Remittance’s impact on economies shows in holiday season
The money sent by migrants to their home countries, or remittance, can have a significant impact on these countries’ economies, data has been showing over the years, especially during vulnerable times of economic shocks. With the UAE and Saudi Arabia being the second and the third biggest sources of remittance in the world, below is a look at how surrounding MENA countries receive remittance and how it shapes their economies.
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The Middle East and North Africa region is witnessing a set of continuous challenges and adverse economic conditions, notably a rise in oil prices and an ongoing food crisis, highlights the World Bank. Add to it depreciating exchange rates driving up prices of daily commodities and the result is a double-digit inflation in Algeria, Egypt, Lebanon, and Tunisia.
Such conditions call for urgent additional resources in the form of remittances from abroad, which has always been a source of foreign currency for MENA countries with high rates of immigration, but is now more needed than ever.
Lebanon is one of the countries where the economy is mostly dependent on remittance. With more than three quarters of the population below the poverty line, Lebanon received $6.8 billion in remittance in 2022 covering rising daily expenses, compared to $6.4 billion in 2021, reported AP, making it the most remittance-dependent country in the world with money sent from abroad representing more than half of the country’s GDP in 2021.
Beyond sending money home, international arrivals to Lebanon double during two seasons: the summer and the end-of-year holidays, bringing with them much needed foreign currency. Close to 700,000 visitors were expected in Lebanon between mid December and the first week of January, bringing an estimated $1.5 billion into the country. Here’s what LinkedIn members are saying.
That said, the extent of the impact of remittance and holiday revenue on the country’s economy remains a question. “Much like remittances, the profits realized in the tourist sector will remain outside the financial system. This means they are unlikely to bolster economic activity by providing an increased capacity for lending or credit issuance in the banking sector.” Sami Zoughaib, Economist and Research Manager at The Policy Initiative shares in a post.
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Similarly in other countries that account for a high number of immigrants, expats' earnings – which are often higher in value compared to local salaries – are an opportunity for a struggling economy. In Egypt, one of the top five countries in the world in terms of receiving remittance from abroad – according to the World Bank – the government is exploring opportunities to encourage Egyptians living and working abroad, especially in the UAE, to invest in Egypt, namely in real estate and agriculture based on growing interest.
“Remittances to low- and middle-income countries (LMICs) withstood global headwinds in 2022, growing an estimated 5% to $626 billion. This is sharply lower than the 10.2% increase in 2021, according to the latest World Bank Migration and Development Brief.” – World Bank.
Financial challenges still continue around the world, and that in turn affects the amount of money sent from abroad. Some countries has witnessed a decline in the amount of money sent home from its diaspora, such as Morocco, where the central bank expects a lower level of remittance in 2023 to $8.35 billion, down from $9.32 billion in 2021. Other countries will see an increase, like India (the largest recipient of remittances in the world) which will reach a new milestone of $100 billion in remittances in 2023, according to the World Bank.
Are you seeing a changing trend in remittances where you are depending on economic ups and downs? Did the holiday season bring on any special change? Share your thoughts in the comments below.
Attended Texas A&M University
1yYes
MEA Region Head @ FactSet | Driving Regional Growth |D,E,&I Advocate
1yImpressive the statistics on Lebanon. I knew Lebanon relied on it but didn’t expect it to account for 50% of GDP!!
Perpetual Inventory Clerk at Macy's
1yInteresting stuff 🤔 👌 👍 👏
Bio:Social Media Executive | Digital Marketer | Content Creator | Content Strategist | Educator .
1yRemittances, which are funds sent by migrant workers to their home countries, can be affected by economic conditions both in the host country where the workers reside and in the home country where the funds are sent. Economic downturns in the host country can lead to job losses and reduced income for migrant workers, which can in turn lead to a decrease in remittances. Conversely, economic upturns in the host country can lead to increased job opportunities and income for migrant workers, which can lead to an increase in remittances. It's difficult to say if the holiday season has a special change on remittances, but historically, remittance flows tend to peak during the months leading up to major holidays such as Christmas and New Year, as migrant workers may send extra funds to their families to help with holiday expenses. It's important to note that remittances can also be affected by factors such as exchange rates, government policies and regulations, and the cost and ease of sending money.