Remittances to Reach $ 630 billion in 2022 with Record Flows into Ukraine
But economies dependent on flows from Russia will see major declines
WASHINGTON, May 11, 2022- Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2 percent this year to reach $ 630 billion. This follows an almost record recovery of 8.6 percent in 2021, according to the World Bank’s latest Migration and Development Brief released today.
Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to rise by over 20 percent in 2022. However, remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically. These declines, combined with rising food, fertilizer, and oil prices, are likely to increase risks to food security and exacerbate poverty in many of these countries.
“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks for a global economy that is still dealing with the impact of the COVID pandemic,” said Michal Rutkowski, Global Director of Social Protection and Jobs Global Practice at the World Bank. “Boosting social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the war’s economic impact, is a key priority to protect people from the threats of food insecurity and rising poverty.”
During 2021, remittance inflows saw strong gains in Latin America and the Caribbean (25.3 percent), Sub-Saharan Africa (14.1 percent), Europe and Central Asia (7.8 percent), the Middle East and North Africa (7.6 percent), and South Asia (6.9 percent). Remittances to East Asia and the Pacific fell by 3.3 percent; although excluding China, remittances grew 2.5 percent. Excluding China, remittance flows have been the largest source of external finance for LMICs since 2015.
The top five recipient countries for remittances in 2021 were India, Mexico (replacing China), China, the Philippines, and Egypt. Among economies where remittance inflows stand at very high shares of GDP are Lebanon (54 percent), Tonga (44 percent), Tajikistan (34 percent), Kyrgyz Republic (33 percent), and Samoa (32 percent).
“On the one hand, the Ukraine crisis has shifted global policy attention away from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting destination communities that are experiencing a large influx of migrants, ”said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. “As the global community prepares to gather at the International Migration Review Forum, the creation of a Concessional Financing Facility for Migration to support destination communities should be seriously considered. This facility could also provide financial support to origin communities experiencing return migration during the COVID-19 crisis. ”
Globally, the average cost of sending $ 200 was 6 percent in the fourth quarter of 2021, double the SDG target of 3 percent, according to the Bank’s Remittances Prices Worldwide Database. It is cheapest to send money to South Asia (4.3 percent) and most expensive to send to Sub-Saharan Africa (7.8 percent).
The costs of sending money to Ukraine are high (7.1 percent from Czech Republic, 6.5 percent from Germany, 5.9 percent from Poland, and 5.2 percent from USA). The global goodwill towards refugees and migrants from Ukraine opens an opportunity to develop and pilot programs to facilitate their access to jobs and social services in host countries, apply simplified anti-money laundering and counter-terrorist financing procedures for small remittance transactions to help reduce remittance costs and mobilize diaspora bond financing.
The war in Ukraine has also affected the international payment systems with implications for cross-border remittance flows. The exclusion of Russia from SWIFT has added a national security dimension to participation in international payments systems.
“Lowering remittance fees by 2 percentage points would potentially translate to $ 12 billion of annual savings for international migrants from LMICs, and $ 400 million for migrants and refugees from Ukraine,” added Ratha. “The cross-border payment systems, however, are likely to become multipolar and less interoperable, slowing progress on reducing remittance fees.”
World Bank Launches International Working Group to Improve Data on Remittances
The COVID-19 pandemic and the war in Ukraine have further highlighted the need for frequent and timely data. In April, the World Bank, under the auspices of KNOMAD and in collaboration with countries where remittances provide a financial lifeline, launched an International Working Group to Improve Data on Remittance Flows. Having improved data on remittances can directly support the Sustainable Development Goal indicators on reducing remittance costs and help increase the volume of remittances. This will also support the first Objective of the Global Compact on Migration, to improve data.
Regional Remittance Trends
Remittance flows to the East Asia and Pacific region fell 3.3 percent following a 7.3 percent drop in 2020. Flows reached $ 133 billion in 2021, close to 2017 levels. Excluding China, remittances to the region grew by 2.5 percent in 2021. Remittances to the Phillipines benefitted from job creation and wage gains in the United States where a large number of Filipino migrants live. Among economies where remittance inflows constitute a high percentage of their GDP are Tonga, Samoa, the Marshall Islands, the Philippines, and Fiji. Excluding China, remittance inflows are projected to grow by 3.8 percent in 2022. The average cost of sending $ 200 to the region fell to 5.9 percent in the fourth quarter of 2021 compared to 6.9 percent a year earlier.
Remittance inflows to Europe and Central Asia increased by 7.8 percent in 2021, reaching historic highs of $ 74 billion. The growth was due in large part to stronger economic activity in the European Union and rebounding energy prices. In 2021, Ukraine received inflows of $ 18.2 billion, driven by receipts from Poland, the largest destination country for Ukrainian migrant workers. Personal transfers constitute a vital source of finance and growth for the economies of Central Asia, for which Russia is the prime source. As a share of GDP, remittance receipts in Tajikistan and the Kyrgyz Republic were 34 percent and 33 percent respectively in 2021. Near-term projections for remittances to the region, which are expected to fall by 1.6 percent in 2022, are highly uncertain, dependent on the scale of the war in Ukraine and the sanctions on outbound payments from Russia. By contrast, remittance flows to Ukraine are expected to increase by over 20 percent in 2022. The average cost of sending $ 200 to the region fell to 6.1 percent in the fourth quarter of 2021 from 6.4 percent a year earlier.
Remittance flows to Latin America and the Caribbean surged to $ 131 billion in 2021, up 25.3 percent from 2020 due to the strong job recovery for foreign-born workers in the United States. Countries registering double-digit growth rates included Guatemala (35 percent), Ecuador (31 percent) Honduras (29 percent), Mexico (25 percent), El Salvador (26 percent), Dominican Republic (26 percent), Colombia (24 percent) , Haiti (21 percent), and Nicaragua (16 percent). Recorded flows to Mexico include funds received by transit migrants from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba, and others. Remittances are important as a source of hard currency for several countries for which these flows represent at least 20 percent of GDP, including El Salvador, Honduras, Jamaica, and Haiti. In 2022, remittances are estimated to grow by 9.1 percent, though downside risks remain. The average cost of sending $ 200 to the region was mostly unchanged at 5.6 percent in the fourth quarter of 2021 compared to a year earlier.
Remittances to the developing countries of the Middle East and North Africa region grew by 7.6 percent in 2021 to $ 61 billion, driven by robust gains into Morocco (40 percent) and Egypt (6.4 percent). Factors supporting the flows were economic growth in host countries in the European Union as well as transit migration which further boosted inflows to temporary host countries such as Egypt, Morocco, and Tunisia. In 2022, remittance flows will likely ease to a 6 percent gain. Remittances have long made up the largest source of external resource flows for developing MENA — among ODA, FDI, and portfolio equity and debt flows — accounting for 61 percent of total inflows in 2021. The cost of sending $ 200 to MENA fell to 6.4 percent in the fourth quarter of 2021 from 6.6 percent a year ago.
Remittances to South Asia grew 6.9 percent to $ 157 billion in 2021. Though large numbers of South Asian migrants returned to home countries as the pandemic broke out in early 2020, the availability of vaccines and opening of Gulf Cooperation Council economies enabled a gradual return to host countries in 2021, supporting larger remittance flows. Better economic performance in the United States was also a major contributor to the growth in 2021. Remittance flows to India and Pakistan grew by 8 percent and 20 percent, respectively. In 2022, growth in remittance inflows is expected to slow to 4.4 percent. Remittances are the dominant source of foreign exchange for the region, with receipts more than three times the level of FDI in 2021. South Asia has the lowest average remittance cost of any world region at 4.3 percent, though this is still higher than the SDG target of 3 percent.
Remittance inflows to Sub-Saharan Africa soared 14.1 percent to $ 49 billion in 2021 following an 8.1 percent decline in the prior year. Growth in remittances was supported by strong economic activity in Europe and the United States. Recorded inflows to Nigeria, the largest recipient country in the region, gained 11.2 percent, in part due to policies intended to channel inflows through the banking system. Countries registering double-digit growth rates include Cabo Verde (23.3 percent), Gambia (31 percent), and Kenya (20.1 percent). Countries where the value of remittance inflows as a share of GDP is significant include the Gambia (27 percent), Lesotho (23 percent), Comoros (19 percent), and Cabo Verde (16 percent). In 2022, remittance inflows are projected to grow by 7.1 percent driven by continued shift to the use of official channels in Nigeria and higher food prices – migrants will likely send more money to home countries that are now suffering extraordinary increases in prices of staples. The cost of sending $ 200 to the region averaged 7.8 percent in the fourth quarter of 2021, a small decline from 8.2 percent a year ago.
PRESS RELEASE NO: 2022/060/SPJ Contacts In Washington Rebecca Ong email@example.com