Remittances from Dubai down 65 percent in April, reports one exchange

Foreign residents in the GCC are sending less money home in remittances as the global economic downturn takes its toll, according to industry insiders.

Individual remittances – money sent home by foreign residents – fell by 65 percent in April, reported Delma Exchange, an exchange shop in the UAE. Corporate remittances also declined by 3 to 4 percent, according to Delma company data. In 2020, remittances are expected to drop by 20 percent, which would be the single largest downturn in the last century, according to the World Bank.

Delma said their figures are in line with broader trends in the GCC, as the economic effects of the coronavirus and all-time low oil prices mean migrants are sending less money from wealthy GCC countries to countries like India, Pakistan, and Egypt in the short and long term. After the US, the UAE and Saudi Arabia are the world's largest sources of remittances, according to World Bank data.

“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 jobs all over GCC, which will have an impact on the remittances,” said Nidhish Devadiga, head of corporate sales and dealing and Delma Exchange.

As GCC governments slow spending, some mega construction projects, where many migrant workers are employed, have been halted because of coronavirus, and those workers are now more limited in their ability to send money home.

Remittances underpin the survival strategies of more than 1 billion people globally, the World Economic Forum (WEF) reported. Many families rely on individuals sending money back from the Arabian Gulf to buy necessities.

“In 2019, an estimated 200 million people in the global migrant workforce sent home US$715 billion (£571 billion). Of this, it’s estimated US$551 billion supported up to 800 million households living in low- and middle-income countries,” WEF reported.

In the Philippines, remittances to the country will fall by about 13 percent this year, Dilip Ratha, senior financial economist in Washington told Bloomberg. Globally, the Philippines receives the fourth highest amount of remittances in US dollars.

Long-term impact

While coronavirus has had an immediate impact on remittances, oil prices will likely have a more delayed impact on the flow of money.

Ali Termos, an assistant professor at the American University in Bulgaria, told Al Arabiya English that the effects of low oil prices on remittances may take two quarters to become evident. Where employment contracts are usually set for a certain amount of time, and housing is typically guaranteed, it’s hard for employers to immediately cut salaries.

Economic diversification policies in the Gulf – such as nationalization programs that aim to employ more locals in the labor force – and the introduction of value added tax coupled with more stringent fiscal measures against money laundering have also led to a slowing of migrant remittances over the last few years, Termos said.

In Saudi Arabia, remittances have decreased over the last three years because the number of foreign workers has fallen, and some of this is due to decreased government expenditure, Omar Al-Ubaydli, a researcher at Deresat, Bahrain told Al Arabiya English.

Impact on home countries of migrant workers

But immediately, one of the biggest issues remains the effect felt by the countries that typically receive those remittances and the families who rely on that money to buy food and pay for education, among other things.

The biggest beneficiaries of remittance inflows are mostly countries in East Asia, led by India, China, and the Philippines.

The loss of migrant workers in the Arabian Gulf will affect not only the economy of the countries where they work but also the economies of their home countries, according to a Dubai-based human resource consultant who asked to remain anonymous because of the sensitivity of the subject.

“Having Indians deployed across the GCC was a natural hedge for Indian economy, which relied heavily on foreign remittances,” he said. “When they lose job or have to return home due to layoff, the Indian economy will be hit by a double whammy: a significant fall in the remittance revenue coupled with the fear of returning workers adding to the swelling unemployment [numbers] in the country.”

On Thursday, more than 300 Indian nationals returned to their home country on two repatriation flights from the UAE. Some 200,000 Indians registered for repatriation services.

This short-term pain brought on by coronavirus stands to turn into long-term pain if remittances do indeed continue to fall through the beginning of 2021 as countries try to recover from unprecedentedly low oil prices.

Read more:

Coronavirus: Etihad announces inbound flights home for residents to UAE from May 9

Valet of US President Trump tests positive for coronavirus

Retail challenges amid coronavirus: Companies file for bankruptcy, lay off employees