How remittances shaped the Middle East's economy in 2021

Customers transferring money at an exchange in the UAE. The National

Throughout history, migrating for work has been a sure-fire way of making money. Today, it is no different. The UAE's workforce has a majority of workers from around the globe. The reputation of the Emirates as a place to earn explains why it is second only to the US in the total sum of outward remittances it sends annually: $43 billion in 2020.

Even after two years of the pandemic, global remittance numbers are growing. In November, the World Bank projected that in 2021, remittances to poor and middle-income countries would grow by more than 7 per cent to almost $590 billion. In the Middle East, flows increased by almost 10 per cent.

Christmas, a time for giving, will see many in the UAE up their share for dependents back home. Physical bank branches and wiring services remain the overwhelmingly popular means of doing so. But year-on-year, an increasing number of people are choosing to do so via technology instead. A number of banks now offer zero-fee remittance options, and an explosion of fintech companies is pushing digitisation in the sector, simplifying and speeding up transactions.

This trend will benefit the wider region. The GCC is home to a large number of migrant workers, who will be keen to send money home after a year in which rates have recovered, following higher global oil prices and a rebounding regional markets.

It is also important to remember that remittances in the opposite direction are a crucial aspect of the Middle East's economy, sometimes dangerously so. In 2020, remittances formed more than 30 per cent of Lebanon’s GDP, the highest ratio in the Arab World. After years of economic incompetence and recklessness, they represent one of the few lifelines still open to ordinary people.

This year, however, they came under threat. In November, the country's economy minister told The National that a diplomatic row caused by Lebanon’s then information minister, George Kordahi, risked prompting Riyadh to ban remittances from Lebanese people living in Saudi Arabia. Mr Kordahi eventually resigned.

One hundred thousand Lebanese people are in Saudi Arabia; it could have been a disaster had he refused to leave office.

For other countries in desperate need, it is proving hard for expats to send money altogether. Sanctions on Afghanistan's banking system, which is teetering on collapse, has complicated remittances a great deal.

Challenges remain, and there is no quick solution. But technology is helping even in the most difficult corners of the region. Cryptocurrency transfers have boomed recently, giving people more agency in managing their own money and financial decisions. They still come with significant risk due to unstable rates, fuelled by a lack of regulation, but even if relatively untested, these new avenues are giving people options where few are on offer.

Budgets this winter will be tight in many parts of the region. But thanks to pockets of economic stability, a building global recovery and new technology, things are not quite as wintry as they might otherwise have been.