Posted by: cochinblogger | March 12, 2010

Remittances to Kerala and the Recession

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    “When the brunt of the economic crisis hit the Gulf last year, and shocks battered the region’s construction sector, many expected the worst damage to manifest itself time zones away in India, Bangladesh and the Philippines. Economies so heavily propped up by remittances, it was thought, were bound to be most vulnerable to the crash. If Dubai caught a cold, wouldn’t Kerala – which derives nearly a quarter of its GDP from overseas wages – fall deathly ill?

    For development economists who study remittance flows, that question posed a genuine mystery – but some of the alarmism surrounding it smacked of the old tendency to underestimate remittances. The dynamics of such a truly global economic crisis had never been observed from the standpoint of migrants, says Dilip Ratha, who now leads the World Bank’s migration and remittances team. Economists had already established that overseas workers tend to dig deeper into their pockets when disaster strikes at home. What would happen when recession straddles both sides of the equation? “We didn’t know,” says Ratha.


    As it happened, the picture that emerged as the crisis unfolded was almost bizarrely reassuring: in a period that battered most private international capital flows, remittances emerged as a pillar of stability by comparison. Overall, remittances declined slightly, by six per cent. But in many places, the transfers didn’t plummet – they surged. Deposits into Keralite bank accounts from overseas workers actually increased by about 20 per cent between September 2008 and September 2009 – some of the ugliest days of the crisis. Similarly, according to the World Bank, remittances to Pakistan went up by 24 per cent in the first eight months of 2009; to Bangladesh, they went up by 16 per cent; to the Philippines, by four per cent. Remittances to the Arab world, Africa and South and Central America fared less well, but the expected collapse did not materialise.”

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This is a lovely piece on life in the UAE, seen through the lens of a Filipina. There are a couple of references to Kerala, not surprising given the article is about remittances workers in the UAE send back home. Here in Kerala, we had expected a flood of returnees from the Gulf when the economic crisis broke — but that never materialized. Life went on as before, and this piece kind of explains why.

This is  wonderful journalism!

Posted from Diigo.


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