For years, Banjeet was among the millions of Asians working in the United Arab Emirates, supporting his immediate family in the oil-rich Gulf state and sending money back to relatives in his home country.
But this month, as the UAE joined other countries across the globe in shutting down parts of the economy to contain coronavirus, the Indian chef was laid off by the Asian restaurant chain in Dubai that had employed him for two decades.
“Business was bad anyway and now it’s worse,” he said, adding that he would wait three months to find a new job before returning home.
In the Gulf states, Hong Kong, Taiwan, Japan and other economies that rely heavily on migrant workers to construct their buildings, nurse their ill and serve their food, people like Banjeet are facing painful but life-changing decisions because of coronavirus.
Some companies are keeping workers on staff, but lay-offs are already happening in the Gulf and across Asia as lockdowns bring services, tourism and construction to a halt.
As migrant workers lose their jobs, it is not only the economies they work in that suffer, but also the economies of their home countries. Analysts say a big shock lies ahead for economies that rely heavily on remittances, including India and the Philippines. It will hit on two fronts: returning workers are expected to add to swelling unemployment rolls, and the revenues they used to contribute — vital foreign currency earnings — will fall.
“The natural hedge of having Filipinos deployed across the globe meant that if the US was in recession, Filipinos in Europe or Japan would send home more,” said Nicholas Mapa, senior economist for the Philippines with ING. “But this is the first time I’m actually worried about the inflows, with the virus in almost every corner of the globe.”
As a region, the Gulf is the largest source of remittance outflows, having sent $119bn home in 2017, the latest year for which complete data are available. The UAE and Saudi Arabia were the world’s second and third-largest exporters of remittances after the US, according to World Bank data.
Foreigners account for about a third of Saudi Arabia’s 30m population and almost 80 per cent of the private sector workforce. In the UAE, expatriates are estimated to account for about 80 per cent of the population.
“Once there are airport openings again and we approach the end of spring and Ramadan [starting in late April], there will be a large exit of expatriate workers of all income brackets, both skilled and unskilled,” said Karen Young, a Gulf expert at the American Enterprise Institute. “There is no incentive for governments to cover rent, wages or outstanding debt for a population that is unlikely to remain, by choice or because they have lost their jobs and their visas.”
The biggest beneficiaries of remittance inflows are mostly countries in east Asia, led by India, China and the Philippines.
In the Philippines last year, remittances reached a record high of $33.5bn. For a country that runs persistent trade and current account deficits, and attracts only modest amounts of foreign direct investment, the money sent home by Filipino builders, nurses and carers has been a vital source of foreign exchange for a consumption-led economy that before Covid-19 was growing at 6 per cent.
Some factors will cushion the blow on workers and their home economies; the rally in the US dollar will increase the value of what they send home in local currency terms, at least in the short term; many Gulf currencies are pegged to the dollar.
“We are seeing a sharp depreciation of Asian currencies against the US dollar,” said Yasuyuki Sawada, chief economist for the Asian Development Bank. “So even if the foreign currency amount of remittances decline, their Asian currency value may increase.”
In past crises such as Typhoon Haiyan — known as Yolanda in the Philippines — in 2013, overseas workers sent more money home, he added. “The impact is very difficult to predict,” Mr Sawada said.
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The biggest variable, analysts said, is how long the crisis lasts, and how effective stimulus measures put in place around the world are.
Immigration figures in Hong Kong do not show any significant change in the number of Philippine workers in the first two months of this year, although they were down 0.9 per cent in February month on month — a slightly larger move than usual — at 217,000, from 219,000 in January.
In the Gulf, governments have announced multibillion dollar support packages for businesses, but lay-offs are beginning as states tighten lockdowns, including suspending international and domestic travel, closing malls and cautioning people to stay at home.
The region is enduring a double blow from the virus and plummeting crude prices, exacerbated by an oil price war between Saudi Arabia and Russia. That, combined with expectations of a global recession, is set to lead to cuts in government spending, the main driver of economic activity in the region.
Banjeet hopes to wait out the crisis and get back to work soon, although some of his former colleagues returned home before the UAE suspended international flights.
“For now, I will stay here,” he said. “Maybe I will start my own little business with my wife — we have to be positive and pull through this together.”
Additional reporting by Alice Woodhouse in Hong Kong
Source: Economy - ft.com
