For years, Banjeet was one of 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 United Arab Emirates joined other countries in the world to shut down parts of the economy to contain the coronavirus, the Indian chef was fired by the Asian restaurant chain in Dubai which l had used for two decades.
“Either way, things were bad and now it’s worse,” he said, adding that he would wait three months to find a new job before going home.
In the Gulf States, Hong Kong, Taiwan and other economies that rely heavily on migrant workers to build their buildings, care for the sick, and serve food, people like Banjeet face painful but life-changing decisions. cause of coronavirus.
Some companies keep their employees on staff, but layoffs are already taking place in the Gulf and across Asia because the closures are blocking services, tourism and construction.
As migrant workers lose their jobs, it is not only the economies in which they work that suffer, but also the economies of their countries of origin. Analysts say a big shock awaits economies that rely heavily on remittances, including India and the Philippines. It will strike on two fronts: returning workers should increase the number of unemployed and the income they used to contribute – vital income in foreign currency – will decrease.
“The natural coverage of the deployment of Filipinos around the world meant that if the United States were in a recession, the Filipinos in Europe or Japan would send more,” said Nicholas Mapa, chief economist for the Philippines at ING. “But this is the first time that I have actually worried about the influx, with the virus in almost every corner of the globe.”
As a region, the Gulf is one of the largest sources of outflows, having sent $ 119 billion in 2017, the latest year for which comprehensive data is available. The United Arab Emirates and Saudi Arabia were the world’s second and third largest remittance exporters after the United States, according to data from the World Bank.
Foreigners make up about a third of Saudi Arabia’s 30 million people and almost 80% of the workforce in the private sector. In the United Arab Emirates, expatriates represent around 80% of the population.
“Once the airports are open again and we are nearing the end of spring and Ramadan [starting in late April], there will be a significant outflow of expatriate workers from all income brackets, both skilled and unskilled, “said Karen Young, a Gulf specialist at the American Enterprise Institute. “There is no incentive for governments to cover the rent, wages or outstanding debt of a population that is unlikely to stay, either by choice or because they have lost their jobs and their visas. “
The main recipients of remittances are mainly from East Asian countries, led by India, China and the Philippines.
In the Philippines last year, remittances hit a record high of $ 33.5 billion. For a country with persistent trade deficits and current account balances and attracting only modest foreign direct investment, the money sent by Filipino builders, nurses and caregivers has been a vital source of foreign exchange for a focused economy. on consumption which, before Covid -19 increased by 6%.
Certain factors will cushion the blow to workers and their economy of origin; the recovery of the US dollar will increase the value of what they send home in local currency, at least in the short term; many Gulf currencies are pegged to the dollar.
“We are witnessing a sharp depreciation of Asian currencies against the US dollar,” said Yasuyuki Sawada, chief economist at the Asian Development Bank. “So even if the amount of foreign currency remittances decreases, their value in Asian currencies could increase.”
In past crises such as Typhoon Haiyan – known as Yolanda in the Philippines – in 2013, foreign workers sent more money home, he added. “The impact is very difficult to predict,” said Sawada.
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According to analysts, the biggest variable is the duration of the crisis and the effectiveness of the stimulus measures implemented around the world.
Immigration figures to Hong Kong show no significant change in the number of Filipino workers in the first two months of this year, although they fell 0.9% in February on a monthly basis – a move slightly larger than usual – at 217,000, compared to 219,000 in January.
Governments in the Gulf have announced multi-billion dollar support plans for businesses, but layoffs begin as states tighten locks, including suspending international and domestic travel, closing shopping malls and warning people to stay at home.
The region is suffering a double blow from the virus and the fall in crude oil prices, exacerbated by an oil price war between Saudi Arabia and Russia. This, combined with expectations of a global recession, should lead to cuts in public spending, the main driver of economic activity in the region.
Banjeet hopes to wait for the crisis and return to work soon, although some of his former colleagues have returned home before the United Arab Emirates suspends their international flights.
“For now, I will stay here,” he said. “Maybe I’m going to start my own small business with my wife – we have to be positive and succeed together.”
Alice Woodhouse additional report in Hong Kong