|A bank teller binds a stack of U.S. dollar banknotes. The protracted oil price fall will send migrant workers’ wages declining, thus affecting remittances to Asian countries, but Vietnam might be spared - PHOTO: UYEN VIEN
HCMC-Saigon times. The protracted oil price fall, coupled with fiscal tightening in many oil exporting countries, will send migrant workers’ wages declining, thus affecting remittances to Asian countries, but Vietnam might be spared, according to a Moody’s report.
The Asia Pacific, excluding Japan, is the world’s largest recipient of remittances, absorbing over 40% of global remittances. A substantial part of the remittances comes from Gulf Cooperation Council (GCC) oil-producing economies, which have been hard hit by the slump in world oil prices. Therefore, incoming remittances to several Asian countries have tumbled.
The report analyses six Asian countries depending heavily on remittances -- Bangladesh, India, Pakistan, the Philippines, Sri Lanka and Vietnam. Remittances to these six nations make up 3% to 10% of GDP, and 22% to 188% of foreign exchange reserves.
The GCC is the dominant source of remittances for Bangladesh, India, Pakistan and Sri Lanka. For the Philippines, remittances from the U.S. and those from GCC are almost equal, at 34% and 31.7%. Meanwhile, 57% of the amount remitted to Vietnam is from the U.S.
Annual incoming remittances to the Asia Pacific, excluding Japan, reached US$250.2 billion at the end of 2015, according to the World Bank’s (WB) estimates. The region’s share of global remittances has risen more than 10 percentage points over the past decade due to an increasing number of migrant workers and the falling cost of money transfer services.
However, the WB forecast that remittances to the region might fall slightly below the global average this year due to the stubbornly low oil price. A fall in remittances will immediately impact recipient countries’ credit profiles via their balance of payments positions.
According to the Moody’s report, the six above countries have low income per capita and their migrant workers are predominantly semi-skilled or unskilled. Remittances to all the six countries slid from double digits in 2014 to single digits in 2015, with India and Sri Lanka reporting falls in remittances.
Remittances to Vietnam rose 10% in 2011 over the previous year but declined in 2012. It inched up 15% in 2013 and slowed to 10% in 2014 and 2% in 2015.