Despite its forecast that global growth will continue to disappoint over the next couple of years, Capital Economics expects remittances to most emerging markets to remain resilient,helping drive growth in emerging markets and provide support to their balance of payments.
“The outlook for remittances is worst in emerging Europe largely because growth prospects in western Europe (where most of the regions remittances come from) is particularly bad. We think remittances to emerging Europe will probably fall over the next couple of years. However, it is worth noting that for most countries in the region remittances typically only account for around 2% of GDP. As a result, the overall impact on the region should be relatively small. One important exception is the Ukraine, which has a large external financing requirement, and where a sharp decline in remittances (which are the equivalent to around 4% of GDP) could exacerbate an already fragile balance of payments position,” it said.