Egypt is expected to gain about 2.7% in remittance flows for 2022 to reach $32bn, according to the World Bank’s Remittances Brave Global Headwinds Special Focus: Climate Migration report.
The report said that this development may reflect a rebalancing of flows among host countries and regions.
“Among the Organisation for Economic Cooperation and Development’s (OECD) economies, erosion of real wages among the Egyptian migrant workforce is likely dampening the remittance of earnings. However, Egypt’s strong ties to the GCC and other Arab countries has probably more than offset the weaker performance of OECD hosts. Fully one-half of Egypt’s migrant labour force resides in the GCC and sends back the bulk of remittances inflows to the country. Crude oil price-related windfalls are accruing to MENA’s high-income exporters (reducing external and fiscal deficits and spurring economic activity) and serving to support Egypt’s inflows. These in turn are now of critical importance to the country in offsetting persistent shortfalls on external and fiscal accounts,” the report read.
The report highlighted that persistent adverse trends in the global environment and deeper financial difficulties in the Middle East and North Africa region are anticipated to slow the pace of remittance receipts to 2% in 2023.
A balance of slowing economic activity — and of the real earning power of the overseas workforce, especially in Europe — needs to be assessed against sharply increasing demand for finance in the region. Upside risks to the projections could emerge should the altruism on display during 2021 resurface. In a base case scenario, flows to Morocco are likely to be hardest hit, dropping from growth of 44% in 2021 to 4% in 2023, and Egypt is expected to see a moderate 2% gain.
In terms of the Euro Area, GDP gains there are anticipated to narrow to 1.2% in 2022. In contrast, windfall gains accruing to GCC countries on the surge in oil price (GDP growth for the group is expected to register 5.2% in 2022) offer some prospect for a pick-up in flows to migrant workers from the Middle East and North Africa that are more established in GCC labour markets.
For Egypt, only weak advances have materialised since the third quarter (3Q) of 2021, yielding a modest 2.7% gain for the first half (1H) of 2022. The slowing of flows is tied to both the dramatic changes unfolding in the international economic context — higher inflation among OECD host countries (wheat, fuel price increases) —as well as important country-specific developments, the World Bank disclosed.
These include significant incidence of drought across Middle East and North Africa countries and adverse fiscal consequences of food and fuel subsidies. Remittance inflows are anticipated to weaken to gains of 2.5% in 2022 and to 2% in 2023.
Africa stands to be the most severely exposed to the concurrent crises, including severe drought and spikes in global energy and food commodity prices. Remittances to Sub-Saharan Africa are estimated to have increased 5.2% compared with 16.4% last year, the report added.
Additionally, remittances to low- and middle-income countries withstood global headwinds in 2022, growing an estimated 5% to $626bn. This is sharply lower than the 10.2% increase in 2021, according to the latest World Bank Migration and Development Brief.
