Gulf remittances could decline 9%

Dubai: Remittances from the Gulf Cooperation Council (GCC) countries are expected to fall nine per cent next year compared to an increase of 38 per cent in 2008, according to a report by the World Bank.

Money from the GCC accounted for 63 per cent of total foreign remittances received by Bangladesh this year, and the percentage was 52 per cent for Pakistan.

UAE-based money transfer companies told Gulf News they expect a slowdown in funds being sent by expatriate workers to their home countries, but ruled out a dramatic reduction.

A combination of falling oil prices and the impact of the global financial crisis on the GCC economies is expected to hit the labour market.

The World Bank said this would affect the banking sector's performance and could "potentially lead to a significant deceleration in construction activities in which a large number of migrants have been employed in recent years."

"Remittance flows from the GCC countries would fall by nine per cent in 2009 in nominal dollar terms compared to an increase of 38 per cent in the previous year," the report said.

Bad news

It added that while layoffs in the construction sector were expected in the GCC countries, it remained unclear whether the numbers would be large enough to result in a net outflow of migrants from the region.

Remittances from the GCC countries are likely to fall more than those from the US and Europe, the report said, affecting recipient countries in the Middle East, North Africa and South Asia.

UAE Exchange chief operating officer Sudhir Kumar Shetty disagreed with the report's prediction, saying there were enough ongoing infrastructure projects in the construction sector to maintain the current momentum in remittances for at least the next 24 months.

"I don't think there will be a reduction, but the growth we have seen in the last two years was phenomenal, between 20 and 25 per cent. This growth may slow down, but it will be by very little, it won't be a dramatic slowdown," he said.

"A lot of ongoing projects in the UAE will go on and there will be enough work for the coming 24 months. Infrastructure projects in Abu Dhabi, Dubai and the northern emirates are still going on, to keep the remittance flows continuing," he added.

Jean Claude Farah, Reg-ional vice-president of Western Union, also disagreed with the World Bank report, saying it was premature to anticipate such a slowdown now.

"As far as Western Union is concerned we have not seen such a slowdown... there may a trend towards lesser growth in time," he said.

The bank expects the slowdown in remittance flows to developing countries, which took hold in the third quarter of this year, to deepen in 2009 due to the global financial crisis.

"In nominal dollar terms, officially recorded remittance flows to developing countries are estimated to reach $283 billion in 2008, up 6.7 per cent from $265 billion in 2007, but in real terms, remittances could fall from two per cent of GDP in 2007 to 1.8 per cent in 2008," the report said.