Remittances to the developing world are expected to grow by 6.3 percent this year to $414 billion and are projected to cross the half-trillion mark by 2016, according to revised estimates and forecasts issued today by the World Bank.
India and China alone will represent nearly a third of total remittances to the developing world this year. Remittance volumes to developing countries, as a whole, are projected to continue growing strongly over the medium term, averaging an annual growth rate of 9 percent to reach $540 billion in 2016.
Global remittances, including those to high-income countries, are estimated to touch $550 billion this year, and reach a record $707 billion by 2016, says the Bank’s Migration and Development Brief.
The estimates reflect recent changes to The World Bank Group’s country classifications, with several large remittance recipient countries, such as Russia, Latvia, Lithuania and Uruguay no longer considered developing countries. In addition, the data on remittances also reflects the International Monetary Fund’s changes to the definition of remittances that now exclude some capital transfers, affecting numbers for a few large developing countries like Brazil.
"These latest estimates show the power of remittances. For a country like Tajikistan they constitute half the GDP. For Bangladesh remittances provide vital protection against poverty. In terms of volume, India, with $71 billion of remittances, tops the global chart. To put this in perspective, this is just short of three times the FDI it received in 2012. Remittances act as a major counter-balance when capital flows weaken as happened in the wake of the US Fed announcing its intention to reign in its liquidity injection program. Also, when a nation's currency weakens, inward remittances rise and, as such, they act as an automatic stabilizer," said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank.
The top recipients of officially recorded remittances for 2013 are India (with an estimated $71 billion), China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 billion). Other large recipients include Pakistan, Bangladesh, Vietnam, and Ukraine.
As a percentage of GDP, the top recipients of remittances, in 2012, were Tajikistan (48 percent), Kyrgyz Republic (31 percent), Lesotho and Nepal (25 percent each), and Moldova (24 percent).
Growth of remittances has been robust in all regions of the world, except for Latin America and the Caribbean, where growth decelerated due to economic weakness in the United States.
“Remittances are the most tangible and least controversial link between migration and development,” said Dilip Ratha, Manager of the Migration and Remittances Team at the Bank’s Development Prospects Group. “Policymakers can do much more to maximize the positive impact of remittances by making them less costly and more productive for both the individual and the recipient country.”
The high cost of sending money through official channels continues to be an obstacle to the utilization of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home. The global average cost for sending remittances is 9 percent, broadly unchanged from 2012.
The Brief points out that while remittance costs seem to have stabilized, banks in many countries have begun imposing additional ‘lifting’ fees on incoming remittances. Such fees can be as high as 5 percent of the transaction value.
Some international banks are also closing down the accounts of money transfer operators because of money laundering and terrorism financing concerns.
“These developments mark an unwelcome reversal of recent gains in the facilitation of cross-border remittances by migrants,” said Ratha. “This runs contrary to the G20 commitment to lower remittance costs.”
The world development community, as it debates the post-2015 agenda, also needs to turn its attention to the high cost of migration, including recruitment costs and fees for visas, passports and residency permits.
The World Bank Group is committed to continuing its engagement on this important aspect of development, as evidenced by the recent establishment of the Global Knowledge Partnership on Migration and Development (KNOMAD), which is envisaged as a hub of knowledge and policy expertise on migration.
KNOMAD’s work program focuses on the following 12 key thematic areas including skilled and unskilled labor migration; integration issues in host communities; policy and institutional coherence; migration, security and development; migrant rights and social aspects of migration; and Internal migration and urbanization.
In addition, KNOMAD will also address cross-cutting themes of gender, monitoring and evaluation, capacity building, and public perception and communication.
Drawing on global expertise, KNOMAD’s outputs will be widely disseminated and will be available as global public goods.