Bilateral Remittance Matrix (new)

In observance of the International Migrants Day, December 18

The KNOMAD/World Bank just released new estimates of bilateral remittance flows for 2021. These estimates are computed using the simple methodology described in Ratha and Shaw, 2007, "South-South Migration and Remittances." Accordingly, inward remittances to a country are allocated to various source countries in proportion to its stock of migrants in those countries, the per capita income (in purchasing power parity terms) in the destination countries, and the per capita income (again in PPP terms) in the origin countries. For this purpose, 2021 data on remittance flows as reported in the latest Migration and Development Brief 37 are used. The bilateral migration matrix (available here) used for this calculation is based on data published, as of 2022, by the United Nations (UN DESA), Eurostat, national statistical offices, the UNHCR and the OECD. 

According to these estimates, top remittance corridors in 2021 were:

• United States – Mexico: $52 billion
• United Arab Emirates- India: $20 billion
• Unites States – India: $6 billion
• Saudi Arabia – India: $13 billion

High-income countries were the main source of remittances. The United States is by far the largest, with an estimated $200 billion in outward flows in 2021. As the largest destination country for migrants, and among the richest, it is not surprising that the United States is the top source of remittances. Saudi Arabia ranks as the second largest, followed by the United Arab Emirates, Germany, the United Kingdom, Russia, Canada, France, Spain, and Australia. The six Gulf Cooperation Council countries accounted for about $134 billion in outward remittance flows in 2021, and indeed, as a share of GDP or on a per capita basis, the GCC region is by far the top source region for outward remittances worldwide. 

Low- and middle-income countries (LMICs) (“Global South”) receive about 56 percent of their remittances from high-income OECD (“Global North”), 27 percent from the GCC and other high-income countries (outside the OECD), and about 17 percent from the other LMICs (table 1). Interestingly, low-income countries received a larger share of remittances from the LMICs (including 15 percent from other LICs) than from the high-income countries (figure 1). 


Table 2 and figure 2 show the sources of remittances received by different geographic regions, based on the bilateral remittance matrix 2021. Several interesting patterns are evident from the figure:

• Intra-regional remittances are very high in Europe and Central Asia (63 percent) and in Sub-Saharan Africa (37 percent).
• Latin America and the Caribbean region received over 90 percent of remittances from largely the United States.
• South Asia and MENA regions receive significant amounts of remittances from the GCC region.

Caveats

The main caveats relating to the estimated bilateral remittance matrix derive from those associated with the inputs used and the methodological assumptions. On inputs, the main caveats derive from the weaknesses of the bilateral migration stock data that include undercounting and reporting lags, and the weaknesses of the remittance inflow data reported by countries (again, due to undercounting of flows through informal channels, or misclassification of trade and tourism receipts as remittances, and vice versa). On assumptions, the incomes of migrants in remittance-source countries and the costs of living in the remittance-recipient countries India are both proxied by per capita incomes in PPP terms, which is only a rough proxy. A major difficulty in aligning sources of remittances is the difficulty of attributing (often wrongly) the source of remittances to countries where the financial intermediaries (correspondent banks) have headquarters. A second, and intractable, difficulty is encountered in countries that selectively ban outward remittance flows for either geopolitical considerations or for shoring up foreign exchange reserves. In the estimates presented in the bilateral remittance matrix, flows between India and Pakistan, Pakistan and India, Lebanon and Israel and vice versa, and Azerbaijan and Armenia and vice versa are assumed to be zero given the political economy situations in these corridors.  

Under the auspices of KNOMAD, the World Bank has initiated the RemitStat Working Group  to improve the definition and reporting of data on worldwide remittance flows. The working group is expected to publish guidelines on remittance data compilation in 2023.
 

Note: Thanks to Baran Pradhan for excellent research assistance.