Fall in Gulf's outward remittances to hit Asian, Middle East recipients

Dubai: A three per cent decline in outward remittances from the Gulf might not dent the region's economies, but could have a slight impact on recipient countries in the Middle East and Asia, according to a latest report.

Remittance flows to the Middle East are estimated to have reached $34 billion (Dh124.8 billion). However, they are expected to decline this year to $33 billion before stabilising at $34 billion next year and growing to $36 billion in 2011, the World Bank's latest remittance data shows.

There have been reports that workers in the Gulf were being affected by a slowdown affecting the construction and financial services sectors.

"However, it is important to distinguish between the impact of the crisis on Dubai which is more dependent on trade and finance and real estate than other parts of the UAE and other GCC countries which depend primarily on oil revenues," a latest World Bank report said.

Dilip Ratha and Sanket Mohapatra, analysts at the World Bank, said in the report: "In recent years remittance outflows from Saudi Arabia have been uncorrelated with oil prices.

"Many GCC countries are following a long-term strategy of infrastructure development for which they have funding from large reserves accumulated over the years.

"It is unlikely that they would slow down infrastructure investments and lay off migrant workers in large numbers.

"The revised forecasts for remittances from the GCC countries show a smaller decline (of three per cent) than projected earlier. These forecasts are more in line with the real GDP growth projections than nominal dollar-denominated GDP growth, which in turn is a function of oil prices and currency exchange rates.

In 2008, total gross remittance inflows for Egypt, Lebanon, Jordan, Tunisia, and Morocco topped $27 billion - three times the level received at the turn of the millennium, Standard & Poor's said in its latest report.

In Jordan, Egypt, and to a lesser extent Lebanon, the diaspora of foreign workers has become increasingly concentrated in the booming oil economies of the Gulf over the past few years.

In Egypt, for example, remittance inflows from workers in Saudi Arabia, Kuwait, and the UAE increased almost four-fold in a space of four years, from $1.1 billion at the end of fiscal year 2003 to 2004, to $4.1 billion in 2007 to 2008 fiscal year, it said.

"We believe that the Gulf states are better placed than most to ride out the global economic downturn given the significant accumulation of oil wealth over the past five years, although we expect that economic activity will inevitably slow down, likely leading to loss of earnings for foreign workers," Standard & Poor's credit analyst Farouk Soussa said.

Global remittance flows to developing countries reached $305 billion in 2008 compared to a revised $281 billion in 2007, according to the latest World Bank data.

The revised estimates translate into a 23 per cent growth in 2007, and a nine per cent increase in 2008.

Remittance flows to India are estimated to have reached $45 billion in 2008, compared to earlier estimates of $30 billion.

Remittance flows to China were about $35 billion in 2008, some $8 billion higher than previously estimated, and those to Mexico about $2 billion higher.

"South-to-South remittances from Russia, South Africa, Malaysia and India are especially vulnerable to the rolling economic crisis. Also the outlook remains uncertain for remittance flows from the GCC countries," Ratha and Sanket said in their report.