Labour market performance and migration flows - European ...

Chapter IFinal Reportmight intensify its social destabilizing potential, and the potential of AMCs to face it will be reduced.The link between migration and development has to be revisited due to the crisis.Indeed, the current global financial crisis is already having indirect impacts on AMC labourmarket. First, as the demand for exports (e.g. textile industry and agricultural products) for Europeanmarkets falls, this affects both manufacturing and agricultural sector outputs and employment andmight lead to higher unemployment. Moroccan exports, for instance, registered a 32% fall in the firstquarter of 2009, meaning that 20,000 jobs have been lost in the textile industry since the beginning ofthe crisis (more than 10% of total employment in this industry). Foreign direct investment has alsobeen hit by the global financial crisis. In addition, as tourism declines (the fall in the number of visitsamounted to 20% in Morocco for the first quarter of 2009 and 11% in revenues for Egypt in the firstfour months of 2009) this has wider implications given the importance of this sector for the economyas a source of foreign exchange and for employment. Finally, if the crisis affects the Gulf States andArab labour importing countries this will lead to less demand for AMC workers in the region and mayresult in significant numbers of these returning. Indeed, the global recession may even lead to anincrease in the number of skilled workers in some AMCs, as newly unemployed emigrants return fromthe Gulf and other destination countries; Lebanon and Jordan are particularly vulnerable to thisscenario. For hydrocarbon exporters (first and foremost Algeria, but to a lesser extent Syria andEgypt), the fall in international prices relative to 2008 has had a major impact on export revenues,which in turn will affect State investment and social expenditure.Thus, the AMC labour markets are not, by any means, immune to the repercussions of the currentglobal crisis, and the International Labour Organisation foresees an increase of unemployment in 2009 ofup to 2 million in the Middle East and North Africa (ILO 2009, p. 35); it is worth noting that thosecountries have no unemployment insurance scheme or only very limited coverage. The negative impact ofthe crisis on employment compounds the impact on living conditions of the food and oil price shockexperienced since the summer of 2008, which seriously affected the purchasing power of many households.Official estimates by CAPMAS, in Egypt, put the inflation rate in urban areas at around 22.3% inNovember 2008, and although the situation has eased since then, it has not returned to previous levels.Another key transmission channel of the global economic crisis to AMCs, though more resilientthan other sources of revenue, are remittances (for a review of their importance in AMCs, see section5.2). They are the main inward financial flows in many AMCs (22.8% of GDP in Lebanon, 20.3% inJordan, 14.7% in Palestine and 9.5% in Morocco). The volume of migrant remittances is alreadyreflecting the effects of the global economic crisis, despite the higher degree of stability remittanceshave shown in the past relative to other financial flows. After the stagnation they experienced in 2008(following on from a decade of double-digit growth), remittances to Middle Eastern and North Africancountries are, after many years of growth, expected to shrink in 2009 between 1.4 and 5.2% (Rathaand Mohapatra 2009), depending on employment developments in OECD countries (exchange ratedevelopment and the eventual hardening of migration policies in development countries are the otherrelevant factors). Indeed, in Morocco, for instance, they already experienced a 15% fall in the firstquarter of 2009. Apart from the negative impact of this decrease on the current account balance ofrecipient countries, this will cause a contraction in consumption (with an impact on employment) anda deterioration in the living conditions of the beneficiaries (for many families in AMCs, remittancespartly compensate for the lack of access to formal social protection mechanisms).51