Amid a backdrop of weak global growth, remittances to developing countries are expected to increase only slightly in 2016, says the World Bank’s latest paper on Migration and Development.
Low oil prices continued to be a factor in reduced remittance flows from Russia and the Gulf Cooperation Council (GCC) countries. In addition, structural factors have also played a role in dampening remittances growth. Anti-money laundering efforts have prompted banks to close down accounts of money transfer operators, diverting activity to informal channels. Policies favoring employment of nationals over migrant workers have discouraged demand for migrant workers in the GCC countries. Also, exchange controls in countries from Nigeria to Venezuela have disrupted the flow of remittances.
The global growth of remittances to developing countries is projected to remain modest at about 3.5 percent over the next two years. Developing regions other than Latin America and the Caribbean are projected to have growth of 2 percent or lower.
The global average cost of sending $200 remained at 7.6 percent in the second quarter of 2016. Average costs have dropped from 9.8 percent in 2008. The highest-cost region to send money to continues to be Sub-Saharan Africa at 9.6 percent while it is the least costly to send remittances to the South Asia region.
“Remittances continue to be an important component of the global economy, surpassing international aid. However this “new normal” of weak growth in remittances could present challenges for millions of families that rely heavily on these flows. This, in turn, can seriously impact the economies of many countries around the world bringing on a new set of challenges to economic growth,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group.
The World Bank paper on “Migration and Development: A Role for the World Bank Group” provides an overview of the fundamental drivers of migration and the associated economic benefits and challenges. The paper also outlines a role for the World Bank Group and International Financial Institutions (IFIs) to take on in this area, thus complementing the New York Declaration on Refugees and Migrants agreed on at the United Nations (UN) Summit on Refugees and Migrants held on September 19, 2016. IFIs can contribute to the global migration agenda in four areas: i) financing migration programs; ii) addressing the fundamental drivers of migration; iii) maximizing the benefits and managing the risks of migration in sending and receiving countries; and iv) providing knowledge for informed policy making and improving public perceptions.
The paper notes that there are about 250 million international migrants and almost three times as many internal migrants. Out of these, there are 21.3 million refugees (including 5.2 million Palestinian refugees). Although the number of refugees has increased considerably recently, it has not reached the historically high levels seen in the early 1990s. Intra-regional migration is substantial and South-South migration outpaces South-North migration. Inequality, demographics and climate change continue to be the main drivers of economic migration.
“Migration is overwhelmingly beneficial but there are some costs that bias public perceptions towards the negative. As the global community prepares to define a global compact on migration by 2018, game-changing ideas are needed to harness the benefits and mitigate the risks associated with migration. Viewing migration through a common lens of reducing poverty and boosting prosperity can provide a unifying framework for a comprehensive response,” said Dilip Ratha, a lead author of the paper and head of the Global Knowledge Partnership on Migration and Development (KNOMAD).
The outlook for remittances in East Asia and the Pacific has worsened due to a weak global economy. Growth decreased from 4.1 percent in 2015 to 2.1 percent in 2016, with the Philippines likely to see the slowest expansion in a decade.
Remittances to Europe and Central Asia are estimated to fall again by another 4 percent in 2016. This is however much less substantial than the decrease of 22.5 percent seen in 2015. Some countries in the region, including Bulgaria, Montenegro and Bosnia and Herzegovina can still expect to see modest remittance growth.
Latin America and the Caribbean saw remittance flows into the region increase in the first half of 2016, due mainly to a recovering U.S. economy. Remittances to the region are expected to grow by 6.3 percent and reach $72 billion by the end of 2016.
Remittances into the Middle East and North Africa are expected to increase by 1.5 percent in 2016 but remittances from GCC countries are expected to decline Beyond 2016, remittance are expected to pick up only gradually.
This year the South Asia region would see a decline of 2.3 percent in remittances to the region due mainly to the impact of declining oil prices and labor market nationalization policies on remittances from GCC countries. Moving forward remittance growth in the region is expected to remain subdued.
Remittances flows to Sub-Saharan Africa are expected to decline by 0.5 percent in 2016. For 2017 remittances are expected to grow at 2.5 percent, underpinned by flat remittances in Nigeria which account for two-thirds of remittance flows into the region.
The paper “Migration and Development: A Role for the World Bank Group” as well as recent Migration and Development Briefs and the latest migration and remittances data are available at www.worldbank.org/migration and www.knomad.org.