Remittance Flows Register Robust 7.3 Percent Growth in 2021
Sunday, November 21, 2021 07:00 AM / by World Bank/ Header Image Credit: Ghanaweb
to low- and middle-income countries are projected to have grown a strong 7.3
percent to reach $589 billion in 2021. This return to growth is more robust
than earlier estimates and follows the resilience of flows in 2020 when remittances
declined by only 1.7 percent despite a severe global recession due to COVID-19,
according to estimates from the World Bank’s Migration and Development Brief
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.
flows from migrants have greatly complemented government cash transfer programs
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,” said Michal Rutkowski, World
Bank Global Director for Social Protection and Jobs.
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 programs. 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.
registered strong growth in most regions. Flows increased by 21.6 percent in
Latin America and the Caribbean, 9.7 percent in Middle East and North Africa, 8
percent in South Asia, 6.2 percent in Sub-Saharan Africa, and 5.3 percent in
Europe and Central Asia. In East Asia and the Pacific, remittances fell by 4
percent – though excluding China, remittances registered a gain of 1.4 percent
in the region. In Latin America and the Caribbean, growth was exceptionally
strong due to economic recovery in the United States and additional factors,
including migrants’ responses to natural disasters in their countries of origin
and remittances sent from home countries to migrants in transit.
The cost of
sending $200 across international borders continued to be too high, averaging
6.4 percent of the amount transferred in the first quarter of 2021, according
to the World Bank’s Remittance Prices Worldwide Database. This is more than
double the Sustainable Development Goal target of 3 percent by 2030. It is most
expensive to send money to Sub-Saharan Africa (8 percent) and lowest in South
Asia (4.6 percent). 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.
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 underpayment,” said
Dilip Ratha, lead author of
the Brief and head of KNOMAD.
are projected to continue to grow by 2.6 percent in 2022 in line with global
macroeconomic forecasts. A resurgence of COVID-19 cases and reimposition 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 programs, as economies recover, may
also dampen remittance flows.
recorded remittance flows to the East Asia and Pacific region
are projected to have fallen by 4 percent in 2021 to $131 billion. Excluding
China, remittances to the region grew by 1.4 percent in 2021 and is projected
to grow by 3.3 percent in 2022. As a share of gross domestic product (GDP), top
recipients in the region are smaller economies such as Tonga (43.9 percent),
Samoa (21.1 percent), and the Marshall Islands (12.8 percent).
costs: The average cost of sending $200 to the region fell to 6.7
percent in the first quarter of 2021 compared to 7.1 percent a year earlier.
The five lowest-cost corridors for the region averaged 2.7 percent for
transfers primarily to the Philippines; while the five highest-cost corridors,
excluding South Africa to China, which is an outlier, averaged 15 percent.
falling 8.6 percent in 2020, remittance flows to Europe and Central
Asia are projected to have grown 5.3 percent to $67 billion in 2021
due to stronger economic activity in the European Union and surging energy
prices. Remittances are projected to grow by 3.8 percent in 2022. Remittances
are currently the largest source of external financing in the region. Inflows
have been higher or equal to the sum of FDI, portfolio investment, and ODA in
2020 and 2021. As a share of GDP, remittances in the Kyrgyz Republic and
Tajikistan stand above 25 percent.
costs: The average cost of sending $200 to the region rose slightly
to 6.6 percent in the first quarter of 2021 from 6.5 percent a year earlier,
largely reflecting a sharp increase in costs in the Turkey-Bulgaria corridor.
Russia is one of the lowest-cost senders globally with costs falling from 1.8
percent to 1 percent.
flows into Latin America and the Caribbean will likely reach a
new high of $126 billion in 2021, registering a solid advance of 21.6 percent
compared to 2020. Mexico, the region’s largest remittance recipient, received
42 percent ($52.7 billion) of the regional total. The value of remittances as a
share of GDP exceeds 20 percent for several smaller economies: El Salvador
(26.2 percent), Honduras (26.6 percent), Jamaica, (23.6 percent), and Guatemala
(18 percent). The adverse effects of COVID-19 and Hurricanes Grace
and Ida contributed to higher remittance flows to Mexico and Central America.
Other main drivers include recovery in employment levels and fiscal and social
assistance programs in hosting countries, particularly the United States. An
increase in the number of transit migrants in Mexico and other countries, and
the remittances they received from overseas to support their living and travel
costs, appears to be a significant factor behind the strong increase. In…