A global drop in remittances by migrant workers due to the coronavirus-induced recession will raise the level of credit risk in countries most dependent on such inflows, according to a new report by Moody’s Investors Service.
“The countries that are most dependent on remittances are largely low and middle income economies, and we expect the decline in remittances will exacerbate the growth slowdown in these countries,” said Christian de Guzman, senior vice president at Moody’s.
Global remittances to low and middle income countries reached a record high of $554 billion (Dh2.03 trillion) in 2019 but are expected to fall by $110bn this year, the Moody’s report said.
The World Bank said in April that it expected remittances to low and middle income countries to fall by about 20 per cent to $445bn this year, the sharpest decline in the sector in recent years. In comparison, remittances fell by about 5 per cent after the global financial crisis in 2009.
The World Bank expects remittances to low and middle income countries to recover and grow by 5.6 per cent to $470bn next year.
The outbreak has tipped the world economy into a recession that is expected to be the worst since the Great Depression, according to the International Monetary Fund. It is set to contract by 4.9 per cent this year.
According to Moody’s, frontier market sovereigns in the Commonwealth of Independent States, Latin America and the Caribbean – countries such as Kyrgyzstan, Tajikistan, El Salvador and Bermuda – are among the most vulnerable to the drop in remittances.
Sources of remittances are highly concentrated, with 25 countries accounting for 85 per cent of outflows, the Moody’s report said. The top 10 remitting countries include many of the largest G20 economies.
According to the Institute of International Finance, the US accounts for most remittances to Latin America while countries in Western Europe are an importance source for remittances for Africa and Eastern Europe. Most workers in the GCC send money to their home countries in Africa and Asia.
The damage done to labour markets in these source countries could continue to weigh on migrant labour for some time, the report said.
We expect the decline in remittances will exacerbate the growth slowdown in low- and middle-income economies
“By affecting household income and consumption, along with current account receipts, a sharp drop in remittances weakens credit profiles through its impact on economic strength and external vulnerability,” said Mr de Guzman.
“While the impact on incomes and economic strength is likely to be more gradual, the hit to current account receipts and weakening of external positions can be abrupt.”
Remittance-receiving countries are largely net oil importers and will benefit from the slump in oil prices since the start of the year.
However, Moody’s said the negative current account impact of a 20 per cent decline in remittances was significant for Kyrgyzstan, Tajikistan and El Salvador.
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Sector: Water technology
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New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
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If you go
The flights
Emirates flies from Dubai to Seattle from Dh5,555 return, including taxes.
The car
Hertz offers compact car rental from about $300 (Dh1,100) per week, including taxes. Emirates Skywards members can earn points on their car hire through Hertz.
The national park
Entry to Mount Rainier National Park costs $30 for one vehicle and passengers for up to seven days. Accommodation can be booked through mtrainierguestservices.com. Prices vary according to season. Rooms at the Holiday Inn Yakima cost from $125 per night, excluding breakfast.
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
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Graduated from the American University of Sharjah
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AC Milan v Inter, Sunday, 6pm (UAE), match live on BeIN Sports
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