Remittances: brace for the fall

“Every time I seem to fall in love. Crash! Boom! Bang!” Time and again, this 90s lyric have been found well-suited to stock markets at home and abroad. But at the risk of an exaggerated expression, somehow one can’t stop humming these lines looking at workers’ remittances data this fiscal year so far.

The latest numbers for April 2017 are equally worrying. According to data released by the State Bank of Pakistan (SBP), April 2017 saw a 9 percent month-on-month decline in remittance inflows, as against an average increase of 1 percent in the preceding five years. That’s a $155 million set-back in April versus March. On year-on-year basis, April 2017 witnessed a fall of 7 percent in contrast to an average 10 percent year-on-year gain in the preceding five years.

As has been the case since the start of this year, the fall in remittance flows from Saudi Arabia has had the biggest dent on total remittance. In the ten months ending April 2017, total remittance dropped $448 million or 2.8 percent compared to an increase of 5.31 percent in the same period last year.

Of that $448 million decrease, the biggest hit came from Saudi Arabia, with a fall of $320 million. The US, UK, UAE and ‘other GCC countries’ followed, leading to a total decrease of about $800 million from these countries in the year to date. If it weren’t for the increase in remittance from EU countries and those categorized as ‘Other Countries’ by the SBP, the dent to total inflows would have been hard hitting.

As for year-end remittance numbers, the central bank expects full year FY17 remittance to range between $19.5 and $20.5; the Planning Commission forecast is $20.2 billion. Last month this column wrote: “BR Research estimates the full year number to land at $19.7 billion. This is assuming an optimistic 20 percent month-on-month growth in June 2017 (due to the Ramadan affect) and optimistic increases of 2.5 and 4 percent (based on historical averages) in April and May respectively.”

However in the wake of weaker than projected April flows that full year forecast has to be revised downward to $19.1 billion, while keeping the optimistic assumption of 20 percent month-on-month growth in June 2017.

If inflows in May 2017 also end up being lower-than-expected, and June doesn’t grow as much as 20 percent, then we may be looking at a full year number less than $19 billion (a possible fall of nearly 5% (YoY). Which is not exactly ‘Crash! Boom! Bang!’ but it feels like that, given the loving hopes pinned to remittance growth. In any case, brace yourself for the first annual fall in remittance in thirteen years.