After a period of strong growth during 2021-2022, officially recorded remittance flows to low- and middle-income countries (LMICs) moderated in 2023, reaching an estimated $656 billion, according to the World Bank’s latest Migration and Development Brief released today.
The modest 0.7% growth rate reflects large variances in regional growth, but remittances remained a crucial source of external finance for developing countries in 2023, bolstering the current accounts of several countries grappling with food insecurity and debt issues. In 2023, remittances surpassed foreign direct investment (FDI) and official development assistance (ODA).
Looking ahead, remittances to LMICs are expected to grow at a faster rate of 2.3% in 2024, although this growth will be uneven across regions. Potential downside risks to these projections include weaker-than-expected economic growth in high-income migrant-hosting countries and volatility in oil prices and currency exchange rates.
“Migration and resulting remittances are essential drivers of economic and human development,” said Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank. “Many countries are interested in managed migration in the face of global demographic imbalances and labor deficits on the one hand, and high levels of unemployment and skill gaps on the other. We are working on partnerships between countries sending and receiving migrants to facilitate training, especially for youth, to get the skills needed for better jobs and income at home and in destination countries.”
In 2023, remittance flows increased most to Latin America and the Caribbean (7.7%), followed by South Asia (5.2%) and East Asia and Pacific (4.8%, excluding China). Sub-Saharan Africa saw a slight decline of 0.3%, while the Middle East and North Africa experienced a nearly 15% drop, with Europe and Central Asia seeing a 10.3% fall.
“The resilience of remittances underscores their importance for millions of people,” said Dilip Ratha, lead economist and lead author of the report. “Leveraging remittances for financial inclusion and capital market access can enhance the development prospects of recipient countries. The World Bank aims to reduce remittance costs and facilitate formal flows by mitigating political and commercial risks to promote private investment in this sector.”
Sending remittances remains costly. In Q4 2023, the global average cost of sending $200 was 6.4%, slightly up from 6.2% a year earlier but well above the SDG target of 3%. Digital remittances had a lower cost at 5%, compared with non-digital methods at 7%, highlighting technological advancements' benefits.
With growing importance placed on remittances, accurate data collection is essential to support UN Sustainable Development Goals on reducing costs while increasing volume; however, statistical data remain inconsistent or incomplete due largely due informal channels like migrants carrying cash when returning home being major factors contributing towards widening global gap between inward-outward flow rates which RemitStat will address through recommendations later this year.
Regional Remittance Trends
Remittances to East Asia-Pacific excluding China grew by approximately $85 billion or around four-point-eight percent throughout last year alone proving crucial especially within Pacific Island economies such as Palau Samoa Tonga Vanuatu where notably Tonga remains most dependent globally holding forty-one percent share GDP-wise projected grow further three-point-two percent next coming years costing senders average five-point-eight percentage fees late previous quarter highest corridor seventeen point one percentage mark overall.
Europe-Central Asian region saw ten-point-three percentage decline totaling seventy-one billion dollars mainly attributed reduced transfers originating Russia affecting multiple Central Asian nations coupled additional impacts Russian invasion Ukraine leading weaker-than-expected figures both Ukrainian-Russian recipients overall projections indicate further declines nearing two-percent upcoming fiscal periods sending averages remaining six-point-seven percent marginal increase previous records.
Latin American-Caribbean regions exhibited seven-point-seven percentage slowdowns culminating one-hundred-fifty-six-billion-dollar totals driven strong US labor markets Mexico maintaining top recipient status sixty-six point two billion-dollar increases despite wide variations ranging forty-four point five Nicaraguan gains thirteen point four Argentine declines respectively forecasting continued albeit slower pace nearing two-point-seven percentages future trends maintaining steady five-nine average costs similar preceding periods.
Middle Eastern-North African areas witnessed fifteen-percentage drops fifty-five-billion-dollar totals primarily influenced sharp Egyptian decreases divergence official parallel forex rates likely diverting unofficial channels rebounding once unified March twenty-four slower GCC countrywide growths projecting recovery four-three percentages following fiscal periods costing senders averaging five-nine down six-seven previous records respectively.
South Asian regions noted five-two percentage gains amounting hundred-eighty-six-billion-dollar totals tapering twelve-percent prior years driven Indian seven-five increases supported robust US-European labor markets reduced GCC outflows amid declining oil prices production cuts slowing projections indicate further four-two percentages upcoming fiscal periods costing senders averaging five-eight compared prior four-two marks respectively.
Sub-Saharan African territories recorded minor zero-three declines fifty-four-billion-dollar figures supporting numerous national accounts amidst food insecurities drought supply chain disruptions floods debt-servicing difficulties notable heavy reliance among Gambia Lesotho Comoros Liberia Cabo Verde predicting slight recoveries nearing one-five future trends maintaining steady seven-nine average sender costs unchanged preceding quarters overall.
The Migration & Development Brief Forty available online www.knomad.org/publication/migration-and-development-brief-forty Follow updates via http://twitter.com/GlobalKNOMAD