It should be remembered that the growth rate of remittances came from 10.8% and 8.3% in 2021 and 2022, respectively. The issue is key and this is how it was expressed Iffath Sharif, director of the WB, pointing out that Migration and related remittances are essential drivers of economic and human development.
Remittances: how they will evolve in 2024
Looking to the future, The World Bank expects remittances to low- and middle-income countries to grow at a faster pace in 2024, in 2.3% lathealthough this growth will not be the same in all regions. “Potential downside risks to these projections include lower-than-expected economic growth in high-income countries hosting migrants and volatility in oil prices and exchange rates.”warns the WB.
Data for 2023 show that remittance flows increased the most in Latin America and the Caribbean (7.7%), followed by South Asia (5.2%) and East Asia and the Pacific (4.8%, excluding China). In sub-Saharan Africa, a slight decrease of 0.3% was recorded, while In the Middle East and North Africa, a drop of almost 15% was observed, and in Europe and Central Asia, a drop of 10.3%.
For Dilip Rathaa World Bank economist, the resilience of remittances highlights their importance to millions of people, adding that leveraging remittances to promote financial inclusion and access to capital markets can improve the development prospects of recipient countries. “The WB aims to reduce the costs of remittances and facilitate formal flows by mitigating political and commercial risks to promote private investment in this sector”he pointed.
Remittances: Warning about high shipping costs
In this regard, the WB report states that Sending remittances is still too expensive: In the fourth quarter of 2023, the global average cost of sending $200 was 6.4% of the amount sentalmost similar to the previous year (6.2%) but well above the 3% target set in the Sustainable Development Goals (SDG).
For its part, Digital remittances had a lower cost, at 5%, compared to 7% for non-digital methods, highlighting the benefits of technological advances in reducing the financial burden on migrants.
Dollars: What do regional remittance trends show?
On the one hand, Shipments to East Asia and the Pacific excluding China rose 4.8% to $85 billion in 2023. “Remittances are crucial for some Pacific island economies such as Palau, Samoa, Tonga and Vanuatu. Notably, Tonga was the most dependent country in the world, with remittances accounting for 41% of GDP. Excluding China, remittance flows to the region are projected to increase by 3.2% in 2024. The cost of sending $200 to the region averaged 5.8% at the end of 2023, with costs as high as 17.1% in the most expensive corridor.”
On the other hand, Remittance flows to Europe and Central Asia are estimated to have decreased by 10.3% and stood at $71 billion in 2023. This decline was driven by reduced transfers from Russia to many Central Asian countries. In addition, the Russian invasion of Ukraine contributed to lower-than-expected remittances to Ukraine and Russia. Remittance flows to the region are estimated to fall by 1.9% in 2024. The cost of sending $200 to the region (excluding Russia) averaged 6.7%, compared to 6.4% in the previous year.
While In Latin America and the Caribbean, remittance flows are estimated to have slowed to 7.7% in 2023, reaching US$156 billion, but they continue to be supported by the strength of the US labor market. Mexico received $66.2 billion, representing an increase of 7.8%, maintaining its position as the region’s top recipient. Regional growth was highly varied, ranging from a 44.5% increase in Nicaragua to a 13.4% decrease in Argentina. Remittance flows to the region are expected to increase by 2.7% in 2024, and the cost of sending $200 to the region is 5.9% on average, virtually the same as the previous year.
Regarding remittances to The Middle East and North Africa fell by 15% to $55 billion in 2023, mainly due to a sharp decline in flows to Egypt. The divergence between official and parallel exchange rates is likely to have caused remittances to be diverted to unofficial channels, the World Bank said. Official flows to Egypt reportedly picked up after exchange rates were unified in March 2024. Remittance flows between countries in the region were affected by slowing growth in the Gulf Cooperation Council (GCC) countries. Flows are expected to recover by 4.3% in 2024 while the cost of sending $200 to the region was, on average, 5.9%, down from 6.7% in the previous year.
Remittance flows to South Asia increased by 5.2% in 2023 to reach $186 billion, Remittances rose by 7.5% to $120 billion, down from an increase of over 12% in 2022. Growth was driven by India, which rose by 7.5% to $120 billion, supported by strong labor markets in the United States and Europe. Declining outflows from GCC countries, affected by falling oil prices and production cuts, contributed to the slowdown. Remittances are estimated to grow by 4.2% in 2024 while the cost of sending $200 to the region averaged 5.8%, up from 4.2% in 2022.
Finally, remittance flows to Sub-Saharan Africa to reach $54 billion in 2023a slight decrease of 0.3%. Remittances supported the current accounts of several African countries grappling with food insecurity, droughts, supply chain disruptions, floods and debt servicing difficulties. Countries that rely heavily on remittances include Gambia, Lesotho, Comoros, Liberia and Cape Verde. Remittances are estimated to grow by 1.5% in 2024 and the cost of sending $200 to the region is estimated to be 7.9% on average, almost the same as the previous year.
Source: Ambito
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