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Remittances around the world, including the UAE’s major expatriate labour markets, are expected to fall by 20 percent, the sharpest decline in recent history, due to the economic crisis induced by the coronavirus pandemic, the latest official figures showed.
The World Bank’s latest report released on Wednesday said the decline is largely due to a drop in income and employment of expatriate workers. However, it warned that falling oil prices will also impact outbound remittances from the Gulf Cooperation Council (GCC) region.
"Falling oil prices will affect remittance outflows from the GCC," the World Bank said in a report.
“Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” World Bank Group president David Malpass said.
Expatriate workers in the UAE alone sent home more than 169 billion UAE dirhams in 2018.
The widespread coronavirus lockdowns have crippled many economies around the world. Businesses have shut their doors, airlines have grounded their planes and people have retreated to their homes. The lack of economic activity has put employers in peril and threatened millions of jobs worldwide.
Sources told Zawya that many companies in the UAE, besides airlines, have imposed salary cuts of between 10 percent and 30 percent to stay afloat during the pandemic.
“We don’t want to fire staff at the moment, but we have cut the salaries by 10 percent. We are constantly monitoring the situation and will act accordingly,” said one employer in the tourism industry.
Given the current environment, expatriates like Mary T., who is based in Sharjah, are now planning to cut back on their remittances.
“I’m now going to control how much money I’d spend on money transfers because right now I’m not sure what’s the future of our company. They have just cut the salaries of my colleagues who have higher paycheques,” she told Zawya.
Osama Al Rahma, vice chairman of Foreign Exchange and Remittance Group (FERG), said the outbound remittances from UAE will most likely be impacted due to income loss of some expatriates as well as the lack of access to digital payment channels among the unbanked population, particularly the labourers who need to visit a physical branch to remit money.
However, Al Rahma pointed out that the impact will not be severe in the UAE compared to its peers.
Projected declines
Due to the economic slowdown, the World Bank said cash flows to low and middle-income countries will also drop by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
Fund transfers to South Asia, which includes some of the UAE’s expatriate markets like India, Pakistan, Sri Lanka and Bangladesh, are projected to decline by 22 percent to $109 billion in 2020 as well.
Remittances to the Middle East and North Africa (Mena) region will also drop by 19.6 percent to $47 billion.
To mitigate the impact, the World Bank said “quick actions” should be undertaken to ensure remittance beneficiaries will have easy access to funds sent by migrants abroad.
“Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants,” said Dilip Ratha, head of Global Knowledge Partnership on Migration and Development, an initiative coordinated by the World Bank.
Remittances to certain markets had been on an upward trend prior to the coronavirus outbreak. Flows to Europe and Central Asia grew by about 6 percent to $65 billion in 2019. Remittances to Latin America and the Caribbean jumped by 7.4 percent to $96 billion during the same period.
According to the UAE Central Bank, outward personal remittances made through exchange houses in the country increased by 7.2 percent or 2.2 billion UE dirhams during the last quarter of 2019.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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