Remittances to low- and middle-income countries are projected to have grown a strong 7.3 per cent to reach $589 billion in 2021.
This return to growth is more robust than earlier estimates and follows the resilience of flows last year when remittances declined by only 1.7 per cent despite a severe global recession due to COVID-19, the World Bank’s Migration and Development Brief estimates released yesterday has shown.
Remittance inflows to sub-Saharan Africa returned to growth, increasing by 6.2 per cent to $45 billion.
Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system.
Remittances are projected to continue to grow by 2.6 per cent in 2022 in line with global macroeconomic forecasts.
A resurgence of COVID-19 cases and re-imposition of mobility restrictions poses the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries.
The rollback of fiscal stimulus and employment-support programmes, as economies recover, may also dampen remittance flows, the report added.
The World Bank’s Remittance Prices Worldwide Database however lamented the huge cost of sending $200 across international borders which it said averaged 6.4 per cent of the amount transferred in the first quarter of 2021.
This is more than double the Sustainable Development Goal (SDG) target of three per cent by 2030. It is most expensive to send money to Sub-Saharan Africa (eight per cent) and lowest in South Asia (4.6 per cent).
Data reveal that costs tend to be higher when remittances are sent through banks than through digital channels or through money transmitters offering cash-to-cash services.
“The immediate impact of the crisis on remittance flows was very deep. The surprising pace of recovery is welcome news. To keep remittances flowing, especially through digital channels, providing access to bank accounts for migrants and remittance service providers remains a key requirement.
Policy responses also must continue to be inclusive of migrants especially in the areas of access to vaccines and protection from under-payment,” lead author of the Brief and head of KNOMAD, Dilip Ratha, said.
For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).
This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.
“Remittance flows from migrants have greatly complemented government cash transfer programmes to support families suffering economic hardships during the COVID-19 crisis.
Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” World Bank Global Director for Social Protection and Jobs, Michal Rutkowski, said.
Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programmes.
In the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity.
Remittances registered strong growth in most regions. Flows increased by 21.6 per cent in Latin America and the Caribbean, 9.7 per cent in Middle East and North Africa, eight per cent in South Asia, 6.2 per cent in sub-Saharan Africa, and 5.3 per cent in Europe and Central Asia.
In East Asia and the Pacific, remittances fell by four per cent – though excluding China, remittances registered a gain of 1.4 per cent in the region. In Latin America and the Caribbean, growth was exceptionally strong due to economic recovery in the United States and additional factors, including migrants’ responses to natural disasters in their countries of origin and remittances sent from home countries to migrants in transit.
Officially recorded remittance flows to the East Asia and Pacific region are projected to have fallen by four per cent in 2021 to $131 billion. Excluding China, remittances to the region grew by 1.4 per cent last year; and it is projected to grow by 3.3 per cent in 2022.
As a share of gross domestic product (GDP), top recipients in the region are smaller economies such as Tonga (43.9 per cent), Samoa (21.1 per cent), and the Marshall Islands (12.8 per cent).
The average cost of sending $200 to the region fell to 6.7 per cent in the first quarter of 2021 compared to 7.1 per cent a year earlier. The five lowest-cost corridors for the region averaged 2.7 per cent for transfers primarily to the Philippines; while the five highest-cost corridors, excluding South Africa to China, which is an outlier, averaged 15 per cent.
After falling 8.6 per cent in 2020, remittance flows to Europe and Central Asia are projected to have grown 5.3 per cent to $67 billion in 2021 due to stronger economic activity in the European Union and surging energy prices.
Remittances are projected to grow by 3.8 per cent in 2022. Remittances are currently the largest source of external financing in the region. Inflows have been higher or equal to the sum of FDI, portfolio investment, and ODA in 2020 and 2021.
As a share of GDP, remittances in the Kyrgyz Republic and Tajikistan stand above 25 per cent.
The average cost of sending $200 to the region rose slightly to 6.6 per cent in the first quarter of 2021 from 6.5 per cent a year earlier, largely reflecting a sharp increase in costs in the Turkey-Bulgaria corridor. Russia is one of the lowest-cost senders globally with costs falling from 1.8 per cent to one per cent.
Remittance flows into Latin America and the Caribbean will likely reach a new high of $126 billion in 2021, registering a solid advance of 21.6 per cent compared to 2020. Mexico, the region’s largest remittance recipient, received 42 per cent ($52.7 billion) of the regional total.
The value of remittances as a share of GDP exceeds 20 per cent for several smaller economies: El Salvador (26.2 per cent), Honduras (26.6 per cent), Jamaica, (23.6 per cent), and Guatemala (18 per cent).
The adverse effects of COVID-19 and Hurricanes Grace and Ida contributed to higher remittance flows to Mexico and Central America. Other main drivers include recovery in employment levels and fiscal and social assistance programs in hosting countries, particularly the United States.
An increase in the number of transit migrants in Mexico and other countries, and the remittances they received from overseas to support their living and travel costs, appears to be a significant factor behind the strong increase.
In 2022, remittances are expected to grow at 4.4 per cent, mainly due to a weaker growth outlook for the United States. Remittance costs: Sending $200 to the region cost 5.5 per cent on average in the first quarter of 2021, down from 6 per cent a year earlier.
Mexico remained the least expensive recipient country in the G20 group, with costs averaging 3.7 per cent. But remittance costs are exorbitant in smaller corridors.
Remittances to the developing countries of the Middle East and North Africa region are projected to have grown by an estimated 9.7 per cent in 2021 to $62 billion, supported by a return to growth of host countries in the European Union (notably France and Spain) and the upsurge in global oil prices which positively affected the GCC countries.
The increase was driven by strong gains in inflows to Egypt (12.6 per cent to $33 billion) and to Morocco (25 per cent to $9.3 billion), return migration and transit migration respectively, playing important roles in the favorable outturns.
Remittance receipts for the Maghreb (Algeria, Morocco, and Tunisia) surged by 15.2 per cent, driven by growth in Euro Area. Flows to several countries fell in 2021, including Jordan (6.9 per cent decline), Djibouti (14.8 per cent decline), and Lebanon (0.3 per cent decline).
For the developing MENA region, remittances have long constituted the largest source of external resource flows among ODA, FDI, and portfolio equity and debt flows.
The outlook for remittances in 2022 is one of slower growth of 3.6 per cent due to risks stemming from COVID-19. Remittance costs: The cost of sending $200 to MENA fell to 6.3 per cent in the first quarter of 2021 from seven per cent a year ago.
Remittances to South Asia likely grew around 8 per cent to $159 billion in 2021. Higher oil prices aided economic recovery and drove the spike in remittances from the GCC countries which employ over half of South Asia’s migrants.
Economic recovery and stimulus programs in the United States also contributed to the growth. In India, remittances advanced by an estimated 4.6 per cent in 2021 to reach $87 billion.
Pakistan had another year of record remittances with growth at 26 per cent and levels reaching $33 billion in 2021. In addition to the common drivers, the government’s Pakistan Remittance Initiative to support transmission through formal channels attracted large inflows.
In addition, Afghanistan’s fragile situation emerged as an unexpected cause of remittances in 2021 intended for Afghan refugees in Pakistan as well as for families in Afghanistan. Remittances are the dominant source of foreign exchange for the region, with receipts more than twice as large as FDI in 2021.
Remittance costs: South Asia has the lowest average costs of any world region at 4.6 per cent. But sending money to South Asia through official channels is expensive compared with informal channels which remain popular.
Cost-reducing policies would create a win-win situation welcomed by migrants and South Asian governments alike.
Countries where the value of remittance inflows as a share of GDP is significant include the Gambia (33.8 per cent), Lesotho (23.5 per cent), Cabo Verde (15.6 per cent) and Comoros (12.3 per cent). In 2022, remittance inflows are projected to grow by 5.5 per cent due to continued economic recovery in Europe and the United States.
Remittance costs: Costs averaged 8 per cent in the first quarter of 2021, down from 8.9 per cent a year ago. Although intra-regional migration makes up more than 70 per cent of cross-border migration, costs are high due to small quantities of formal flows and utilisation of black-market exchange rates.
Detailed analyses of trends in migration and remittances are available at www.knomad.org and blogs.worldbank.org/peoplemove.
The Migration and Development Brief 35 highlights developments related to migration-related Sustainable Development Goal indicators for which the World Bank is a custodian: increasing the volume of remittances as a percentage of GDP (Indicator 17.3.2), reducing remittance costs (Indicator 10.c.1), and reducing recruitment costs (indicator 10.7.1).
