Small drop in food prices in April ‘a welcome relief’
Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to grow 4.2 percent this year to $630 billion. This follows a near-record rebound of 8.6 percent in 2021, according to the World Bank’s latest Migration and Development Brief released today.
Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to increase by over 20 percent in 2022. However, remittance flows to many Central Asian countries, the main source of which is Russia, are likely to decrease dramatically. These declines, coupled with rising food, fertilizer and oil prices, are likely to increase food security risks and exacerbate poverty in many of these countries.
“The Russian invasion of Ukraine has unleashed major humanitarian crises, migratory and refugee crises and risks to a global economy still grappling with the effects of the COVID pandemic.” called Michal Rutkowski, Global Director of the Global Practice Social Protection and Jobs at the World Bank. “Strengthening social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the economic impact of war, is a key priority to protect people from the threat of food insecurity and rising poverty.”
In 2021, remittance inflows were recorded in Latin America and the Caribbean (25.3 percent), Sub-Saharan Africa (14.1 percent), Europe and Central Asia (7.8 percent), the Middle East and North Africa (7.6 percent), and strong growth in South Asia (6.9 percent). Remittances to East Asia and the Pacific fell 3.3 percent; Ex-China, remittances grew 2.5 percent. With the exception of China, remittance flows have been the largest external source of funding for LMICs since 2015.
The top five recipient countries for remittances in 2021 were India, Mexico (instead of China), China, the Philippines and Egypt. Economies where remittances account for a very high proportion of GDP include Lebanon (54 percent), Tonga (44 percent), Tajikistan (34 percent), the Kyrgyz Republic (33 percent) and Samoa (32 percent).
“On the one hand, the Ukraine crisis has diverted the attention of world politics away from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting target communities that are experiencing large influxes of migrants.” called Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. “As the global community prepares to meet at the International Migration Review Forum, the creation of a concessional migration financing facility to support target communities should be seriously considered. This facility could also provide financial support to communities of origin affected by remigration during the COVID-19 crisis.”
Globally, the average cost of remitting $200 was 6 percent in Q4 2021, double the SDG target of 3 percent, according to the bank’s Remittances Prices Worldwide Database. It is cheapest to send money to South Asia (4.3 percent) and most expensive to Sub-Saharan Africa (7.8 percent).
The cost of sending money to Ukraine is high (7.1 percent from the Czech Republic, 6.5 percent from Germany, 5.9 percent from Poland and 5.2 percent from the USA). Global goodwill towards refugees and migrants from Ukraine opens an opportunity to develop and test programs to improve their access to jobs and social services in host countries, to apply simplified anti-money laundering and anti-terrorist financing procedures to small remittance transactions, to Remittances reduce costs and mobilize diaspora bond financing.
The war in Ukraine has also affected international payment systems, affecting cross-border remittance flows. Russia’s exclusion from SWIFT has added a national security dimension to participation in international payment systems.
“A 2 percentage point reduction in remittance fees would potentially mean $12 billion in annual savings for international migrants from LMICs and $400 million for migrants and refugees from Ukraine.” added Ratha. “However, cross-border payment systems are likely to become multipolar and less interoperable, slowing progress in reducing transfer fees.”
The World Bank establishes an international working group to improve data on remittances
The COVID-19 pandemic and the war in Ukraine have further highlighted the need for frequent and timely data. In April, the World Bank, under the auspices of KNOMAD and in collaboration with countries where remittances provide a financial lifeline, launched an international working group to improve data on remittance flows. Improved data on remittances can directly support SDG indicators on reducing the cost of remittances and help increase the volume of remittances. This will also support the first goal of the Global Compact on Migration to improve data.
Regional referral trends
Transfer goes to the East Asia and Pacific Region fell 3.3 percent after a 7.3 percent decline in 2020. Flows hit $133 billion in 2021, nearly 2017 levels. Excluding China, remittances to the region increased 2.5 percent in 2021 Percent. Remittances to the Philippines benefited from job creation and wage increases in the United States, where large numbers of Filipino migrants live. Economies where remittances account for a high percentage of their GDP include Tonga, Samoa, the Marshall Islands, the Philippines and Fiji. Excluding China, remittance inflows are expected to increase by 3.8 percent in 2022. The average cost of sending $200 to the region fell to 5.9 percent in the fourth quarter of 2021, compared to 6.9 percent a year earlier.
remittance inflows Europe and Central Asia Up 7.8 percent in 2021 to hit historic highs of $74 billion. Much of the growth was due to stronger economic activity in the European Union and rising energy prices. In 2021, Ukraine received $18.2 billion in inflows, fueled by receipts from Poland, the top destination country for Ukrainian migrant workers. Personal transfers represent a vital source of financing and growth for the economies of Central Asia, of which Russia is the main source. As a share of GDP, remittance receipts in Tajikistan and the Kyrgyz Republic were 34 percent and 33 percent, respectively, in 2021. Near-term projections for remittances to the region, which are expected to fall 1.6 percent in 2022, are highly uncertain and dependent on the extent of the war in Ukraine and sanctions on outbound payments from Russia. In contrast, remittance flows to Ukraine are expected to increase by over 20 percent in 2022. The average cost of sending $200 to the region fell to 6.1 percent in the fourth quarter of 2021 from 6.4 percent a year earlier.
Transfer flowing Latin America and the Caribbean rose to $131 billion in 2021, up 25.3 percent from 2020, driven by the strong recovery in jobs for foreign-born workers in the United States. Countries with double-digit growth rates included Guatemala (35 percent), Ecuador (31 percent), Honduras (29 percent), Mexico (25 percent), El Salvador (26 percent), Dominican Republic (26 percent), Colombia (24 percent) . , Haiti (21 percent) and Nicaragua (16 percent). Flows to Mexico recorded include funds received from transit migrants from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba and others. Remittances are important as a source of hard currency for several countries for which these flows account for at least 20 percent of GDP, including El Salvador, Honduras, Jamaica and Haiti. In 2022, remittances are estimated to grow by 9.1 percent, although downside risks remain. The average cost of sending $200 to the region remained largely flat at 5.6 percent in the fourth quarter of 2021 compared to a year earlier.
remittances to developing countries Middle East and North Africa Region grew 7.6 percent to $61 billion in 2021, driven by robust increases in Morocco (40 percent) and Egypt (6.4 percent). Factors supporting the flows were economic growth in receiving countries in the European Union, as well as transit migration, which further increased inflows to temporary receiving countries such as Egypt, Morocco and Tunisia. In 2022, remittance flows are expected to increase by 6 percent. Remittances have long been the largest source of external resource flows for MENA development — among ODA, FDI, and portfolio capital and debt flows — and accounted for 61 percent of total inflows in 2021. The cost of sending $200 to MENA fell to 6.4 percent in the fourth quarter of 2021 from 6.6 percent a year ago.
transfers to South Asia grew 6.9 percent to $157 billion in 2021. Although large numbers of South Asian migrants returned to their home countries when the pandemic broke out in early 2020, vaccine availability and the opening up of Gulf Cooperation Council economies allowed a gradual return to host countries in 2021. Support larger remittance flows. Better economic performance in the United States was also a major contributor to growth in 2021. Remittance flows to India and Pakistan increased by 8 percent and 20 percent, respectively. In 2022, remittance inflow growth is expected to slow to 4.4 percent. Remittances are the dominant source of foreign exchange for the region, with receipts more than triple foreign direct investment in 2021. South Asia has the lowest average remittance cost of any world region at 4.3 percent, although this is still above the SDG target of 3 percent.
remittance inflows Africa southern of the Sahara rose 14.1 percent to $49 billion in 2021 after an 8.1 percent decline in the previous year. Remittance growth was supported by strong economic activity in Europe and the United States. Recorded inflows into Nigeria, the largest recipient country in the region, rose 11.2 percent, partly due to measures aimed at channeling inflows through the banking system. Countries with double-digit growth rates include Cabo Verde (23.3 percent), The Gambia (31 percent) and Kenya (20.1 percent). Countries where the share of remittances in GDP is significant include Gambia (27 percent), Lesotho (23 percent), Comoros (19 percent) and Cabo Verde (16 percent). In 2022, remittance inflows are expected to increase by 7.1 percent, driven by the continued shift towards using official channels in Nigeria and higher food prices – migrants are likely to send more money to their home countries, which are now suffering from extraordinary price hikes on basic commodities . The cost of sending $200 to the region averaged 7.8 percent in the fourth quarter of 2021, down slightly from 8.2 percent a year ago.