Dubai: Global remittance flows could decline by 6.1 per cent this year to $317 billion from last year's record flow of $338 billion, said a top World Bank remittance expert.
"The year 2008 held off so well that despite a decline in private capital flows, global remittances reached their peak," Dilip Ratha, Lead Economist and Manager for Migration and Remittance of World Bank's Development Prospects Group, told Gulf News on the sidelines of the World Economic Forum's Global Agenda Summit that concludes on Sunday.
"The true size of flows, including unrecorded flows through formal and informal channels, is even higher.
"The crisis has impacted new migration flows, but existing migrants are not returning; global migration stock is still rising. Remittances are estimated to have declined by only 6.1 per cent in 2009, but a shallower recovery is expected during 2010-11.
Uncertainty
"Risks to this outlook include uncertainty regarding duration of the financial crisis, unemployment, currency movement and rising protectionism," Ratha said.
While the US and Saudi Arabia remain the world's top two remittance sources, Ratha believes the UAE could be the third.
Remittances to Bangladesh, Pakistan and the Philippines are still growing, fuelled by workers from the Gulf Cooperation Council countries.
He added remittances from the UAE remained resilient.
"Lots of people might have sent their families back home to save on rents — which were very high last year — that could have triggered a higher remittance flow to South Asia because you remit more money if immediate family is away," Ratha said.
South Asia
Remittance flows to South Asia grew strongly in 2008 despite the global economic crisis, but now there are risks that they may slow down in a lagged response to a weak global economy.
East Asia and Sub-Saharan Africa also face similar risks.
By contrast, remittance flows to Latin America and the Caribbean, and Middle East and North Africa have been weaker than expected in 2009, yet they appear to have reached a bottom already, with the expectation of a recovery in 2010 and 2011, the World Bank report said.
"Besides, weakening South Asian currencies, some of which have depreciated by up to 30 per cent in value, also triggered the growth in remittances, especially to India, which last year received a record $52 billion in remittances."
With some of these currencies rebounding, it will be difficult for South Asian countries to match the 2008 figures, Ratha said.
A higher oil price could, however, change things a bit. With higher oil prices, the oil-exporting Gulf countries' surpluses go up, spurring domestic investment in infrastructure development.
"Yes, a higher oil price could help create jobs due to investment in infrastructure and projects that could require a higher number of workers back on to the job and the cycle of remittance could go up again," Ratha said.
"Despite the downturn, people actually did not return home in huge numbers. Most of them held on for a quick recovery and we could see them back in work."
Latin America
He said remittance flows into Latin America have already bottomed out and the flow to South Asia has peaked and could decline from last year's record.
"This is where I think South Asian countries will have to look at their policies on how they could attract more remittances," Ratha said.
However, going forward, risks persist, as usual.
"The crisis could last longer [and be deeper] than expected, while weak job markets in the destination countries may lead to further tightening of immigration controls," he said.
"Currency movements are highly unpredictable."
That's why, Ratha cautions, anti-immigration sentiment may rise, but protectionism related to hiring of immigrant workers will hurt recovery in the corporate sector.
Origin countries should provide business facilitation services to returnees, he said, adding that "international and intra-regional remittance flows should be facilitated."
Are you remitting more money lately? Or are you concentrating on saving? Do currency exchange rates influence your decision to send money home? Tell us at letter2editor@gulfnews.com
