Dubai: The US dollar’s strength against Asian currencies is leading to a surge in remittances from migrant workers in the Gulf Arab region, exchange houses say, giving a boost to their home countries such as India, Philippines and Pakistan.
But lower oil prices are expected to gradually reduce demand for blue-collar workers, tempering growth in remittances next year, say industry executives.
With its huge population of expatriates, the Gulf is one of the most important sources of remittances as mainly lower-skilled workers send money home to families in Asia.
Expatriates in the Gulf sent home $93.4 billion in 2013, according to the World Bank, which rates Saudi Arabia and the UAE among the top five migrant destination countries.
With most Gulf currencies pegged to the dollar, its rise in recent months has helped swell remittances as expatriates take advantage of the strong dollar.
Year-to-date, the dollar is up 4.84 per cent against the Indian rupee, 3.75 per cent against the Pakistani rupee, 2.65 per cent against the Chinese yuan and 4.7 per cent against the Philippine peso, according to Thomson Reuters data.
“The majority of migrants are those that have to remit money whatever the currency situation, but there are also opportunists, who time their savings on currency weakness and we have seen a great surge in those remitters,” said Promoth Manghat, chief executive of UAE Exchange, one of the largest exchange houses in the region.
UAE Exchange has seen growth in remittances to India, its largest market, of around 15 per cent year-on-year in the last two months, up from 8 to 10 per cent in the first half of the year, Manghat said.
The money is vital to support the economies in workers’ home countries.
In Kerala, an Indian state with roughly two million expatriates in the Gulf, international remittances make up around a third of the state’s domestic product. In the Philippines, global remittances form around 10 per cent of GDP.
Growth in remittances have not yet been significantly hit by the roughly halving in oil prices since June last year.
Long-planned major projects, such as the new terminal at Abu Dhabi International Airport and a scheme to build a canal through Dubai, are helping sustain appetite for blue-collar workers. But that could start to change.
“With oil going down certain projects will be delayed, so construction workers will come in at a reduced rate and we won’t see the same rate of growth in remittances,” said Rajiv Raipancholia, chief executive of UAE-based Orient Exchange and secretary of industry body Foreign Exchange and Remittance Group (FERG).
He forecasts remittances growth for the UAE industry of 5 per cent in 2016, down from 10 to 15 per cent in 2015.
Osama al-Rahma, chief executive of Dubai-based Al Fardan Exchange, and chairman of FERG, said some exchange houses were already starting to see slimmer remittance business.