Remittances from Saudi Arabia and Qatar, which account for around half of remittances from the Gulf Co-operation Countries (GCC), increased by 7% quarter-on-quarter in Q3, 2015, latest data from The Global Knowledge Partnership on Migration and Development (KNOMAD), a multi-donor trust fund established
by the World Bank, shows.
More recent data from the fourth quarter of 2015, however, indicates a “slowdown” in remittances from the GCC countries.
“If lower oil prices persist, remittance outflows from GCC countries are likely to slow
further,” KNOMAD said.
Although details of 2015 remittances from Qatar are not available, data shows total remittances by expatriates from Qatar touched nearly $11.2bn in 2014.
Qatar tops the world in terms of the number of migrant workers as a share of population with 91% followed by the United Arab Emirates (88%) and Kuwait (72%), KNOMAD said.
The report showed that the continuing fall in the price of oil was reducing the growth of remittances, globally.
Following the recent declines in oil prices, remittance outflows from Russia are estimated to have fallen in 2015 by around 40% in dollar terms. On the other hand, remittance outflows from the major oil-exporting countries of the GCC continued to grow in 2015, as the GCC countries have used their substantial reserves to maintain spending levels, and also because the GCC currencies are linked to the dollar.
“The outlook for the price of oil is a major downside risk to the remittances
forecast,” KNOMAD said.
The most recent projection by the trust fund envisions some recovery in the price of oil for the rest of this year, resulting in an 8.5% decline in the average price in 2016 (as the price is now considerably below the 2015 average), followed by a 7.2% rise in 2017.
Lower than expected oil prices could further depress remittances from Russia to Europe and Central Asia.
Moreover, in the face of the steep drop in the oil price, incomes in GCC countries have so far been supported by drawing down assets. A further decline in the oil price, or even the growing belief that the price will not rise over the long term, could encourage authorities to adjust to lower oil prices. The result would be reduced incomes for migrants in these countries, and perhaps steps to restrict hiring of or even repatriate foreign workers, that could substantially reduce remittance outflows to the Middle East, South Asia, and East Asia and the Pacific, KNOMAD said.
The beginning of fiscal adjustment in the GCC in response to the fall in oil prices could lead to wage cuts and the dismissal of foreign workers, in part due to a step up of nationalisation policies targeted at high-skilled workers, it said.
Moreover, cuts in subsidies in the latter half of 2015 - with further cuts anticipated for this year - and the planned introduction of a GCC-wide value-added tax (VAT) could raise the cost of living, leading migrants to reduce the amount of money sent home; nearly all GCC states have discussed the introduction of a tax on remittances, KNOMAD said.