Remittances from GCC takes a direct hit; down 6.4 percent

WASHINGTON: As GCC countries cut back on spending, remittances to South Asia have taken a direct hit and fallen by 6.4 percent in 2016, the World Bank revealed yesterday in its Migration and Development Brief. Low oil prices and weak economic growth in the Gulf and in Russia are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa, the institution said during its annual Spring Meetings in Washington.

The GCC’s fiscal tightening resulted in $110 billion worth of remittances to South Asia, but that is expected to grow by two percent to $112 billion this year - an increase the World Bank described as “muted”. The economic slowdown in the GCC countries also affected remittances to the Middle East and North Africa, which saw an estimated decline of 4.4 percent to $49 billion in 2016, the World Bank said. The decline for the region was driven by Egypt the region’s largest remittance recipient.

Remittances to the region are expected to expand by 6.1 percent to $52 billion this year, the brief showed. Globally, remittances to developing countries fell for a second consecutive year in 2016 - a trend not seen in three decades, the brief noted. Officially, recorded remittances to developing countries amounted to some $429 billion - a decline of 2.4 percent from 2015, it said.

This year, global remittance flows are expected to increase by an estimated 3.3 percent to $444 billion, the World Bank estimated. The institution somewhat discouraged the taxation of outward remittances by high-income countries because they are “difficult to administer and likely to drive the flows underground,” the brief said. On average around the world, the cost of sending $200 remained set at 7.45 percent in the first quarter of 2017, but it is still much higher than the set target of 3 percent, the brief noted.

The highest cost region to send money to is still Sub-Saharan Africa, with an average cost of 9.8 percent. “A major barrier to reducing remittance costs is de-risking by international banks, when they close the bank accounts of money transfer operators, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime,” the World Bank said. “This has posed a major challenge to the provision and cost of remittance services to certain regions.”— KUNA