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Gulf cutbacks will harm migrant worker countries

Thursday, March 31, 2016

Remittances are a major revenue source for poorer countries in the Middle East and Asia

Gulf states are seeking to reduce their heavy dependence on foreign labour as the oil price crunch bites... Reduced remittance flows from the Gulf will affect some countries more than others

Source: World Bank Migration and Remittances Factbook 2016

Outlook

The Gulf states are among the top destinations for migrant workers worldwide. The oil boom and the Gulf's infrastructure and industrialisation programmes have caused a rise in foreign labour in recent years, drawn mainly from other Arab states and Asia. Gulf states are one of the top sources of global remittance outflows, which totalled 98 billion dollars in 2014 (Saudi Arabia alone accounted for 37 billion dollars).

However, following the oil price crash, these flows are set to decline significantly. Gulf governments are planning to scale back migrant worker jobs and benefits as they look for ways to cut their budgets and encourage their own nationals into the private sector.

Impacts

  • Reduced remittance flows will affect household consumption and investment in recipient communities in Asia.
  • Falls in living standards and increased unemployment could heighten social tensions in Egypt, Jordan, Lebanon, Yemen, Nepal and Bangladesh.
  • Targeting expats carries minimal political cost for Gulf governments, unlike cuts for Gulf nationals.
  • The return of skilled labour to South-east Asia will help drive infrastructure expansion there.

See also