RemittancesGateway.org

US jobless rise hits migrants’ home countries

Tuesday, 14 July 2009 08:11

US unemployment is having an effect well beyond the country’s own borders and will contribute to a larger-than-expected drop in the amount of money migrant workers send home this year, the World Bank said on Monday.

The international financial institution said that global remittance flows to developing countries would fall by 7 per cent to 10 per cent this year, down from a previous estimate of a 5-8 per cent decline. Remittance flows last year increased 15 per cent, from $285bn in 2007 to $328bn (€235bn, £202bn), beating their estimate.

Unstable exchange rates and a rise in protectionist trade policies could choke off remittance flows by more than expected, the World Bank warned, with the UK and Russia highlighted for their “anti-immigration sentiment”.

But it is the global economic slowdown and the 9.5 per cent unemployment rate in the US – the world’s biggest economy – that is having the most significant impact, causing immigrants there to send less money to their families throughout Latin America and across the Caribbean.

In Mexico, remittance flows this year have declined by about 11 per cent, a fall at least partly attributed to the slowdown in the US construction ­sector, which has traditionally been a significant source of employment for Mexican migrants.

Dilip Ratha, a senior economist at the World Bank, said the figures were “resilient” in spite of the decline and would still outstrip the performance of private capital flows to developing countries.

However, he said that the fall “can pose significant hardships to the [recipient country’s] people and to governments, especially those facing external financing gaps”.

The worldwide picture is not uniform, with remittances to China and the Philippines growing strongly last year and predicted to remain in positive territory this year in spite of the depressed developed economies around the world.

The World Bank did however acknowledge that it was possible that some instances of “reverse remittances” were occurring, where out-of-work migrants living in developed countries were receiving financial support from their families back in their home countries. But it added that these were “most likely minuscule and they seem to be declining”.

India is the top recipient of remittances with an estimated $52bn in 2008, followed by China with $40.6bn and Mexico with $26.3bn. But as a share of gross domestic product, Tajikistan remains the country most dependent on remittances from abroad – they accounted for 46 per cent of GDP in 2007.

Tajikistan and other central Asian countries have seen the decline in remittances from Russia exacerbated by the depreciation in the value of the rouble. However, the World Bank offered one optimistic note, pointing out that a rebound in oil prices could stimulate demand in Russia for migrant workers.

In Latin America –and in spite of the sharp decline predicted for this year – the World Bank said there were “emerging signs of a bottoming out”, with a stabilising job market for migrants in the US manufacturing and service sectors.