Development – Remittances
Remittances to Recover Modestly After Two Years of Decline
WASHINGTON, October 3, 2017 – Remittances to low- and middle-income countries are on course to recover in 2017 after two consecutive years of decline, says the latest edition of the World Bank’s Migration and Development Brief, released today.
The Bank estimates that officially recorded remittances to developing countries are expected to grow by 4.8 percent to $450 billion for 2017. Global remittances, which include flows to high-income countries, are projected to grow by 3.9 percent to $596 billion.
The recovery in remittance flows is driven by relatively stronger growth in the European Union, Russian Federation, and the United States. As a result, those regions likely to see the strongest growth in remittance inflows this year are Sub-Saharan Africa, Europe and Central Asia, and Latin America and the Caribbean. In the Gulf Cooperation Council (GCC) countries, fiscal tightening, due to low oil prices, and policies discouraging recruitment of foreign workers, will dampen remittance flows to East and South Asia.
Among major remittance recipients, India retains its top spot, with remittances expected to total $65 billion this year, followed by China ($63 billion), the Philippines ($33 billion), Mexico (a record $31 billion), and Nigeria (($22 billion).
In keeping with an improving global economy, remittances to low- and middle-income countries are expected to grow modestly by 3.5 percent in 2018, to $466 billion. Global remittances will grow by 3.4 percent to $616 billion in 2018.
The global average cost of sending $200 remained stagnant at 7.2 percent in the third quarter of 2017.This was significantly higher than the Sustainable Development Goal (SDG) target of 3 percent. Sub-Saharan Africa, with an average cost of 9.1 percent, remains the highest-cost region. Two major factors contributing to high costs are exclusive partnerships between national post office systems and any single money transfer operator (MTO), which stifles market competition and allows the MTO to raise remittance fees, as well as de-risking by commercial banks, as they close bank accounts of MTOs, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime.
“Remittances are a lifeline for developing countries; this is particularly true following natural disasters, such as the recent earthquakes in Mexico and the storms devastating the Caribbean. It is imperative for the global community to reduce the cost of remitting money, by eliminating exclusivity contracts, especially in the high-income OECD countries. There is also an urgent need to address de-risking behavior of global banks,” said Dilip Ratha, lead author of the Brief and head of KNOMAD.
In a special feature on forced and voluntary return migration, the Brief notes that the surge in refugees, asylum seekers and undocumented migrants arriving in Europe is slowing. Even as European countries grapple with refugee and migrant flows, low- and middle-income countries continue to host more than 90 percent of refugees. It highlights the challenges of return and reintegration of migrants. Policies that promote voluntary return and successful reintegration back home include: recognition of skills and qualifications acquired abroad; the possibility of securing a permanent residency in the host country; anti-discrimination and equal access programs in the countries of origin; and portability of social benefits.
“The fundamental drivers of the ongoing migration crisis – conflict, economic deprivation, demographic pressures and environmental change – need to be addressed. The World Bank is looking into policies and programs that will help tackle these issues,” said Michal Rutkowski, Senior Director of the Social Protection and Jobs Global Practice at the World Bank..