Personal money transfers from the UAE, which fell by billions of UAE dirhams last year due to the crisis induced by the coronavirus pandemic, is poised to recover this year amid improving economic outlook, an industry source said.
From July to September 2020, outward remittances settled through banks and exchange houses in the country reached 40.1 billion dirhams ($10.9 billion), down by 7.7 percent from 43.4 billion dirhams recorded in the same period of 2019, according to the UAE central bank.
Exchange houses, which used to be the popular choice for remittance transactions, saw a huge decline in transactions by 6.9 billion dirhams, but transfers made through banks went up by 3.6 billion dirhams.
Changing demographic, falling incomes
The decline is due to several reasons, including the changing demographic and population in the country, as well as the fall in household incomes and employment numbers, according to Osama Al Rahma, vice chairman of Foreign Exchange and Remittance Group (FERG).
Remittances provide an important source of funds for low-income economies around the world. Many foreigners in expat destinations such as the UAE remit funds regularly to their home countries to support dependent family members.
“During the pandemic, there was an unprecedented situation, whereby the ability to remit to certain jurisdictions were difficult due to extended lockdown periods in receiving countries,” noted Al Rahma.
“In addition to it, many sectors were also affected during the past year, resulting in reduced employment and remuneration. This has, in turn, reflect on the decreased number of outward remittances,” Al Rahma told Zawya.
However, he pointed out that the rate of decline in money transfers from the UAE is “one of the lowest when compared to global numbers”.
“The UAE has been very resilient over the past year, and we will need to receive the data for the final quarter of 2020 to give us a complete picture of the remittance performance,” he added.
Despite the slowdown, Al Rahma said the remittance industry had a “fairly positive year”, adding that in 2021, an improving economy would result in higher outward fund flows.
“With the vaccination drive underway across the country, we expect the various sectors to open up more and boost the economy. Additionally, the opening up of the leisure and travel industry is also an indication of the increased confidence of getting back to normality,” Al Rahma said.
“We are expecting the GDP of the UAE to grow at a rate of 1.5 to 2 percent, while that of Dubai is expected to grow at 4 percent. These will reflect directly on the remittance industry in a positive manner.”
The World Bank projected earlier that global remittances could decline sharply by about 20 percent in 2020 due to the pandemic. The reduction will be the “sharpest decline in recent history” and will be driven largely by the fall in wages and employment of expatriates.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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