*Consistent with global growth pattern, remittances to low and middle-income countries (LMICs) are expected to grow at about 4.1% in 2018, to $485bn
Remittances from the Gulf Cooperation Council region are expected to see an upsurge this year on the back of an increase in oil prices that should have a positive impact on the energy-rich Gulf countries, a World Bank Group report has shown.
Consistent with the global growth pattern, the report said remittances to low and middle-income countries (LMICs) are expected to grow at about 4.1% in 2018, to $485bn.
In its development brief, the Global Knowledge Partnership on Migration and Development (KNOMAD), a World Bank Group initiative, said after two consecutive years of decline, remittance flows to LMICs increased by an estimated 8.5% in 2017, to reach $466bn, which is a new record.
Remittances are now more than three times the size of official development assistance.
Excluding China, remittance flows are also significantly larger than foreign direct investment (FDI) in LMICs. Remittances are relatively more stable than cyclical private debt and equity flows.
These figures reflect only officially recorded data; the true size of remittances, including flows through informal channels, is significantly larger.
According to KNOMAD, the recovery of remittance flows in 2017 is significantly stronger than the expectations set out six months ago. Remittances were larger than expected in Europe and Central Asia, Sub-Saharan Africa, and the Middle East and North Africa, driven by a cyclical economic upturn observed in Europe, the Russian Federation, and the US, and related to exchange rate movements.
The valuation effects of a stronger euro and a stronger ruble against the dollar further accentuated the growth of remittances in dollar terms.
“These effects more than compensated for the dampening of outbound remittance flows from the Gulf Cooperation Council (GCC) countries, in particular Saudi Arabia, due to fiscal tightening and policies discouraging the recruitment of foreign workers,” the report said.
In 2017, the top remittance receiving countries—in dollar terms—were India, China, the Philippines, Mexico, Nigeria, and Egypt.
As a share of gross domestic product (GDP) for 2017, the top recipients were smaller countries— the Kyrgyz Republic, Tonga, Tajikistan, Haiti, Nepal, and Liberia.
On the outlook for remittances (2018-2020), the report said it is worth noting that economic growth in remittance-source countries of the global South (for example, Cote d’Ivoire, India, Malaysia, Russia, South Africa) impacts the flow of remittances, as does the growth of top migrant destinations in the global North.
The current, accelerated pace of global economic growth may continue due to a cyclical recovery in global manufacturing and investment, propelled by trade in goods. This is likely to hold if commodity prices remain steady, and global financial conditions remain supportive despite some tightening in monetary policy.
The growth of advanced economies in 2018 is likely to continue at the same accelerated pace experienced in 2017, the World Bank said.
However, it said there are “downside risks” to this outlook.
“Policy uncertainty and geopolitical risk, increased restrictions on trade, and a sharper than expected slowdown in potential growth may derail global growth. Moreover, no solutions are yet in sight for the difficulties posed by the de-risking practices of correspondent banks.
“Also, remittance flows are vulnerable to downside risks from spreading anti-migration sentiments and restrictive migration policies in most of the remittance-source countries in North America, Europe, Russia, and the GCC,” the World Bank report noted.
