WASHINGTON, June 13, 2023 ¡ª Officially recorded remittance flows to low- and middle-income countries (LMICs) are estimated to grow by 1.4% to $656 billion in 2023 as economic activity in remittance source countries is set to soften, limiting employment and wage gains for migrants, according to the World Bank¡¯s latest released today.
This edition of the Brief also revises upwards 2022¡¯s growth in remittance flows to 8%, reaching $647 billion. In the post-COVID period of slower economic growth and falling foreign direct investments, remittance inflows have become more important to countries and households, given their resilience as a source of external financing, particularly for LMICs with high external debt.
¡°Remittances are highly complementary to government cash transfers and essential to households during times of need,¡± said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank. ¡°Ä¾¹ÏÓ°Ôº is leading analytical and operational work on global migration to facilitate remittance flows and reduce costs.¡±
During 2022, remittances were supported by 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 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. Remittance inflows declined by 3.8% for the Middle East and North Africa region.
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¡ªhighlighting the importance of remittances for funding current account and fiscal shortfalls¡ª include Tajikistan (51% of GDP), Tonga (44%), Lebanon (36%), Samoa (34%) and the Kyrgyz Republic (31%).
¡°Remittances have become a financial lifeline in many economies through the pandemic and will become even more so in the foreseeable future,¡± said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. ¡°We have stepped up collaborations with source and recipient countries to improve data and leverage remittances to mobilize private sector capital through diaspora bonds and improved sovereign ratings.¡±
Globally, the average cost of sending $200 was 6.2% in the fourth quarter of 2022, up slightly from 6% a year ago, and more than twice the Sustainable Development Goal target of 3%, according to the Bank¡¯s . Banks are the costliest channel for sending remittances, with an average cost of 11.8%, followed by post offices (6.3%), money transfer operators (5.4%), and mobile operators (4.5%). While mobile operations are the cheapest, they account for less than 1% of total transaction volume.
Regional Remittance Trends
Remittances to East Asia and the Pacific increased by 0.7% to reach $130 billion in 2022. Remittances to China have been on the decline because rising prosperity and an ageing population have slowed the pace of less-skilled emigration. Outside of China, post-pandemic demand in OECD countries for East Asia¡¯s high-skilled migrants, continued demand for workers in the GCC countries, and increased employment opportunities in Australia and New Zealand supported migrants¡¯ ability to send money home. In 2023, remittances are projected to grow by 1% as slower growth in host countries will affect incomes and employment prospects. The average cost of sending $200 to the region was 5.7% in the fourth quarter of 2022, a small decline from 5.9% a year ago. In the top five least expensive corridors, the cost decreased to under 3%.
Remittance flows to Europe and Central Asia grew 19% and registered a record high of $79 billion in 2022. The strong performance was due mainly to record high amounts of money transfers from the Russian Federation to neighboring countries. The surging inflows of Russian remittances were driven by capital migration through the relocation of Russian companies and citizens, the strong ruble, and the increased demand for migrant workers in Russia. In 2022, Ukraine remained the region¡¯s largest recipient of remittances, receiving inflows of $17.1 billion, a decline of 5.4% over 2021. In the first four months of 2023, the volume of remittances decreased by 11.5%, pointing to continued weakness in remittance flows to the country. In 2023, remittance flows to the region are projected to grow by 1%. The average cost of sending $200 to the region was 6.4% in the fourth quarter of 2022, up from 6.1% a year ago.
Remittance flows to Latin America and the Caribbean increased by 11.3% to $145 billion in 2022 aided by the strong U.S. labor market. Flows to Mexico grew by 12.9% to $61.1 billion. The growth of remittances varied widely across countries, ranging from a rise of 50% in Nicaragua, 18% in Guatemala, 17.8% in Honduras, and 9.7% in Colombia. In 2023, remittances are projected to grow by 3.3%. But with prospects tightly linked to developments in the U.S. economy, which is slowing, the risks are skewed to the downside. Sending $200 to the region cost on average 5.8% in the fourth quarter of 2022, up from 5.6% a year ago.
Growth in remittances to the Middle East and North Africa fell by 3.8% to $64 billion in 2022 after posting strong growth of 12.2% in 2021. Economies in the region that saw slight gains in remittance flows included several Maghreb countries. In 2023, remittance inflows are projected to grow by 1.7% with the outlook differentiated across regional subgroups depending on dominant host countries and the degree of exposure to higher inflation and financial volatility. Sending $200 to the region cost on average 6.2% in the fourth quarter of 2022, down from 6.4% a year ago.
Remittance flows to South Asia grew by over 12% in 2022 to $176 billion, benefiting from strong labor market conditions in OECD destination economies, high demand for less skilled migrants in GCC countries, and anti-food price inflation measures that supported migrant incomes in GCC countries. Flows to India grew by 24% to reach $111 billion. Other top global recipients in the region were Pakistan (ranked 5th) and Bangladesh (7th) with remittance inflows in 2022 reaching $30 billion and $22 billion, respectively. Among the countries with remittance inflows that form a significant part of GDP, Nepal ranks 9th globally with remittances equal to 23% of GDP in 2022. In 2023, remittances are projected to grow by 0.3% due to slower growth in the OECD economies, especially in the high-tech sector in the United States which affects demand for IT workers, and migrants¡¯ preference for informal relative to formal channels of money transfer in Pakistan, Bangladesh, and Sri Lanka due to worsening domestic economic conditions. Sending $200 to the region cost on average 4.9% in the fourth quarter of 2022, up from 4.3% a year ago.
Remittance flows to Sub-Saharan Africa grew by 6.1% in 2022 to $53 billion. The trend was largely driven by strong remittance growth in Ghana (12%), Kenya (8.5%), Tanzania (25%), Rwanda (21%), and Uganda (17%). Remittances to Nigeria, accounting for around 38% of total remittance inflows to the region, increased by 3.3% to $20.1 billion. Remittance inflows supported the current accounts of several African countries dealing with food insecurity, supply chain disruptions, severe drought (Horn of Africa), floods (Nigeria, Chad, Niger, Burkina Faso, Mali, and Cameroon), and the spread of debt-servicing difficulties. In 2023, growth in remittances is expected to ease to 1.3%. Sending $200 to the region cost on average 8% in the fourth quarter of 2022, up from 7.8% a year ago.
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