Moody's Investors Service anticipated that the global economic downturn as a result of the COVID-19 outbreak will weigh on remittance inflows to low- and middle-income countries, which the World Bank projected to decline by nearly 20% to $110bn in 2020. It pointed out that remittance inflows originate mostly from members of the Group of 20 economies and from Gulf Cooperation Council (GCC) countries. It noted that the G-20 and GCC economies are experiencing a severe contraction in economic activity from the coronavirus pandemic and/or from the collapse in global oil prices, which resulted in job losses, particularly among migrant workers, and affected remittance outflows from these countries. Further, it anticipated that remittance inflows will partially pick up in 2021, but it said that they will remain below pre-coronavirus levels as it expected the global labor markets to recover slowly. 

In parallel, the agency anticipated that the decline in remittance inflows to low- and middle-income economies in 2020 will exacerbate the economic slowdown and external vulnerabilities in these countries. It noted that the expected drop in remittances in 2020 will amplify the growth shock of the virus for economies that significantly rely on remittances to finance consumption. As a result, it anticipated that the 20% decline in remittance inflows will reduce GDP by between 1% to 7% in 2020 in such countries. Further, it indicated that remittance inflows make up a significant share of current account receipts of most low- and middle-income sovereigns. As such, it forecast that the 20% fall in remittance inflows this year will result in an average drop of three percentage points of GDP in the current account balance of remittance-dependent economies. But it noted that most remittance-reliant countries are also net oil importers, and expected lower oil prices to partly mitigate the impact of lower remittances on their external balance. As such, it forecast the median current account deficit of these countries at 5% of GDP in 2020.
Source: Moody's Investors Service

BNP Paribas anticipated that the economic recession, wide fiscal deficits and nationalization programs of the local labor markets in Gulf Cooperation Council (GCC) countries will lead to significant departures of expatriate workers, particularly from the public sector. It projected activity in the non-oil sector to contract by 3.4% this year, while it expected the region's aggregate fiscal deficit to reach a record high of 12.7% of GDP in 2020, amid the outbreak of the coronavirus and the drop in global oil prices. It indicated that the construction and tourism sectors, which employ a large number of expatriate workers, along with the oil sector, will be the most affected industries. Further, it noted that GCC countries, particularly those that are dealing with recurrent fiscal deficits and significant pressures on their labor market, have been introducing programs to encourage the employment of nationals in the past few years. It noted that several GCC countries, including Kuwait and Qatar, have already taken initiatives to either reduce the number of expatriates in the public sector or lower their wages. It estimated that more than one million expatriate workers could leave Kuwait by the end of 2020, while it anticipated that about 1.5 million expatriate workers could exit Saudi Arabia and Dubai this year. Further, it indicated that the reduction in the number of expatriate workers will not only affect the least skilled workers in the construction or services sectors, but also intermediate positions. It added that it is too early to predict if the departure of foreign workers will have a sustained and significant impact on the employment of nationals in the GCC.
Source: BNP Paribas

S&P Global Ratings considered that the COVID-19 pandemic will have a significant and long-lasting impact on the asset quality of banks worldwide. It projected 88 banking systems to post credit losses of $1.3 trillion (tn) in 2020 as a result of the pandemic, compared to losses of $0.6tn in 2019, and forecast the losses to moderate to $0.8tn in 2021. The agency defines credit losses as charges on a bank's income statement that translates to provisions or allowances for the expected losses on its balance sheet, as well as any direct write-offs of loans. It projected credit losses at banks in the Asia Pacific region at $1.3tn, or 59.4% of the total, in the 2020-21 period, followed by losses at banks in North America with $366bn (17.2%), in Western Europe with $228bn (10.7%), in Central & Eastern Europe and Middle East & Africa with $142bn (6.7%), and in Latin America with $131bn (6.1%). It added that credit losses at Chinese banks will account for over 75% the losses of banks in the Asia Pacific region in the covered period. Also, S&P projected the credit losses of top 200 rated banks worldwide to absorb over 75% of their pre-provision earnings in 2020, compared to 30% of earnings in 2019, which shows the banks' limited capacity to absorb a further rise in losses. It considered that the fiscal measures that authorities around the world are implementing to cope with the economic and financial fallouts of the pandemic are essential, but it noted that the premature withdrawal of such measures could deepen the global economic contraction and weigh on the banks' asset quality.
Source: S&P Global Ratings