Global remittance flows to be sluggish in 2015: World Bank

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14 April 2015

Remittance flows to the East Asia and Pacific Region (EAP) region are projected to grow by just 2.8 per cent in 2015, to $125 billion, on the back of sluggish growth prospects in the Euro area and weak values of the Euro, the Japanese Yen and other source-country currencies against the US dollar, says the latest issue of the World Bank's `Migration and Development Brief'.

In 2014, remittances to the region grew by an estimated 7.6 per cent to $122 billion. Two EAP countries, China and the Philippines, are the world's second and third-largest remittance recipients, receiving an estimated $64 billion and $28 billion, respectively, in 2014.

However, smaller Pacific island countries are amongst the most dependent on remittances, with Tonga and Samoa among the world's top 10 recipients as a share of GDP. Remittances to Tonga were 24 per cent of GDP and 20 per cent for Samoa, in 2013.

Overall, the outlook for remittances to the region remains favourable, as workers continue to go overseas, with remittances expected to grow to $130 billion in 2016 and $135 billion in 2017.

Remittances to developing countries in the Europe and Central Asia region will continue to decline sharply for a second consecutive year in 2015. Inflows are expected to total $42 million this year, a decrease of 12.7 per cent over 2014 when remittances declined by 6.3 per cent.

The economic contraction in Russia, a major remittance source country, has resulted in migrant job losses while the depreciation of the rouble has reduced the real incomes of migrant workers in Russia and reduced the value of remittances in US dollar terms.

Central Asian countries are the hardest hit, due to their heavy dependency on remittances from Russia. In 2014, remittances to Ukraine contracted by 27 per cent, to Uzbekistan by 16 per cent, Armenia 11 per cent and Tajikistan 8 per cent, with dramatic declines occurring in the fourth quarter of the year.

Tajikistan is the world's most remittance-dependent country, with remittances constituting 49 per cent of GDP in 2013, and for Armenia remittances were 21 per cent of GDP. Inflows to the region are expected to recover to $45 billion in 2016 and $48 billion in 2017.

In the Latin America and Caribbean region, remittances are expected to grow by 2.3 per cent in 2015 to $66 billion. While this growth is slower than that seen in 2014, it is significantly higher than the anemic pace of the post-crisis period. Nonetheless, growth in remittance inflows in 2014 was uneven across countries in the region. Countries which saw robust growth included Mexico, which was the world's fourth largest remittance recipient in 2014 with $25 billion received, followede by El Salvador, Guatemala and Honduras.

Remittance growth was sluggish in Argentina, Bolivia, and Paraguay and declined in Brazil and Peru, partly owing to weak economic activity in Japan and Spain. The outlook for the region is positive, as remittance inflows are expected to benefit from growth in GDP and employment in the United States, although this will be offset by high unemployment in Spain. Remittances to the region are expected to grow to $69 billion in 2016 and $71 billion in 2017.

Remittances to the Middle East and North Africa region will slow considerably in 2015, rising 1.1 per cent to $53 billion. The modest growth this year follows a surge in 2014 of 7.7 per cent, the fastest growth amongst all regions, largely due to a strong 10 per cent growth in inflows to Egypt, the world's sixth largest recipient in 2014 with $20 billion received. Lebanon saw a 13 per cent increase in remittances to $9 billion in 2014, making it the world's 10th largest recipient for the year.

Looking ahead, continued low oil prices could reduce remittances from the GCC countries in the medium-to-long term. In the short term, however, significant foreign exchange reserves and strong fiscal positions could support current spending, thus delaying the negative impact of low oil revenues on migrant employment.

Remittances to the region are expected to grow to $55 billion in 2016 and $57 billion in 2017. Conflicts in the region are resulting in international displacement and forced migration across borders, and remain a major risk factor to the outlook for remittances in the region.

The South Asia region is projected to receive $120 billion in remittances 2015, at a slower growth pace of 3.7 per cent, compared with 4.5 per cent the previous year. Large scale construction activities and fiscal expansion in the GCC countries, which account for 60 per cent of remittances to South Asia, and improving economic prospects in the United States will continue to support inflows to the region.

Partly due to the appreciation of the rupee, growth in remittances to India, the world's largest recipient, slowed to 0.6 per cent in 2014 (from 1.7 per cent in 2013), amounting to $70 billion. In contrast, remittances soared to Pakistan (by 16.6 per cent), Sri Lanka (9.6 per cent) and Bangladesh (8 per cent). Remittances are extremely important for several countries in the region: in Pakistan, Sri Lanka, Nepal and Bangladesh, remittances exceeded 6 per cent of GDP in 2013, according to the latest available data. Growth in remittances to the region is expected to pick up to $126 billion in 2016 and $132 billion in 2017.

Growth of remittances to the Sub-Saharan Africa region is projected to slow to 0.9 per cent in 2015, amounting to $33 billion. Nigeria alone accounts for around two-thirds of total remittance inflows to the region, but its remittances are estimated to have remained flat in 2014, at roughly $21 billion.

The regional growth in remittances in 2014 largely reflected strong growth in Kenya (10.7 per cent), South Africa (7.1 per cent) and Uganda (6.8 per cent). The level of remittance dependency varies across countries. Remittances in the Gambia, Lesotho, Liberia and Comoros equal about 20 per cent of GDP in 2013, the latest available data. Remittance flows to the region are expected to pick up to $34 billion in 2016 and $36 billion in 2017. In Somalia, concerns are rising about the impact on remittances due to ''de-risking'' the closing of bank accounts of money transfer operators by correspondent banks fearing risks of money laundering and financial crime.





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