DUBAI — The UAE recorded an ‘extremely high annual growth rate of 15 per cent in outward remittances’ which has helped to lessen the pressure of currency appreciation, experts said in new study released on Tuesday.
While remittance flows to countries in the Middle East and Africa region grew by 2.6 per cent, the slowest among all developing regions due to the uncertainties and civil unrest triggered by the Arab Spring, the GCC countries accounted for more than 25 per cent of inward remittances to the various countries in the region, said the study without giving specific details on remittance value.
The study titled, ‘Economic Impact of Uprisings on the Mena Region,’ was sponsored by Western Union, a leader in money transfer and global payment services. The study observed that an upsurge in oil prices, notably after oil production in Libya was affected, positively impacted the GCC countries.
The rise in oil prices implies growing surpluses in the government budgets of GCC countries which will enable higher public spending, and help GCC members to maintain the level of employment in their economies without negative impacts on immigrants status and remittances flows. However, GCC countries stock markets were slightly affected, as were their direct and indirect investments in Mena countries that experienced revolutions. However, the impact was mild, when compared to what happened to their investments and sovereign wealth funds during the 2008-09 financial crises, experts pointed out in their study.
The study observed that the economic performance and future economic prospects of GCC countries are favourable and have positive implications for remittance flows to migration-sending countries and could play an important role in relaxing foreign-exchange constraints in those countries.
“Despite the uprisings, the Middle East and Africa region is still witnessing moderate economic growth. The evolution and changes in the political and economic structures of various countries have given rise to certain opportunities,” said Jean Claude Farah, Western Union’s senior vice-president for the Middle East and Africa.
“The GCC countries have been preferred destinations for recent migrants and we have started to witness an increase in Arab migrants from countries like Yemen and Egypt. The GCC countries sailed through the period of regional unrest nearly unscathed while also experiencing robust economic activity,” said Farah.
The study, highlighting the economic ramifications of the uprisings, was conducted by Dr Ahmed Ghoneim, Professor of Economics at Cairo University, with assistance from Cairo-based, Heba El-Deken, senior economist at American University and Asmaa Ezzat, assistant lecturer at Cairo University.
The study noted that labour markets in the countries that experienced revolutions are facing major disruptions, with increasing rates of unemployment, exacerbated in some cases by large-scale return of migrants from other troubled countries.
Higher oil prices have also negatively affected major oil importing Arab countries, especially their balance of payments and government budget deficits which in turn affects the flow of remittances to some Mena countries, such as Egypt and Tunisia and further deepen the problem of unemployment.
The study stressed the need to enhance good governance mechanisms as many of the economic and political problems that the region’s economies have experienced in the last ten years have stemmed from a lack of transparency and accountability.
“The development paradigm in Mena countries also needs to be revisited; monetary and fiscal policies should continue to aim at disciplining the core functions of the economies, but their focus should be on inclusive growth that prioritises employment, income distribution and poverty reduction, and encompass social considerations as well,” expert said.
They said the financial sector in the region needed “serious and rapid reform to attain several objectives, including widening access to credit for SMEs as it can help significantly in creating employment, and addressing the issue of non-performing loans, which represents a major problem in the region.”
They warned that inflation is expected to rise sharply in all Mena countries and monetary policy alone is unlikely to be able to accommodate such inflationary pressures