RemittancesGateway.org

World Bank forecasts growth in GCC remittance outflows

Wednesday, 07 April 2010 16:15

Source: The Daily Star

Region rode out predicted mass exodus of foreign workers

The World Bank said this week that remittance outflows from the Gulf Cooperation Council (GCC) continued to grow in 2009, rising by almost 8 percent, in spite of the drop in global remittance outflows last year.

The report, carried by Bank Audi MENA Weekly Monitor, said the growth recorded in 2009 was much lower than 2008, when remittance outflows from the region grew by more than 30 percent to reach $40 billion, with UAE and Saudi Arabia sharing the bulk of it.

The World Bank noted that the growing trend is expected to continue in the current year, as Gulf economies return to healthy growth in 2010.

The World Bank estimates suggest that the GCC countries have about 12 million expatriate workers, most of them from Asia and Africa, where remittances didn’t decline as much as other regions such as Central Asia or Latin America.

The World Bank said that the worst-case scenario predicted at the start of the economic recession was the mass exodus of expatriate workers from developed and developing economies, but the region was largely spared, with many workers in the GCC countries continuing to send remittances back home.

The UAE, where expatriates constitute around 80 percent of the population, has been recognized as a major source of remittances worldwide.

Remittances from the UAE are estimated to vary between $15 billion and $20 billion per year, and the country currently houses 110 exchange companies with over 550 branches.

The report cited as an example the 22 percent annual growth in remittance inflows to Pakistan to $5.2 billion in 2009, buoyed by significant growth in transfers from the UAE (up 127 percent), the United Kingdom (up 90 percent) and Saudi Arabia (up 19 percent).

Also, remittance inflows to Bangladesh rose by 21 percent to reach $6.5 billion, with the majority of remittances originating from the GCC countries.

Globally, remittances from expatriate workers to their countries of origin are expected to start to revive this year, after a small drop last year due to the global economic crisis.

According to the World Bank estimates, and based on official figures from Central Banks of relevant countries, global remittances declined by about 6 percent in 2009, reaching $317 billion.

However, they are expected to grow modestly in 2010 even though economic recovery is still fragile.

The World Bank indicated that the relatively sound economic situation in regions such as the GCC would help keep global remittances of expatriate workers healthy in 2010.

Furthermore, in the GCC, there are high pressures on companies to reduce production costs, which may create opportunities for low cost emigrant laborers.

Another factor supporting remittances is that workers from poor countries typically face high migration costs. This is likely to deter those who lost their jobs during the crisis from returning home, instead encouraging them to remain in the host country or even to look for illegal work, as per the World Bank.