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Economy
Nov 19, 2021

Remittance flows register robust 7.3% growth in 2021

Foreign Affairs News Desk
Remittance

Remittances to low- and middle-income countries are projected to have grown a strong 7.3 per cent to reach US $589 billion in 2021.

This return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 per cent despite a severe global recession due to COVID-19, according to estimates from the World Bank’s Migration and Development Brief released Thursday.

For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).

This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.

Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programs.

In the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity.

Remittances registered strong growth in most regions. Flows increased by 21.6 per cent in Latin America and the Caribbean, 9.7 per cent in Middle East and North Africa, 8 per cent in South Asia, 6.2 per cent in Sub-Saharan Africa, and 5.3 per cent in Europe and Central Asia.

In East Asia and the Pacific, remittances fell by 4 percent – though excluding China, remittances registered a gain of 1.4 per cent in the region.

In Latin America and the Caribbean, growth was exceptionally strong due to economic recovery in the United States and additional factors, including migrants’ responses to natural disasters in their countries of origin and remittances sent from home countries to migrants in transit.

The cost of sending US $200 across international borders continued to be too high, averaging 6.4 per cent of the amount transferred in the first quarter of 2021, according to the World Bank’s Remittance Prices Worldwide Database.

This is more than double the Sustainable Development Goal target of 3 per cent by 2030. It is most expensive to send money to Sub-Saharan Africa (8 per cent) and lowest in South Asia (4.6 per cent).

Remittances are projected to continue to grow by 2.6 per cent in 2022 in line with global macroeconomic forecasts.

Regional Remittance Trends

Officially recorded remittance flows to the East Asia and Pacific region are projected to have fallen by 4 per cent in 2021 to US $131 billion. Excluding China, remittances to the region grew by 1.4 per cent in 2021 and is projected to grow by 3.3 per cent in 2022.

After falling 8.6 per cent in 2020, remittance flows to Europe and Central Asia are projected to have grown 5.3 percent to US $67 billion in 2021 due to stronger economic activity in the European Union and surging energy prices. Remittances are projected to grow by 3.8 percent in 2022.

Remittance flows into Latin America and the Caribbean will likely reach a new high of $126 billion in 2021, registering a solid advance of 21.6 per cent compared to 2020.

Remittances to the developing countries of the Middle East and North Africa region are projected to have grown by an estimated 9.7 per cent in 2021 to US $62 billion, supported by a return to growth of host countries in the European Union (notably France and Spain) and the upsurge in global oil prices which positively affected the GCC countries.

Remittances to South Asia likely grew around 8 percent to US $159 billion in 2021. Higher oil prices aided economic recovery and drove the spike in remittances from the GCC countries which employ over half of South Asia’s migrants.

Economic recovery and stimulus programs in the United States also contributed to the growth.

South Asia has the lowest average costs of any world region at 4.6 per cent. But sending money to South Asia through official channels is expensive compared with informal channels which remain popular.

Cost-reducing policies would create a win-win situation welcomed by migrants and South Asian governments alike.

Remittance inflows to Sub-Saharan Africa returned to growth in 2021, increasing by 6.2 per cent to US $45 billion.