S&P report assesses risks to MENA countries' xxternal balances from falling remittances
In 2008, total gross remittance inflows for Egypt, Lebanon, Jordan, Tunisia, and Morocco combined topped $27 billion, three times the level received at the turn of the millennium. In a new report titled "Middle East And North African Countries May Feel The Pinch Of Falling Remittances In Global Downturn," Standard & Poor's Ratings Services discusses its assessment of the possible negative effects on the current account balances of the Middle East and North Africa (MENA) countries listed above from a number of assumed stress scenarios to remittance inflows.
In Morocco and Tunisia, over 80% of foreign workers are based within the European Union, with a significant concentration in France and, particularly for Moroccan workers, the ailing Spanish construction sector. The slowdown in European economic growth therefore presents risks to the earning potential of these workers, and thus their ability to remit wages to their home countries.
In Jordan, Egypt, and to a lesser extent Lebanon, the diaspora of foreign workers has become increasingly concentrated in the booming oil economies of the Persian Gulf over the past few years. In Egypt, for example, remittance inflows from workers in Saudi Arabia, Kuwait, and the United Arab Emirates increased almost four-fold in the space of four years, from $1.1 billion at the end of fiscal year 2003/2004, to $4.1 billion in fiscal year 2007/2008. While no such data exists for Jordan, anecdotal evidence suggests a similar pattern has occurred there.
"We believe that the Gulf states are better placed than most to ride out the global economic downturn given the significant accumulation of oil wealth over the past five years, although we expect that economic activity will inevitably slow down, likely leading to loss of earnings for foreign workers," Standard & Poor's credit analyst Farouk Soussa said.
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