Remittances remain resilient but risks of slowdown ahead
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This remarkable, consecutive year-on-year growth was supported by several factors such as strong oil prices in the Gulf Cooperation Council (GCC) countries, which increased migrants’ incomes; large money transfers from the Russian Federation to countries in Central Asia; and the strong labor market in the United States and other advanced migrant destination economies. By region, remittance inflows grew by 0.7% in East Asia and the Pacific, 19% in Europe and Central Asia, 11.3% in Latin America and the Caribbean, 12.2% in South Asia, and 6.1% in Sub-Saharan Africa in 2022. In the same period, remittance inflows declined by 3.8% for the Middle East and North Africa region.
In 2023, however, slower growth in remittances is expected in all regions, notably in Europe and Central Asia (1 percent) and South Asia (0.3 percent). In Europe and Central Asia, remittances are slowing down because of lower Russian demand for their workers in Russia from that region, and the weakening of the ruble against the U.S. dollar. In South Asia, growth in remittances is expected to slow due to worldwide layoffs in the information technology IT sector globally and the possible diversion of remittance flows to informal channels as domestic economic uncertainties worsen in some recipient countries.
By contrast, the growth rate of remittances is expected to remain relatively remain strong in Latin America and the Caribbean region (3.3 percent). Most of the senders of remittances to this region are based in the United States, where both the employment levels and wages of Hispanics and foreign-born workers and their wages have been strong. Growth rates of remittance flows are expected to be 1.5 percent in the Middle East and North Africa, 1 percent in East Asia and the Pacific region, and 1.3 percent in Sub-Saharan Africa.
The top five recipient countries for remittances in 2022 were India (receiving $111 billion), Mexico ($61 billion), China ($51 billion), the Philippines ($38 billion), and Pakistan ($30 billion). Economies where remittance inflows represent large shares of GDP—highlighting the importance of remittances for funding current account and fiscal shortfalls— include Tajikistan (51% of GDP), Tonga (44%), Lebanon (36%), Samoa (34%) and the Kyrgyz Republic (31%).
Besides economic growth and the employment levels of foreign workers, the other two variables that affect remittance flows are oil prices (especially in the Russian Federation and the GCC countries member countries of the Gulf Cooperation Council), and exchange rates of local currencies with respect to the U.S. dollar. In many remittance-recipient countries facing balance of payments difficulties and the emergence of gaps between the official and the market exchange rate, remittance flows may shift to informal channels, which can potentially underestimate the true size of official data on remittance flows.
Also, The World Bank has stepped up collaborations with source and recipient countries to improve data and remittances to mobilize private sector capital through diaspora bonds and globally improved sovereign ratings.
To read more on the developments in migration and remittance flows, please download the latest Migration and Development Brief here.
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