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Remittance flows set to recover this year, after two years of decline

Dilip Ratha's picture

The latest edition of the Migration and Development Brief and an accompanying Press Release have just been launched.

Remittances to low- and middle-income countries are on course to recover in 2017 after two consecutive years of decline, says the latest edition of the World Bank’s Migration and Development Brief, released today.

The Bank estimates that officially recorded remittances to developing countries are expected to grow by 4.8 percent to $450 billion for 2017. Global remittances, which include flows to high-income countries, are projected to grow by 3.9 percent to $596 billion.

The recovery in remittance flows is driven by relatively stronger growth in the European Union, Russian Federation, and the United States. As a result, those regions likely to see the strongest growth in remittance inflows this year are Sub-Saharan Africa, Europe and Central Asia, and Latin America and the Caribbean. In the Gulf Cooperation Council (GCC) countries, fiscal tightening, due to low oil prices, and policies discouraging recruitment of foreign workers, will dampen remittance flows to East and South Asia.

Among major remittance recipients, India retains its top spot, with remittances expected to total $65 billion this year, followed by China ($63 billion), the Philippines ($33 billion), Mexico (a record $31 billion), and Nigeria (($22 billion).

In keeping with an improving global economy, remittances to low- and middle-income countries are expected to grow modestly by 3.5 percent in 2018, to $466 billion. Global remittances will grow by 3.4 percent to $616 billion in 2018.

The global average cost of sending $200 remained stagnant at 7.2 percent in the third quarter of 2017.This was significantly higher than the Sustainable Development Goal (SDG) target of 3 percent. Sub-Saharan Africa, with an average cost of 9.1 percent, remains the highest-cost region. Two major factors contributing to high costs are exclusive partnerships between national post office systems and any single money transfer operator (MTO), which stifles market competition and allows the MTO to raise remittance fees, as well as de-risking by commercial banks, as they close bank accounts of MTOs, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime.

In a special feature on forced and voluntary return migration, the Brief notes that the surge in refugees, asylum seekers and undocumented migrants arriving in Europe is slowing. Even as European countries grapple with refugee and migrant flows, low- and middle-income countries continue to host more than 90 percent of refugees. It highlights the challenges of return and reintegration of migrants. Policies that promote voluntary return and successful reintegration back home include: recognition of skills and qualifications acquired abroad; the possibility of securing a permanent residency in the host country; anti-discrimination and equal access programs in the countries of origin; and portability of social benefits.

The Brief presents the results of a survey, conducted by the International Labor Organization (ILO) and the Global Knowledge Partnership on Migration and Development (KNOMAD), on recruitment costs paid by low-skilled migrant workers. Reducing recruitment costs is a part of the Sustainable Development Goal (SDG) of promoting safe, regular and orderly migration. Such costs can be exorbitantly high in some corridors. For example, a significant number of Pakistani construction workers in Saudi Arabia reportedly paid over $5,000 to recruitment agents, an amount equivalent to 20 months or more of earnings. Efforts to reduce recruitment costs would require curtailing the abuses and exploitation by illegal recruitment agencies, cooperation with bona fide overseas employers, and stronger bilateral coordination between labor sending and destination countries.

Data: Data on Remittance Inflows,  Data on Remittance Outflows,  Data on Bilateral Remittance Matrix, Infographic, Video

Comments

Submitted by chinmoy kumar on

Dear Sir,
On the issue of cost of remittance being high in sub-saharan region due to the exclusivity clause I was wondering if the national regulators of these African countries can bring about a regulation prohibiting such agreements. I presume then there would be some kind competition which can bring down the cost of sending money for the expats to their relatives back home.

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