MENA countries to suffer in wake of Gulf slowdown

LESS MONEY: Workers from Egypt and other MENA countries in the Gulf will be sending less money home as a result of the slowdown, says S&P.

The slowdown in Gulf economies will have a knock on effect in several other MENA countries, as remittances from expat workers decline, S&P forecasts.

Remittance inflows for Egypt, Lebanon, Jordan, Tunisia, and Morocco topped $27bn in 2008, three times the amount received at the beginning of the millennium.

“We believe that the Gulf states are better placed than most to ride out the global economic downturn given the significant accumulation of oil wealth over the past five years,” analyst Farouk Soussa said.

But economic activity will “inevitably slow down”, leading to loss of earnings for foreign workers, he added.

In Jordan, Egypt, and to a lesser extent Lebanon, the diaspora of foreign workers has become increasingly concentrated in the GCC over the past few years.

In Egypt, remittance inflows from workers in Saudi Arabia, Kuwait, and the United Arab Emirates increased almost four fold in the space of four years, from $1.1bn at the end of fiscal year 2003/2004, to $4.1bn in 2007/2008.

Anecdotal evidence suggests a similar pattern has occurred in Jordan, S&P said.

In Morocco and Tunisia, over 80 percent of foreign workers are believed to be in the European Union, with a significant concentration in France and, particularly for Moroccan workers, the ailing Spanish construction sector.

“The slowdown in European economic growth therefore presents risks to the earning potential of these workers, and thus their ability to remit wages to their home countries,” the ratings agency said in a statement.

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