Lower remittances from the Middle East will affect the credit profiles of six recipient countries including the Philippines and hurt economic growth, debt watcher Moody’s Investors Service said in a report Wednesday.
“Lower remittances from Gulf Cooperation Council economies, which have been hit hard by the slump in oil prices, will reduce the benefits of cheaper oil imports for several Asia-Pacific countries,” Moody’s said.
There were reports that hundreds of Filipinos lost their jobs in Saudi Arabia alone, after their companies closed shop amid the oil price slump.
“Generally, weaker remittances will immediately impact the recipient countries’ credit profiles via their balance of payment positions. A prolonged fall would also hurt economic growth, given the importance of remittances to household incomes,” Moody’s said.
Moody’s, however, said “for India, the Philippines and Vietnam, the diversified locations and vocations of their overseas workers could help reduce the fall in remittances overall.”
Moody’s report analyzed the potential credit implications of weaker remittances from their citizens working abroad for six Asian countries including Bangladesh (Ba3 stable), India (Baa3 positive), Pakistan (B3 stable), the Philippines (Baa2 stable), Sri Lanka (B1 stable) and Vietnam (B1 stable).
The report said while previous oil price shocks had limited and short-lived effects on remittances to Asian countries, the current more pronounced and prolonged decline, coupled with fiscal tightening in many oil-exporting countries would likely hurt migrant worker earnings and consequently remittances.
Moody’s said for the six economies in the study, remittances were equivalent to 3 percent to 10 percent of GDP and between 22 percent and 188 percent of foreign reserves.
It said for most countries in the study, remittances inflows were greater than net oil import payments as a percentage to GDP.
Remittances from Filipinos overseas grew 4.6 percent in 2015 to a record $25.767 billion from $24.628 billion in 2014. The 2015 level represented about 9.8 percent of GDP and 8.1 percent of gross national income.
Bangko Sentral expects a 4-percent growth in remittances this year.