Remittances to low- and middle-income countries are projected to have grown a strong 7.3 per cent to reach $589 billion in 2021. This return to growth is more robust than earlier estimates and follows the resilience of flows last year when remittances declined by only 1.7 per cent despite a severe global recession due to COVID-19, the World Bank’s Migration and Development Brief estimates released yesterday has shown.
Remittance inflows to sub-Saharan Africa returned to growth, increasing by 6.2 per cent to $45 billion. Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system.
Remittances are projected to continue to grow by 2.6 per cent in 2022 in line with global macroeconomic forecasts. A resurgence of COVID-19 cases and re-imposition of mobility restrictions poses the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries. The rollback of fiscal stimulus and employment-support programmes, as economies recover, may also dampen remittance flows, the report added.
The World Bank’s Remittance Prices Worldwide Database however lamented the huge cost of sending $200 across international borders which it said averaged 6.4 per cent of the amount transferred in the first quarter of 2021. This is more than double the Sustainable Development Goal (SDG) target of three per cent by 2030. It is most expensive to send money to Sub-Saharan Africa (eight per cent) and lowest in South Asia (4.6 per cent).
Data reveal that costs tend to be higher when remittances are sent through banks than through digital channels or through money transmitters offering cash-to-cash services.
“The immediate impact of the crisis on remittance flows was very deep. The surprising pace of recovery is welcome news. To keep remittances flowing, especially through digital channels, providing access to bank accounts for migrants and remittance service providers remains a key requirement. Policy responses also must continue to be inclusive of migrants especially in the areas of access to vaccines and protection from under-payment,” lead author of the Brief and head of KNOMAD, Dilip Ratha, said.
For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA). This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.
“Remittance flows from migrants have greatly complemented government cash transfer programmes to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” World Bank Global Director for Social Protection and Jobs, Michal Rutkowski, said.
Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programmes. In the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity.
– The Nation