As coronavirus upends livelihoods, will record transfers cause a remittance crash in Asia?

Remittance doomsayers see something else in the larger than usual transfers: a coming crash, triggered by a bleak job market

The Philippines government, for example, expects almost 300,000 overseas Filipinos to come home this year, with potentially severe consequences

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Officials spray disinfectant on luggage of disembarking Filipino overseas workers at a seaport in Cebu City. Photo: EPA

Published: 3:00pm, 22 Sep 2020Updated: 11:53am, 23 Sep 2020

Migrant workers from Asia’s developing countries have managed to send home record amounts of money in recent months, defying pandemic expectations and propping up home economies at a critical time.

Remittance doomsayers see something else in the larger than usual transfers: a coming crash, triggered by a bleak job market, particularly in the Middle East. As they see opportunity drying up along with demand for oil, workers are sending money home in advance of their own return.

The Philippines government, for example, expects almost 300,000 overseas Filipinos to come home this year, with potentially severe consequences: Remittances make up about 10 per cent of the economy and have pushed the peso to a three-year high against the dollar.

“People are returning home,” said Thomas Isaac, the finance minister for the southern Indian state of Kerala, which accounts for the country’s largest share of remittances. India is the world’s top recipient of transfers and a leading supplier of labour to the gulf; it took in US$83 billion last year, exceeding the US$51 billion it took in as foreign direct investment.

“Therefore, they bring back all their savings,” Isaac said.

Overall, remittances to the Asia-Pacific region will drop 12 per cent in the second half of 2020 compared with the same period last year, Fitch Ratings said this month. “That will drive a decline in remittances as the temporary supporting factors fade,” said Jeremy Zook, a director at Fitch Ratings based in Hong Kong.

Unlike Latin American countries, which continue to benefit from a tentative US recovery, Asian countries are vulnerable to economic austerity in Saudi Arabia and elsewhere in the Middle East.

More than 60 per cent of remittances to India, Bangladesh and Pakistan come from Gulf Cooperation Council countries, said Khurram Schehzad, chief executive officer at Karachi-based advisory Alpha Beta Core Solutions. The region is also the top destination for workers from the Philippines, one of the world’s largest suppliers of overseas labour.

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