Dubai: Remittance flows to the developing world are expected to exceed earlier estimates and total $406 billion (Dh1.49 trillion) this year, an increase of 6.5 per cent over the previous year, the World Bank said in its latest report, released on Wednesday.
“Remittances to developing countries are projected to grow by 7.9 per cent in 2013, 10.1 per cent in 2014 and 10.7 per cent in 2015 to reach $534 billion in 2015,” the report, Migration and Development Brief, says.
When high-income countries are included, worldwide remittances are expected to total $534 billion in 2012, and projected to grow to $685 billion in 2015, it said.
India topped the list of the world’s biggest remittance recipient countries with $70 billion, followed by China with $66 billion, the Philippines and Mexico $24 billion each, and Nigeria $21 billion. Other large recipients include Egypt, Pakistan, Bangladesh, Vietnam, and Lebanon.
“However, despite the growth in remittance flows overall to developing countries, the continuing global economic crisis is dampening remittance flows to some regions, with Europe and Central Asia and Sub-Saharan Africa especially affected, while South Asia and the Middle East and North Africa (Mena) are expected to fare much better than previously estimated,” it said.
More than 215 million people, or 3 per cent of the world’s population, live outside their countries of birth while over 700 million migrate within their countries for socio-political and economic reasons.
Remittances, the money sent home by migrants, are three times the size of official development assistance and they provide an important lifeline for millions of poor households. Remittances to developing countries are estimated to reach $372 billion in 2011.
“Although migrant workers are, to a large extent, adversely affected by the slow growth in the global economy, remittance volumes have remained remarkably resilient, providing a vital lifeline to not only poor families but a steady and reliable source of foreign currency in many poor remittances recipient countries,” said Hans Timmer, Director of the Bank’s Development Prospects Group.
Regions and countries with large numbers of migrants in oil exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, especially Western Europe.
Thus South Asia, Mena and East Asia and Pacific regions, with large numbers of workers in the Gulf Cooperation Council (GCC) countries, are seeing better-than-expected growth in remittances. For South Asia, remittances in 2012 are expected to total $109 billion, an increase of 12.5 per cent over 2011; the East Asia and Pacific region is estimated to attract $114 billion, an increase of 7.2 per cent over 2011; while Mena is expected to receive $47 billion, an increase of 8.4 per cent over the previous year.
Remittances help developing countries to boost up foreign exchange reserves that help them meet their balance of payment requirements especially when exports fall.
Remittances to Latin America and the Caribbean are supported by a recovering economy and an improving labour market in the United States but moderated by a weak European economy. The region will therefore see a modest growth of 2.9 per cent in 2012, totalling an estimated $64 billion.
In contrast, remittances are expected to remain flat to Europe and Central Asia and Sub-Saharan Africa regions, mainly because of the economic contractions in high-income European countries.
“In Europe, outward remittance has weakened due to high rate of unemployment,” Dilip Ratha, Manager of the World Bank’s Migration and Remittances Unit and lead author of the Migration and Development Brief, told Gulf News. “Weak unemployment is affecting remittance flows in to North Africa and Central Asian regions that rely on Europe. It needs to be seen how the crisis shapes up.”
Remittance flows to Europe and Central Asia are estimated at a virtually unchanged $41 billion and $31 billion to Sub-Saharan Africa this year, although both regions are projected to make a robust recovery in remittance flows in 2013.
“Migrant workers are displaying tremendous resilience in the face of the continuing economic crisis in advanced countries,” said Ratha. “Their agility in finding alternate employment and cutting down on personal expenses has prevented large-scale return to their home countries.”
Going forward, the bank expects continued growth in remittance flows to all regions of the world, although persistent unemployment in Europe and hardening attitudes towards migrant workers in some places present serious downside risks.
Another obstacle to growth of remittance flows is the high cost of sending money, which averaged 7.5 per cent in the third quarter of 2012 for the top 20 bilateral remittance corridors and 9 per cent for all countries for which cost data are available. The average remittance cost for Sub-Saharan Africa was 12.4 per cent, the highest amongst all developing regions.
The report also notes that the promise of mobile remittances has yet to be fulfilled, despite the skyrocketing use of mobile telephones throughout the developing world. Mobile remittances fall in the regulatory void between financial and telecom regulations, with many central banks prohibiting non-bank entities to conduct financial services. Central banks and telecommunication authorities, thus, need to come together to craft rules relating to mobile remittances.
“The global community has made progress in three out of four areas of the global remittances agenda – data, remittance costs, and leveraging remittances for capital market access for countries. Progress, however, has been slow in the area of linking remittances to financial access for the poor. There is great potential for developing remittance-linked micro-saving and micro-insurance schemes and for small and medium enterprise (SME) financing,” said Ratha.
GCC Region
Remittance outflow from the GCC remained quite strong, despite problems in other parts of the Middle East, Ratha told Gulf News.
“The crisis [Arab Spring] is firmly behind us. Remittance outflow from the GCC has been quite strong, especially towards India, Pakistan and Bangladesh – the flows remained unusually high,” Ratha said in an interview with Gulf News.
He said, there is a correlation between political uncertainty and remittance flows. “Remittance flows to Egypt and Syria has been quite strong – because crisis-hit people needs funds more than others,” he says. “In Egypt, remittance inflows have become more than double the revenues earned from Suez canal.”
Despite slowdown in India’s economic growth rate, remittance went up by $6 billion. “The weak Indian currency and investment in personal assets could cause this increase,” Sudhir Kumar Shetty, Chief Operating Officer of the UAE Exchange Centre, told Gulf News.
“Besides, the number of non-resident Indians is growing. As long as it keeps growing, the remittance flow will also increase, irrespective of the slowdown in Indian economy.”
Sidebar
Reverse migration
Prolonged economic crisis in Europe that is causing a reverse migration flow from Europe could change the flow of remittances, a senior World Bank economist said.
“If the European crisis continues for some more time, there could be a reverse migration from European countries to emerging economies that could change the flow of remittance,” Dilip Ratha, Manager of the World Bank’s Migration and Remittances Unit, told Gulf News. “In fact this has already started as more and more Europeans from the crisis-ridden countries are looking at emerging markets for employment due to a weakening job market in those countries.
“This could change the flow of remittances. Already remittance outflow from Europe has weakened.”
Box
Top 10 Remittance Recipients
[Amount in US$ billion]
India $70
China $66
Mexico $24
Philippines $24
Nigeria $21
Egypt $18
Bangladesh $14
Pakistan $14
Vietnam $9
Lebanon $7
