Outlook for Remittance Flows 2009-2011: Remittances expected to fall by 7-10 percent in 2009

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We have just released Migration and Development Brief 10 reporting latest data on remittance flows. In line with a recent downward revision in the World Bank’s forecast of global economic growth, we have lowered our forecasts for remittance flows to developing countries to -7.3 percent in 2009 from the earlier forecast of -5 percent.

Flows to Latin America have been falling in a lagged response to the construction sector slowdown in the US, but there are emerging signs of a bottoming out. In contrast, flows to South Asia and East Asia have been strong; but there is risk of a slowdown going forward.

The predicted decline in remittances is far smaller than that for private flows to developing countries. For more information, read  the Migration and Development Brief 10.

Authors

Dilip Ratha

Lead Economist and Economic Adviser to the Vice President of Operations, Multilateral Investment Guarantee Agency, World Bank

Martijn Boermans
July 19, 2009

I find it interesting that the report notes that remittances are more stable than FDI flows. However, it would be interesting to provide estimates of the number of migrants working abroad losing their source of income and thereafter decide to return home. Does the crisis lead to reversed migration e.g. due to job losses?

Another interesting point is how migrants share income with their country of origin. Do they increase their share of giving as their personal incomes drop in order to compensate? Try to relate this to international investors that simply pull out FDI in grief times and pump hot money in during booms...

Dilip
July 21, 2009

You are right: crisis-related job losses in destination countries are causing some return migration, but this phenomenon has not really picked up much steam. Migrants in rich countries are unwilling to return because the situation back home isn't really that great either. Interestingly, as they are staying on in the face of falling incomes or weak job markets, many of them are drawing on their assets back home, and we are also observing sporadic reverse remittances, as also discussed in the Brief.

A major factor behind the resilience of remittances is the persistence of the migrant stock. Another is the fact that migrants are willing and able to absorb a bit of the income loss by skipping meals and sharing accommodation with others. In that sense, they are trying to maintain the level of remittances by sending a larger fraction of the income.

Thanks for your comments.

Hazem Elhagrasey
July 29, 2009

While the impact of the global financial crisis on the GCC countries has definitely not been as severe as in the west, recent news events and deeper analysis into the numbers of the banks indicates they have not come out completely unscathed. In your reports you mention that while growth in is still positive, it too has slowed. I wonder if there is a lag effect that means these countries will see the real impact of the crisis only by year end or in 2010?
You cite some figures in your latest update in the form of graphs for Bangladesh and Pakistan, for example, that indicate these trends. Do you have numbers for GCC outbound or South Asia inbound that one could use for analysis? I was unable to find them in the excel file posted on your site.
Thanks for the tremendously useful work you do. It's important for all who work with remittances to have a holistic view and understanding of all global markets, and you help give us that perspective.

Sanket
July 29, 2009

Dear Hazem,
 
We are glad that you found our brief useful and informative. As you correctly mention, recent news from the region indicates that banks and firms, especially those in the construction sector, are facing serious financing difficulties (see http://www.economist.com/world/mideast-africa/displaystory.cfm?story_id…). The impact of the current crisis on employment and earnings of migrants in the GCC have been less severe than expected so far and remittances to migrant-sending countries (Bangladesh, Pakistan and Nepal) have grown robustly until mid-year. However, if the firms and banks continue to face difficulties in finding financing to complete their projects, this could impact migrant earnings and their ability to send remittances going forward. There is a parallel with US - the US construction slowdown affected remittance flows to Latin America after several months.  
 
On your question about the data, we have posted inflows and outflows data for all countries and regions as an Excel file at our website www.worldbank.org/prospects/migrationandremittances Please scroll down in the Excel file for the regional aggregates. While the GCC are not part of the World Bank's income groups or regions (see www.worldbank.org/data/countryclass/classgroups.htm), it is relatively easy to add up the outflows for the six GCC countries from the remittance outflows sheet.  

Priya
August 09, 2009

I think it is interesting that remittances are falling in many countries, while at the same time it is being projected as a buffer for the crisis.

It seems that the diagnosis is that in dollar terms, remittances are going down but in peso terms it's helping countries like Mexico that are depreciating.

I was wondering - what is the status for Lesotho specifically? While it is sustained by South Africa based remittances, are their specific risks to the country? The excel file attached to the migration projections only went up to 2008. Would you happen to have projections on Lesotho for 2009?

Jim T
August 17, 2009

One would expect remittances to remain relatively stable because the money isn't usually used for investments, but I guess unemployment is going to hurt just about everyone! Here is an interesting article on why remittances might fall in the next couple of years: https://www.mindreign.com/en/mindshare/Global-Economics/Remittances/sl3…

chalespinosa
September 26, 2009

Interestintg that you say that the subject " money isn't usually used for investments " so most must be used for consumption. If this is the case, then the short fall between remittances and comsumption will be made up maybe by borrowing from MFIs. Question in an developing country environment that has falling FDI, lower remittances, poor crops due to El Nino and poor in country economic environment the situation does not seem to warrant incresed lending on the part of the MFI's because loan portfolio quality will suffer.

What is your take.

Olivier Sanrey
November 11, 2009

Dear Dilip and team,

first of all, thanks for the great and helpfull work.

I have two questions about the last update:

- How comes that there is no data for Qatar which is quite an important remitting country?
- Are you planning to update the corridor based database you once did? It was really helpful but I think the last version was from 2005.

Thanks again
Olivier

Shafiul Azam
September 08, 2010

I have been developing the Remittance Network through the Banks/NGO's/Mobile Operators and taking the service to the doorstep of the receipent in the rural areas of Bangladesh.I have started this from June 2005 and I have worked very hard for it and I am getting the result as I see people are sending money through official channels and they are turning their back to "Hundi".

As Remittance has increased year by year that is due to the sender who previously use to send through unofficial channel is sending through official channel this is possible due to the awareness/advertisement/road shows, print & electronic media,NGO's, Mobile Operators & Private & Govt.Banks initiative.

As I can tell you all that by 2015 Bangladesh Remittance Market will reach to 25 billion US Dollar through official channel.

Regards

Shafiul Azam

Alex John
February 22, 2012

When the economic slowdown in the United States in the construction industry, Latin America, there are emerging signs of bottoming out it, why? In contrast, the inflow of South Asia and East Asia has been strong, but there is a forward risk of a slowdown. Could you someone tell me?