India retained its top spot as the world's largest recipient of overseas remittances in 2015, attracting about $69 billion, down from $70 billion in 2014, on the back of a slowdown in remittances to developing countries strained by weak oil prices and other factors, says a World Bank report
Other large recipients in 2015 were China, with $64 billion, the Philippines ($28 billion), Mexico ($25 billion), and Nigeria ($21 billion), says the World Bank's latest edition of the Migration and Development Brief, released on Wednesday.
Officially recorded remittances to developing countries amounted to $431.6 billion in 2015, an increase of 0.4 per cent against $430 billion in 2014. The pace of growth of remittances in 2015 was the slowest since the global financial crisis.
Overall global remittances, which include those to high-income countries, contracted by 1.7 per cent to $581.6 billion in 2015, from $592 billion in 2014.
The slowing in remittances growth, which began in 2012, was exacerbated last year by low oil prices, which are taking a toll on many oil-exporting countries such as Russia and the Gulf Cooperation Council (GCC) states.
As a result, many remittance-receiving countries, including India, the world's largest remittance recipient, and Egypt saw remittances contract in 2015, as flows from the GCC countries slowed considerably.
Remittances contracted by 20 per cent to countries in the Europe and Central Asia region, with the heaviest impacts on Tajikistan and Ukraine, as a struggling Russian economy, and depreciation of the Russian ruble against the dollar contributed to the decline in remittances to the region.
''Remittances are an important and fairly stable source of income for millions of families and of foreign exchange to many developing countries. However, if remittances continue to slow, and dramatically as in the case of Central Asian countries, poor families in many parts of the world would face serious challenges including nutrition, access to health care and education,'' said Augusto Lopez-Claros, director of the World Bank's Global Indicators Group.
Remittance flows are expected to recover this year, after a bottoming out in 2015, with growth driven by continued economic recovery in the United States and the Euro Area, and a stabilisation of US dollar exchange rates of remittance-source countries.
In addition to currency movements, oil prices are a key downside risk to this outlook. Should the price of oil suffer unexpected declines, remittances from Russia and the GCC would be further buffeted.
The global average cost of sending $200 was about 7.4 per cent in the fourth quarter of 2015, down slightly from the previous quarter and 0.6 percentage points below the end of 2014.
Sub-Saharan Africa, with an average cost of 9.5 per cent, remains the highest-cost region.
However, major international banks continue to close correspondent banking accounts of money transfer operators (MTO) to limit exposure to money laundering and other financial crimes. A World Bank survey confirms that account closures are widespread, with adverse impacts on remittance costs and flows in rural and remote regions.
For example, over the past two years, 84 accounts of 32 Philippine remittance providers (including both banks and MTOs) were closed by 33 foreign banks in 13 major remittance-sending countries, according to the Philippine central bank.
Latin America and the Caribbean saw the most rapid growth rate in remittances in 2015, of 4.8 per cent, due to the recovery in labor markets in the United States. Growth is expected to continue in 2016, albeit at a slower pace, with remittances expected to reach $69.3 billion this year, from $66.7 billion last year.
Remittances to East Asia and the Pacific rose by 4.2 per cent in 2015, down from 7.4 per cent in 2014. Nevertheless, the region remained the top remittance recipient amongst all geographical regions. Remittances are projected at $131 billion this year, up from $127 billion in 2015.
Remittances to South Asia grew by 2 per cent in 2015, down from 4.3 per cent in 2014, due to a contraction in flows to India, the world's largest remittance recipient, and Sri Lanka, despite a spike in remittances to Nepal in response to the earthquake. The region is expected to attract $123.3 billion in remittances this year, compared to $117.9 billion in 2015.
Sub-Saharan Africa saw a modest growth of 1 per cent in remittances in 2015, compared to 0.2 per cent in 2014. Remittances to the region are expected to increase further this year, by 3.4 per cent, to $36 billion, from $35.2 billion in 2015.
Remittances to the Middle East and North Africa contracted by 0.9 per cent in 2015, from 4 per cent growth in 2014, largely due to a decline in inflows to Egypt, the region's largest remittance recipient. However, remittances to the region are expected to grow by 2.6 per cent this year to $51.6 billion, from $50.3 billion in 2015.
Remittance flows to Europe and Central Asia were severely affected in 2015, contracting by 20.3 per cent, due to the depreciation of the Russian rouble against the dollar and the slowdown in economic activity in Russia, a major source of remittances for the region.
The region should, however, see a robust recovery this year, with remittances expected to grow by 5.1 per cent to $36.3 billion, from $34.6 billion in 2015.