Dubai: Weak economic growth and low oil prices are causing a slowdown in money transfers to a number of Asian countries, but experts are expecting a recovery in the latter part of the year, the latest analysis showed.
The World Bank, in its new report, noted that money flows from the Gulf Cooperation Council (GCC) region, in particular, have slowed down this year.
Overall, fund transfers to low and middle income countries are forecast to hit $442 billion, growing by only 0.8 per cent over a year earlier. India, China, the Philippines, Mexico and Pakistan remained this year’s top remittance beneficiaries.
According to the World Bank, remittances to South Asian countries are forecast to drop by 2.3 per cent in 2016, following a 1.6 per cent decline in 2015. Financial flows to India are predicted to fall by 5 per cent, while Bangladesh can expect to see a 3.5 per cent drop.
In Pakistan and Sri Lanka, however, remittances are likely to post an increase of 5.1 per cent and 1.6 per cent, respectively.
“Besides weak economic growth in remittance-source countries, cyclical low oil prices have dampened the growth of remittance flows from Russia and the GCC countries,” the World Bank said.
“More worrisome are structural factors such as de-risking by commercial banks, the labour market nationalization policies in some GCC countries that discourage demand for migrant workers and exchange controls in many countries faced with adverse balance of payments and falling international reserves.”
Money transfer experts, however, argued that the remittance sector remained resilient this year. Sudhesh Giriyan, COO of Xpress Money in the UAE, pointed out that the global remittance industry has been growing by 3.8 per cent year-on-year since 2010.
“Economic challenges haven’t entirely stopped the growth or remittances. The remittance sector is holding on even as other market economic indicators register quite mixed readings,” Giriyan said.
“We have seen that global remittances have managed to survive the storm. We are looking forward to seeing a remittance recovery in the latter half of the year, and expect it to gather pace in early 2017.”
Giriyan clarified that remittances from the UAE have not been affected by the slowdown, citing that the country continues to offer employment opportunities and attract expatriate talent at the same time.
"With the UAE becoming the top destination of choice in the Middle East for expats from across the world, remittances from the country have also been growing steadily. UAE's attractiveness will further increase, given the rise of global events like Expo 2020 being hosted in the country," Giriyan told Gulf News.
"Global events create positive halo effects that generate more employment opportunities and attract jobseekers - in turn multiplying remittance streams from the UAE not only to South Asian or developing countries but also to other countries within [the region]."
Giriyan expects global remittances to South Asia to post a moderate growth of 2.2 per cent next year. He added that while the number of expatriates sending money home from the UAE has increased, the weakening of various currencies against the US dollar this year has also encouraged foreigners to transfer larger amounts of money.
"Few currencies were at their lowest level this year and events such as Brexit significantly contributed to remittance growth."