Resilient labour markets drive 3.8% growth in remittances in 2023, World Bank says

Poor and middle-income countries receive an estimated $669 billion

Growth of remittances to poor and middle-income countries is expected to slow to 3.1 per cent in 2024, the World Bank said. Victor Besa / The National

Remittances to poor and middle-income countries grew an estimated 3.8 per cent to reach $669 billion this year.

Resilient labour markets in advanced economies and GCC countries continued supporting migrants’ ability to send money home, according to a new World Bank report.

However, this was a moderation from the high gains of the previous two years, the bank said.

There is a risk of a decline in real income for migrants next year in the face of global inflation and low growth prospects, according to the World Bank’s latest migration and development brief.

India is the top remittance recipient country this year, receiving funds worth $125 billion, followed by Mexico at $67 billion, China at $50 billion, the Philippines at $40 billion, and Egypt at $24 billion, the Washington-based lender said.

The US continued to be the largest source of remittances, according to the report.

“High inflation and subdued global growth is affecting how much money migrants can send,” said Iffath Sharif, global director of the social protection and jobs global practice at the World Bank.

“Labour markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a lifeline for developing countries.”

Three in four people in the Middle East who transfer money to loved ones back home expect their volume of remittances to increase over the next 12 months given rising inflationary challenges for households, according to a March survey by Western Union.

Nearly three quarters of 30,600 consumers said they were transferring more money than in previous years because of economic challenges such as a higher cost of living around the world, while 79 per cent of receiving consumers said they intended to ask for more money, the poll found.

Based on the trajectory of weaker global economic activity, growth of remittances to poor and middle-income countries is expected to soften further to 3.1 per cent in 2024, the World Bank said.

Other downside risks include the prospect of weaker job markets in several high-income countries, volatile oil prices, currency exchange rates and a deeper-than-expected economic downturn in some countries, the lender added.

Economies where remittance inflows account for a large share of gross domestic product are Tajikistan (48 per cent of GDP), Tonga (41 per cent), Samoa (32 per cent), Lebanon (28 per cent) and Nicaragua (27 per cent), the research said.

“Remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing,” said Dilip Ratha, lead economist and lead author of the report.

Remittance inflows to the Middle East and North Africa fell for the second year, declining by 5.3 per cent to $61 billion mainly due to a sharp drop in flows to Egypt, the report showed.

For Egypt, a significant gap between the official exchange rate and the parallel market is likely to have caused a large part of remittances to be unrecorded, it said.

In 2024, remittance flows are projected to recover to a 2.1 per cent gain based on an expected turnaround in flows to Egypt, the lender estimated.

Remittances to East Asia and the Pacific increased by an estimated 3 per cent to reach $133 billion this year, while those to Europe and Central Asia are projected to have declined by 1.4 per cent to $78 billion in 2023, according to the World Bank.

The subdued growth to Europe and Central Asia is due to an unusually high base level posted in 2022, driven by huge amounts of money transfers from Russia and depreciation of the Russian rouble, the research said.

Remittance flows to Latin America and the Caribbean are expected to increase by 8 per cent to reach $156 billion in 2023 driven by a strong US labour market.

Meanwhile, remittance flows to South Asia are estimated to have grown 7.2 per cent this year to reach $189 billion. The increase is attributable entirely to remittance flows to India.

Remittance flows to sub-Saharan Africa are expected to have increased by about 1.9 per cent in 2023 to $54 billion.

The global average cost of sending $200 remained high, at 6.2 per cent in the second quarter of 2023, the World Bank said.

Compared to a year ago, sending money to all regions was more expensive, with the Mena region being the exception, the lender said.

Banks continue to be the costliest channel for sending remittances, with an average cost of 12.1 per cent, followed by post offices at 7 per cent, money transfer operators at 5.3 per cent, and mobile operators at 4.1 per cent, it added.