JEDDAH – Estimating over $27.6 billion of outward remittance flow in 2012, the World Bank ranks Saudi Arabia as the second top remittance-sending country in the world after the USA. GCC-wise, UAE comes second, with $20.3 billion, followed by Kuwait at $8.5 billion. The estimated top three remittance beneficiaries from Saudi Arabia in 2012 are India ($ 8.4 billion), Egypt ($ 5.7 billion), and Pakistan ($3 billion). The National Commercial Bank, in its latest “Saudi Economic Review”, said the average cost of remitting $200 or its equivalent reveals that Saudi Arabia, alongside Russia are the cheapest remittance-sending countries at 4.5 percent of the amount sent. South Africa, on the other hand, is the costliest remittance-sending country with an average of 20.7 percent of the amount sent. The data showed that the cost of remitting funds negatively correlates with the volume of remittance inflow. NCB report said “in our opinion, the Saudi Nitaqat program is expected to swell these figures in 2013 as expatriates boost money transfers prior to leaving the country.” Robust oil prices and vibrant economic activity in Saudi Arabia led to a surge in urban development, which in turn, increased demand for foreign labor. Remittance inflows data released by the World Bank and the IMF Balance of Payments statistics reveal that developing countries received the lion's share of remittance inflows in all recorded years. It is estimated that 75.8 percent or $401 billion of last year's total inflows were transferred to developing countries. Moreover, estimates for 2013 indicate a 6.7 percent Y/Y growth rate, leading to a total of $427 billion. India, China, the Philippines remain the largest recipients of migrant remittances. The World Bank estimates that India received $69.4 billion in 2012, followed by China and the Philippines receiving $60.2 billion and $24.5 billion, respectively. Analysis of developing countries by region shows a substantial variation between and within regions. In Central Asia experienced a decline. Surges in Bangladesh and Pakistan propelled South Asia to rise as the largest recipient region in 2012, growing by 12.3 percent Y/Y to $109 billion. In the medium-term, however, East Asia and the Pacific region is expected to remain the largest recipient. In 2012, remittances to the Middle East and North Africa (MENA) region grew by an estimated 14.3 percent Y/Y, which is the fastest annual expansion rate, stacking $49 billion. It's worth-noting that Egypt accounts for over 40 percent of remittance inflows to the MENA region, a $20.5 billion or 6 percent of GDP which is a six-fold increase over the past 8 years, leaping over Lebanon, Jordan, Morocco and Tunisia. Large volumes and frequency of transferred funds have prompted financial institutions to utilize and service this niche market. In contrast to FDI and capital market flows which fell sharply following the global economic downturn in 2008, remittances were only minimally affected. Granted resilience in the following years, global remittances steadily grew from 2010 by an annual 10.9 percent, realizing $514 billion in 2011. In perspective, officially recorded remitted funds are estimated to have reached $529 billion in 2012. $401 billion of which went to developing countries, involving 192 million migrants who constitute 3 percent of the world's population. The latest forecasts suggest remittances to reach $559 billion this year. Meanwhile, the NCB report further noted that consumer prices have been contained and the benchmark inflation rate recorded a 3.5 percent annual rise during August. The recently rebased index peaked at 3.96 percent last April, but since then, policy makers have been pro-active in subduing any inflationary pressures. Imported inflation considerably influences local prices given the heavy reliance on imports. Food prices remain the leading category driving up prices as the sub-category accelerated by 6.5 percent Y/Y. Interestingly, the category of furnishings and household equipment witnessed a second consecutive rise in annual prices at 5.9 percent. The category holds a weight of 9.09 percent within the index. Furthermore, rental prices were supported higher by the academic holiday and Ramadan season. Real estate prices remain a priority concern for consumers as the youth population seek to own their assets. However, elevated prices have been a major burden for the majority of citizens and the situation is yet to be mended by the mortgage law. The inflation rate is expected to remain subdued despite the liquid state of the economy. We do not foresee the index rising to 4 percent within 2013 with upside risks in 2014 as the expected drop in the $, given the US tapering intentions, will contribute to higher imported inflation. SAMA's macroprudential policy will contain potential liquidity risks by its willingness to use conventional tools such as treasury bills. Consequently, the broader measure of money supply, M3, decelerated to record a gain of 13.8 percent on an annual basis. On a monthly basis, M3 declined from its all-time high of SR,474.0 billion during July to SR1,467.1 billion by the end of August. The highlight of the month was the sizable growth in time and savings deposits. Amid the globally suppressed interest rate market and the bullish momentum of the local stock market during August, time and saving deposits man-aged to gain a significant 11.2 percent Y/Y, the fastest pace since October 2012. Meanwhile, the largest component of M3, demand deposits, continues to expand rapidly by posting an annual 19.1 percent growth rate. Furthermore, other quasi-monetary deposits decelerated significantly and only increased 2.7 percent during August in comparison to the same month of 2012. – SG
