Strategy Note /

If remittances drop 20% who is exposed in emerging and frontier markets?

  • The World Bank forecasts a 20% drop in remittances in 2020; India is the most exposed in large emerging markets...

  • ...And Egypt, Georgia, Jordan, Lebanon, Nigeria, Pakistan, Philippines, Sri Lanka, Ukraine, Vietnam in small emerging

  • We chart remittance exposure and highlight those most tied to oil exporters (GCC, Russia) and developed markets (US, EU)

If remittances drop 20% who is exposed in emerging and frontier markets?
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
29 April 2020
Published byTellimer Research

We are in the month of Ramadan, according to the Lunar or Islamic calendar: a month of abstinence from personal consumption and largesse on charitable donation. For Muslim expatriates, this month usually marks an annual peak for remittances to their country of origin. 

For many countries in EM, remittances from overseas emigrants provide balance of payments support (ie reducing risk to the FX rate) and a boost to domestic construction and consumption; often with less cyclical fluctuation than seen in the domestic economic growth of those home countries.

In the midst of the Covid-19 crisis and oil price crash, the World Bank recently forecast around a 20% decline in remittances. To provide context, we chart economic dependence across emerging markets to global remittances and highlight those countries most exposed to declines from oil exporter regions (GCC, Russia) and lock-downs in developed markets (US, EU). 

The wide range of countries (in terms of location, income levels and overall economic size) with significant exposure of their GDP to remittances reinforces our view that, when the full scope of economic links (remittances, portfolio capital flows, trade balance, tourism, potential sovereign debt relief and assistance) and political repercussions (policy-making by elderly elites, more difficult structural reform, US-China friction, regional bloc fragmentation) are factored in, it is very hard to find an island of insulation from the combination of Covid-19, the oil price collapse and the US-China trade war.

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