Jan 26, 2016 (LBO) – Sri Lanka has experienced a contraction in inward remittances after several years amidst falling oil prices and slower hiring in the Gulf nations, a top research firm said.
2015 remittance inflows have contracted 0.5 percent against the previous year, Frontier Research said.
In 2014 remittances grew around 9.5 percent, which followed 7 percent growth in 2013. In 2011 inward remittances grew 25 percent.
“But remittances is still one of the biggest foreign income earners because it is about 7 billion inflows that we get,” analyst at Frontier Research Shiran Fernando said.
The research firm said falling oil prices and its impact on Gulf nations could be one reason behind this contraction of remittances.
“We are seeing probably less hiring from Gulf nations, so growth from that base is not improving,” Fernando said.
Frontier Research also said the next reason for the reduction of remittances could be the weakend euro against the dollar.
“Sri Lanka also has people working in European nations as well. Since the euro has weakend against the dollar; they are sending in less than what they would have in 2014.”
Fernando said the high growth eventually has to subside and this could be the start of it.
“But it’s too early to call that the growth has actually reached a saturation level,” Fernando said.
“With oil falling to 30 dollars a barrel, it’s positive for us in terms of our fuel bill but remittances could hurt even more in 2016 if this trend continues.”
Fernando further said Gulf nations are looking to cut down expenditure because earlier they were planning there government budgets based on a dollar of about 135 though it is about 30 now.
“So cutting down on public expenditure, things like infrastructure would mean fewer opportunities for Sri Lankan workers trying to get jobs there.”
“I think 2016 is a number that we certainly need to keep an eye on,” Fernando added.