This outlook for remittance flows, however, is subject to three key risks:
First, the economic recovery in the major destination countries in North America and Europe is not very firm yet. There is a risk that the fiscal retrenchment being planned or implemented in some of the major destination countries might restrain aggregate demand and economic growth, and contribute to high unemployment rates, which in turn could reduce the migrants’ incomes and remittances.
Second, movements in currency exchange rates and commodity prices can pose unpredictable risks for remittance flows. While a weaker US dollar can imply larger dollar-denominated remittances from Europe, it can also increase dollar prices of assets and goods in remittance-receiving countries (such as India, Mexico and the Philippines).
- Finally, there is a risk that immigration controls imposed in response to high domestic unemployment rates will deepen and adversely affect migration and remittance flows. In general, protectionist policies that slow the movement of goods and people across borders are likely to delay an adjustment to the crisis and prolong the process of recovery. Such policies are also inconsistent with the sharp increase in demand for migrants projected in the rapidly aging societies of the North.