistan saw a 35 per cent fall in inflows in the first nine months of 2009. Most of the country's workers seek work in Russia, whose economy contracted by almost eight per cent in real terms last year.
Remittances from the US are important for many economies in Latin America and the Caribbean. And the steep downturn in the US economy has undermined remittance flows to countries in the south. In El Salvador, for example, funds sent back by Salvadorans working in the US fell for 15 consecutive months to December 2009, the longest protracted month-by-month downturn on record. Remittances inflows fell by 8.5 per cent in 2009 as a whole. Honduras, meanwhile, saw a 12.5 per cent fall in remittances in 2009. Mexico, the world's third-largest recipient of remittances in absolute terms, suffered a 16 per cent decline in remittances in the year to January 2010, according to its central bank data. If the relatively-sound economic situation in regions such as the GCC would help keep global remittances of expatriate workers healthy, other factors contribute to keeping remittances growing.
Cheap labour costs
As economic recovery in developed economies is still weak, pressures on companies are high to reduce production costs. That might be good for expatriate workers, for the lower cost of employing such labour may encourage employers to get rid of more expensive workers creating opportunities for emigrant labourers. Another factor supporting remittances is that workers from poor countries typically face high migration costs. This is likely to deter those who lost their jobs during the crisis from returning home, instead encouraging them to soldier on in the host country or even to look for illegal work.
The World Bank estimates global remittances to increase in 2010 to $321.6bn, which is not that much of a revival. Analysts suggest that with unemployment set to remain very high in key employment markets, and with the global recovery at risk of stalling as governments withdraw policy stimulus, remittance flows from migrant workers are likely to come under further pressure.
At least it is not expected to be growing at the same pace of 2007 and 2008.
Monday, 29 March 2010 08:48
Source: Emirates Business
By: Dr Ayman Ali
Cash outflows from Gulf countries continue to grow. Remittances from expat workers to their countries are expected to start revive this year, after a small drop last year due to global economic crisis, according to different estimates. Global remittances declined slightly last year, but are expected to grow modestly in 2010 even though economic recovery is still fragile.
The worst case scenario predicted at the start of the economic recession – mass exodus of expatriate workers from developed and developing economies – didn't happen and such workers sent even more remittances from certain regions like the Gulf Co-operation Council (GCC) countries.
According to World Bank (WB) estimates, based on official figures from central banks of relevant countries, the drop in remittances in 2009 was at about six per cent to reach $317.2 billion (Dh1.16 trillion).
Though the drop was not severe, taking into consideration the global economic crisis, it was significant to countries relying on remittances inflows. Compare last year to the year before and significance becomes evident: in 2008 global remittances totalled $337.8bn out of less than $300bn a couple of years before. The halt of upward trend in itself could have significant impact on certain labour-exporting countries.
Remittances outflows from GCC countries continued to grow anyway, rising by almost eight per cent last year. That of course is far less than growth in 2008, when remittances from the region grew by more than 30 per cent to reach $40bn, with UAE and Saudi Arabia sharing the bulk of it. That trend is expected to continue, as Gulf economies return to healthy growth.
Various estimates suggest that GCC countries have about 12 million expatriate workers, most of them from Asia and Africa – where remittances didn't decline as much as other regions such as Central Asia or Latin America.
For example, remittances inflows to Pakistan grew by 22 per cent annually to $5.2bn in the first seven months of the current financial year, buoyed by rapid growth in transfers from UAE (up 127 per cent), UK (up 90 per cent) and Saudi Arabia (up 19 per cent). While Bangladesh's remittance inflows rose 21 per cent in the seven months to January to $6.5bn.
Remittances and GDP
Philippines is seen by WB and other institutions as an important example for understanding the remittances picture because its inflows are both large in absolute terms ($17bn) and comprise a relatively large share of its GDP (about 11 per cent).
Data from its central bank indicate that remittances grew 5.6 per cent last year. This marked a significant slowdown after seven straight years of double-digit growth.
But it was still a strong performance in the circumstances, enabling private consumption to grow by 3.8 per cent in real terms, which is a much faster pace than the overall economy.
As the impact of economic slowdown on remittances was not even globally, some parts of the world bore the brunt of the negative effects. Though China and India receive the most in remittances in absolute terms, remittances inflows constitute very small as a share of their GDPs (about one per cent and four per cent, respectively). But for very small economies, remittances can be hugely important. According to WB the value of remittance flows in 2008 was equivalent to 50 per cent of GDP in Tajikistan, 38 per cent of GDP in Tonga and 31 per cent of GDP in Moldova. Official data show that Tajikistan saw a 35 per cent fall in inflows in the first nine months of 2009. Most of the country's workers seek work in Russia, whose economy contracted by almost eight per cent in real terms last year.
Remittances from the US are important for many economies in Latin America and the Caribbean. And the steep downturn in the US economy has undermined remittance flows to countries in the south. In El Salvador, for example, funds sent back by Salvadorans working in the US fell for 15 consecutive months to December 2009, the longest protracted month-by-month downturn on record. Remittances inflows fell by 8.5 per cent in 2009 as a whole. Honduras, meanwhile, saw a 12.5 per cent fall in remittances in 2009. Mexico, the world's third-largest recipient of remittances in absolute terms, suffered a 16 per cent decline in remittances in the year to January 2010, according to its central bank data. If the relatively-sound economic situation in regions such as the GCC would help keep global remittances of expatriate workers healthy, other factors contribute to keeping remittances growing.
Cheap labour costs
As economic recovery in developed economies is still weak, pressures on companies are high to reduce production costs. That might be good for expatriate workers, for the lower cost of employing such labour may encourage employers to get rid of more expensive workers creating opportunities for emigrant labourers. Another factor supporting remittances is that workers from poor countries typically face high migration costs. This is likely to deter those who lost their jobs during the crisis from returning home, instead encouraging them to soldier on in the host country or even to look for illegal work.
The World Bank estimates global remittances to increase in 2010 to $321.6bn, which is not that much of a revival. Analysts suggest that with unemployment set to remain very high in key employment markets, and with the global recovery at risk of stalling as governments withdraw policy stimulus, remittance flows from migrant workers are likely to come under further pressure.
At least it is not expected to be growing at the same pace of 2007 and 2008.