We have just released Migration and Development Brief 12 reporting the latest estimates of remittance flows for 2008-09 and forecasts for 2010-11. Officially recorded remittance flows to developing countries reached $316 billion in 2009, down 6 percent from $336 billion in 2008. With improved prospects for the global economy, remittance flows to developing countries are expected to increase at 6.2% in 2010 and 7.1% in 2011, a faster pace of recovery in 2010 than our earlier forecasts.
The decline in remittance flows to Latin America that began with the onset of financial crisis in the United States appears to have bottomed out since the last quarter of 2009. Remittance flows to South Asia (and to a smaller extent, East Asia) continued to grow in 2009 although at markedly slower pace than in the pre-crisis years. Flows to Europe & Central Asia and Middle-East and North Africa fell more than expected in 2009.
These regional trends reveal that: (a) the more diverse the migration destinations, the more resilient are remittances; (b) the lower the barriers to labor mobility, the stronger the link between remittances and economic cycles in that corridor; and (c) exchange rate movements produce valuation effects, but they also influence the consumption-investment motive for remittances.
The resilience of remittances during the financial crisis has highlighted their importance in countries facing external financing gaps. Remittances are now being factored into sovereign ratings in middle-income countries and debt sustainability analysis in low-income countries. Countries are also becoming increasingly aware of the income and wealth of overseas diaspora as potential sources of capital. Some countries are showing interest in financial instruments such as diaspora bonds and securitization of future remittances, to raise international capital.
Risks to the outlook presented in the Brief include persistently high unemployment rates in high-income countries, unpredictable movements in exchange rates and oil prices, and rising anti-immigration sentiment in some destination countries.