India, Record remittance is turning into a crash

Migrant workers from Asia’s developing countries have managed to send home record amounts of money in recent months, defying pandemic expectations and propping up home economies at a critical time.
Remittance doomsayers see something else in the bigger-than-usual transfers: a coming crash, triggered by a bleak job market, particularly in the Middle East. As they see opportunity drying up along with demand for oil, workers are sending money home in advance of their own return.
The Philippines government, for example, expects almost 300,000 overseas Filipinos to come home this year, with potentially severe consequences: Remittances make up about 10% of the economy and have pushed the peso to a three-year high against the dollar.
“People are returning home,” said Thomas Isaac, the finance minister for the southern Indian state of Kerala, which accounts for the country’s largest share of remittances. “Therefore, they bring back all their savings.” India is the world’s top recipient of transfers and a leading supplier of labor to the gulf; it took in $83 billion last year, exceeding the $51 billion it took in as foreign direct investment.
Overall, remittances to the Asia-Pacific region will drop 12% in the second half of 2020 compared with the same period last year, Fitch Ratings said this month. “That will drive a decline in remittances as the temporary supporting factors fade,” said Jeremy Zook, a director at Fitch Ratings based in Hong Kong.
Read more at: The Print

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