The Gulf remittance risk for Asia

A prolonged conflict in the Middle East could hit remittance flows as worsening economic prospects in the Gulf weighed on demand for migrant workers. A collapse in remittances seems unlikely. But any drop in inflows would cause external deficits in the Philippines and much of South Asia to widen further at a time when high energy prices will already be pushing deficits deeper into the red. That could put more pressure on currencies and force central banks to keep policy tighter than it would otherwise need to be.