Remittances 'will rise' after fall-off
Western Union expects the amount of money that foreign workers in the Gulf transfer home to rebound next year after remittances declined in the second quarter of the year. Although remittance flows from the region should improve next year they were unlikely to return just yet to the peaks of the economic boom, said Christina Gold, the chief executive and president of Western Union.
Globally, remittances to developing countries are expected to rise by about 6.2 per cent this year before increasing again next year to reach a record high of at least US$350 billion (Dh1.28 trillion). "From our perspective, we see this as a challenging region in 2010 but we see opportunities coming into next year and see growth rebounding in the region," she said. "We are not seeing the growth we saw and seeing it pretty much steady on to last year's numbers."
Widely viewed as a shadow sector to banking, the money transfer industry enables migrant workers to send money to their families, who can pick up the funds either through transfer agents or through the internet. Remittances from the region declined last year after the global financial crisis prompted a wave of redundancies. Workers within the Gulf's property sector suffered especially as a drop in construction projects meant there was less demand for low-skilled migrant labour, who account for a large percentage of those who use money transfer services.
With activity remaining largely sluggish in the construction sector, money transfer transactions from foreign breadwinners are expected to finish the year at a similar level to last year. Western Union experienced a moderate decline in transactions in the Gulf states in the second quarter of the year. Money transfer flows provide a useful gauge of the health of the global economy, with remittances often among the first to be affected once the economic outlook begins to slow.
"In some parts of the world it's a leading indicator and other parts of the world it's a lagging indicator," said Mrs Gold. Remittance flows from the US to Mexico dropped long before other signs emerged of a deceleration in the US economy, she said. In contrast, in Dubai the company began to see a decline in transfers about 12 months after economic indicators first showed evidence of the global financial crisis hitting the emirate.
"The more remittances are dependent on customers in a lot of different industries, it tends to be more of a lagging indicator," she said. While Russia and the US, in particular, were now showing signs of a pick-up in transfers, evidence from other countries showed they were still struggling to emerge from the financial crisis. With unemployment running at up to 20 per cent in Spain, remittances from the country had yet to improve, she said.
Until last year, the US payment services company's business in the Gulf had grown at double-digit levels as the region underwent an economic transformation requiring the employment of a high volume of workers from overseas. email@example.com
Published: August 18, 2010 04:00 AM