Foreign remittance transactions from the UAE to India and other major recipient countries are expected to plummet by up to 35 percent during the second quarter of this year due to the lockdown impact, at a much steeper pace than the average global drop predicted by the World Bank, money transfer companies said.
The World Bank has predicted that, globally, remittances would decline sharply by about 20 per cent in 2020 due to the economic crisis induced by the coronavirus pandemic and shutdowns, while remittances to India, the world's largest recipient nation, are likely to drop by 23 per cent from $83 billion in 2019 to $64 billion this year due to the pandemic.
Forecasting a grimmer scenario of further sharper declines in the successive quarters, exchange firms said money transfer to India from the UAE will see the sharpest decline in recent history during the April-June quarter.
The UAE, home of more than 3.3 million Indian expats, is the largest remittance source market for the third largest Asian economy, and also accounts for more than 26 per cent of the worldwide remittance flows to India.
Rashed Al Ansari, CEO of Al Ansari Exchange, said remittance transactions in the first half of April witnessed a 30 per cent decrease as compared to the same period in 2019.
"In terms of performance, we saw a good start to the first quarter of this year. By mid-March, we witnessed a significant decline in foreign exchange purchases by more than 80 per cent. This can be attributed to the restrictions on travel that had led to a decline in tourism activity."
Al Ansari said he expects remittances from the UAE for the first quarter would remain at around Dh40 billion, almost at level with 2019 first quarter.
"Remittances to India have seen a dip in recent months as against the start of the year. This is along expected lines and can be attributed to the increased restrictions on outdoor movements in the past few weeks, as well as the prevailing sentiment of job uncertainty due to the covid-19 pandemic," said Adeeb Ahamed, managing director of LuLu Financial Group.
"Remittances from the UAE were stifled in the second quarter, mostly because of the lockdown protocols implemented across in April. The drop in business in the first month of the second quarter was more than 35 per cent. However, May has been positive on account of the remittances for Eid and the unsent remittances of April," said Dharmesh Krishnan, assistant general manager at Belhasa Global Exchange.
He said remittances are expected to decline by at least 20 per cent in the current quarter. According to the World Bank, the inevitable down trend being felt across the world is "largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country". World Bank Group president David Malpass said the economic recession caused by Covid-19 is taking a severe toll on the ability to send money home.
The projected decline in remittances to Pakistan is also around 23 per cent, down to $17 billion from $22.5 billion last year, when remittances grew by 6.2 per cent.
In Bangladesh, remittances this year are projected at $14 billion this year, a fall of about 22 per cent. Remittances to Nepal and Sri Lanka are expected to decline by 14 per cent and 19 per cent, respectively, this year.
Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 per cent), followed by Sub-Saharan Africa (23.1 per cent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).
Ahamed said with several users switching to their mobile offering, LuLu Money, the company has managed to stem their remittance volumes from sliding further.
"LuLu Money accounted for over 15 per cent of the remittance transactions performed via our platform in April. Digital transactions are growing at a healthy pace on a month-on-month basis, and are reflective of the larger global preference for digital solutions."
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