But economies that depend on flows from Russia will experience major declines
WASHINGTON, May 11, 2022 — Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to rise 4.2% this year to reach $630 billion. This follows a near-record recovery of 8.6% in 2021, according to the latest World Bank Migration and Development Report released today.
Remittances to Ukraine, the largest recipient in Europe and Central Asia, are expected to increase by more than 20% in 2022. However, remittance flows to many Central Asian countries, whose main source is Russia, are likely to drastically decrease. Are The declines, combined 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 large-scale refugee, migration and humanitarian crises and risks for a global economy still grappling with the impact of the COVID pandemic.” said Michal Rutkowski, Global Director of the World Bank’s Social Protection and Employment Global Practice. “Boosting social protection programs to protect the most vulnerable, including Ukrainians and Central Asian families, as well as those affected by the economic impact of war, is a key priority to protect people from the threats of food insecurity and increased poverty.
During 2021, remittance inflows experienced strong increases in Latin America and the Caribbean (25.3%), Sub-Saharan Africa (14.1%), Europe and Central Asia (7.8%), the Middle East and North Africa ( 7.6%) and South Africa. Asia (6.9 percent). Remittances to East Asia and the Pacific fell 3.3 percent; although excluding China, remittances grew 2.5 percent. Excluding China, remittance flows have been the largest source of external funding for LMICs since 2015.
The top five remittance-receiving countries in 2021 were India, Mexico (replacing China), China, the Philippines, and Egypt. Economies where remittance inflows represent a very high proportion of GDP include Lebanon (54%), Tonga (44%), Tajikistan (34%), the Kyrgyz Republic (33%), and Samoa (32%).
“On the one hand, the Ukraine crisis has diverted the attention of world politics from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting destination communities that are experiencing a large influx of migrants.” said Dilip Ratha, lead author of the report on migration and remittances and director of KNOMAD. “As the global community prepares to convene at the International Migration Review Forum, serious consideration should be given to creating a Concessional Migration Finance Fund to support destination communities. This facility could also provide financial support to communities of origin experiencing return migration during the COVID-19 crisis.”
Globally, the average cost of sending $200 was 6% in Q4 2021, double the SDG target of 3%, according to the Bank’s Global Remittance Price Database. It is cheaper to send money to South Asia (4.3 percent) and more expensive to send money to sub-Saharan Africa (7.8 percent).
The costs of sending money to Ukraine are high (7.1 percent from the Czech Republic, 6.5 percent from Germany, 5.9 percent from Poland, and 5.2 percent from the US). Global goodwill towards Ukrainian refugees and migrants opens an opportunity to develop and test programs to facilitate their access to jobs and social services in host countries, apply simplified anti-money laundering and terrorist financing procedures to small remittance transactions to help reduce remittances. costs and mobilize bond financing from the diaspora.
The war in Ukraine has also affected international payment systems with implications for cross-border remittance flows. Russia’s exclusion from SWIFT has added a national security dimension to participation in international payment systems.
“Reducing remittance fees by 2 percentage points would potentially translate into $12 billion in annual savings for LMIC international migrants and $400 million for Ukrainian migrants and refugees.” additional ratha. “However, cross-border payment systems are likely to become multi-polar and less interoperable, which will slow progress on reducing remittance fees.”
The World Bank launches an international task force 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 Task Force to Improve Data on Remittance Flows. Having improved data on remittances can directly support the Sustainable Development Goal indicators on reducing remittance costs and help increase the volume of remittances. This will also support the first goal of the Global Compact on Migration, to improve data.
Regional remittance trends
Remittances flow to the East Asia and the Pacific The region fell 3.3 percent after a 7.3 percent drop in 2020. Flows reached $133 billion in 2021, close to 2017 levels. Excluding China, remittances to the region grew 2 .5 percent in 2021. Remittances to the Philippines benefited from job creation and wage gains in the United States, where a large number of Filipino immigrants live. Economies where remittance inflows constitute a high percentage of their GDP include Tonga, Samoa, the Marshall Islands, the Philippines, and Fiji. Excluding China, remittance inflows are projected to grow 3.8% in 2022. The average cost of sending $200 to the region fell to 5.9% in the fourth quarter of 2021 compared to 6.9% last year. last year.
Remittance inflows to Europe and Central Asia rose 7.8% in 2021, reaching all-time highs of $74 billion. The growth was largely due to increased economic activity in the European Union and a rebound in energy prices. In 2021, Ukraine received $18.2 billion worth of inflows, driven by receipts from Poland, the main destination country for Ukrainian migrant workers. Personal transfers are a vital source of financing and growth for the Central Asian economies, of which Russia is the main source. As a percentage of GDP, remittance receipts in Tajikistan and the Kyrgyz Republic were 34% and 33%, respectively, in 2021. Near-term projections for remittances to the region, which are expected to decline by 1.6 % in 2022, are highly uncertain and depend on the scale of the war in Ukraine and sanctions on outgoing payments from Russia. By contrast, remittance flows to Ukraine are expected to increase by more than 20% in 2022. The average cost of sending $200 to the region fell to 6.1% in the fourth quarter of 2021 from 6.4% in the year former.
Remittances flow to Latin America and the Caribbean increased to $131 billion in 2021, up 25.3 percent from 2020 due to the strong job recovery for foreign-born workers in the United States. Countries that recorded 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). Registered flows to Mexico include funds received by migrants in transit from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba and others. Remittances are important as a source of foreign exchange for several countries for which these flows represent at least 20 percent of GDP, including El Salvador, Honduras, Jamaica, and Haiti. In 2022, it is estimated that remittances will grow by 9.1%, although downside risks persist. The average cost to send $200 to the region was virtually unchanged at 5.6 percent in the fourth quarter of 2021 compared to a year earlier.
remittances to developing countries Middle East and North Africa The region grew 7.6% in 2021 to $61 billion, driven by strong gains in Morocco (40%) and Egypt (6.4%). Factors supporting the flows were economic growth in the European Union host countries, as well as transit migration that further boosted inflows to temporary host countries such as Egypt, Morocco and Tunisia. In 2022, remittance flows are likely to slow to a 6 percent increase. Remittances have long been the largest source of external resource flows for MENA development, between ODA, FDI, and portfolio equity and debt flows, accounting for 61% of total inflows in 2021. The cost of sending $200 to MENA fell to 6.4% in the fourth quarter of 2021 from 6.6 percent a year ago.
remittances to South Asia grew 6.9 percent to $157 billion in 2021. Although large numbers of South Asian immigrants returned to their home countries when the pandemic broke out in early 2020, the availability of vaccines and the opening of economies of the Gulf Cooperation Council allowed for a gradual return to host countries in 2021, supporting increased remittance flows. Better economic performance in the United States was also an important contributor to growth in 2021. Remittance flows to India and Pakistan grew by 8% and 20%, respectively. In 2022, the growth of remittance inflows is expected to slow to 4.4%. Remittances are the main source of foreign exchange for the region, with inflows more than three times the level of FDI in 2021. South Asia has the lowest average cost of remittances of any region in the world at 4.3%, although it is still higher than the SDG target of 3 percent.
Remittance inflows to sub-saharan africa it shot up 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 to Nigeria, the largest receiving country in the region, increased by 11.2%, partly due to policies to channel inflows through the banking system. Countries recording double-digit growth rates include Cape Verde (23.3 percent), The Gambia (31 percent) and Kenya (20.1 percent). Countries where the value of remittance inflows as a percentage of GDP is significant include The Gambia (27%), Lesotho (23%), Comoros (19%), and Cape Verde (16%). In 2022, remittance inflows are projected to grow by 7.1% driven by the continued shift towards using official channels in Nigeria and rising food prices – migrants likely to send more money home of origin who are now suffering extraordinary increases in the prices of basic products. The cost to send $200 to the region averaged 7.8% in Q4 2021, a small decrease from 8.2% a year ago.
