The World Bank and KNOMAD (Global Knowledge Partnership on Migration and Development) published their latest report in June 2023, ‘Remittances Remain Resilient but Are Slowing; Migration and Development Brief 38’. The Migration and Development report captures key developments in remittance flows that have occurred since the previous brief in November 2022.

Projections have been made of 2023 remittance trends in the backdrop of a slowing global economy, continuing high inflation and rising interest rates as well as Russia’s invasion of Ukraine and the conflict in Sudan. Here are some of its key insights and highlights, summarised for the benefit of readers.

 

Remittance Trends: Major Source of External Finance for Developing Countries

In 2022, remittance flows to low- and middle-income countries (LMICs) are estimated to have risen by 8%, reaching $647 billion. The remittance growth rate is anticipated to moderate to 1.4% in 2023, resulting in total inflows of $656 billion. Worldwide, remittance flows are slated to reach $840 billion in 2023. Globally, the remittance growth rate is expected to rise to 2.0% in 2024, increasing inflows by $18 billion.

The top five recipient nations for annual remittances in 2022 were India ($111 billion), Mexico ($61 billion), China ($51 billion), the Philippines ($38 billion), and Pakistan ($30 billion).

 

Robust growth of remittances in 2022

After a 10.6% rise in 2021, strong growth in LMICs’ remittances in 2022 came despite high inflation and slower growth in some OECD (Organisation for Economic Co-operation and Development) countries, which may have reduced migrants’ real incomes. Remittances were supported by the oil boom in GCC (Gulf Cooperation Council) member countries, which increased migrants’ incomes; large money transfers from the Russian Federation to countries in Central Asia; and the strong labor market in the US and the OECD countries.

 

2023 Remittance Outlook

The growth of remittances to LMICs is predicted to slow to 1.4% in 2023 as GDP growth in high-income countries keeps slowing (from 2.8% in 2022 to a projected 0.8% in 2023), further minimizing migrants’ wage gains in host countries. Remittance growth is likely to remain the highest in Latin America and the Caribbean (forecast 3.3%), as the US labor market holds strong. Conversely, remittance growth may be lowest in South Asia (0.3%), largely due to the very high level in 2022, and the slowing demand for highly skilled IT workers in the US and Europe.

Meanwhile, the growing importance of remittances as a financial lifeline in many economies, particularly after the pandemic, has accelerated efforts to enhance the quality, frequency, and granularity of this data.

 

Remittance Costs

These costs remained high in the fourth quarter of 2022 (2022Q4), being more than double the UN SDG (Sustainable Development Goal) target of 3%. As per the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending $200 was 6.2% in 2022Q4, somewhat higher than the previous year’s 6%.

1Dilip Ratha, Sonia Plaza, Eung Ju Kim, Vandana Chandra, Nyasha Kurasha, and Baran Pradhan. 2023. Migration and Development Brief 38: Remittances Remain Resilient But Are Slowing. KNOMAD–World Bank, Washington, DC
Banks remain the costliest channel for remittances, with an average cost of 11.8% during 2022Q4. The average cost for post offices was 6.3%, money transfer operators 5.4%, and mobile operators 4.5%. While mobile operations are the cheapest type of service provider, they only account for a small percentage of the total transaction volume (under 1%).

 

Migration highlights

Irregular border crossings abound around the world. In the US, around 176,000 people crossed the southern border in the first seven months of fiscal year 2023, compared with 184,000 each month in FY2022. Since the establishment of new regulations, the number of irregular crossings has dropped. The number of first-time asylum seekers in the European Union rose by 10% in March 2023 compared with the previous year (around 92,000 applications).

As of 05 May 2023, due to Russia’s ongoing invasion of Ukraine, an estimated 5.3 million people were displaced within Ukraine, taking the overall number of Ukrainians within the country requiring humanitarian assistance to 17 million (UNHCR 2023).

 

Regional trends in remittance flows

East Asia and Pacific: After declining for a couple of years, East Asia’s remittances had mildly positive growth (0.7%) in 2022. But excluding China, East Asian remittances rose more vibrantly at 3.8% in 2022, somewhat below the 5.5% rate in 2021. The recorded remittance flows to East Asia stood at $130 billion in 2022 with China ($51 billion) being the largest recipient followed by the Philippines ($38 billion) and Vietnam ($13 billion).

Europe and Central Asia: Remittance flows to the Europe and Central Asia region have grown steadily over a decade, touching a record high of $79 billion in 2022 – a 19% increase from 2021. Growth remained uninterrupted by Russia’s invasion of Ukraine, and most remittances in 2022 originated in the Russian Federation. The strong performance was primarily due to record high money transfers from Russia to neighboring countries, especially to the Commonwealth of Independent States.

Latin America and the Caribbean: After a record rise in remittances in 2021 (26.5%), remittance flows into Latin America and the Caribbean increased by 11.3% to touch $145 billion in 2022. Excluding Brazil, where FDI inflows almost doubled in 2022, remittances were substantially larger than FDI flows. Growth in remittances to this region is slated to decelerate to 3.3% in 2023 and 2.8% in 2024.

Middle East and North Africa: After a strong 12% growth in 2021, remittances to the Middle East and North Africa fell by around 4% in 2022 to $64 billion. Meanwhile, robust growth in major host countries in the EU (France and Spain) supported remittance flows into the Maghreb nations (which rose by 1.7% over the year), offsetting some of the region’s negative flows.

South Asia: Surpassing expectations, remittance flows to South Asia reached $176 billion in 2022, mainly because India’s remittance flows overshot its $100 billion milestone by $11 billion. Remittances to South Asia grew at 12.2% in 2022, nearly double the 2021 rate in all but three nations (Bangladesh, Pakistan, and Sri Lanka).

Sub-Saharan Africa: Remittance flows to Sub-Saharan Africa touched $53 billion in 2022, a 6.1% rise from 2021. Remittance flows to this region are expected to rise by 1.3% and 3.7% in 2023 and 2024, respectively. The projected moderate remittance growth reflects the anticipated economic growth slowdown from 2.6% in 2022 to 0.7% in 2023 in major developed nations, where a large percentage of remittance senders reside.

 

Mapping global remittance trends

In the post-pandemic period, remittances are more vital as a source of external financing. Besides economic growth and the employment levels of foreign workers, two other variables impacting remittance flows are oil prices (more so in the Russian Federation and member nations of the GCC), and exchange rates of local currencies vis-à-vis the US dollar. When the local currency of a source nation (e.g., the ruble) weakens against the US dollar, the value of remittances in dollar terms declines equally. Such valuation effects are significant for remittance flows to Central Asian nations (where remittances originate in ruble) and in the case of North Africa (where remittances originate in euro or pound sterling).

In many remittance-recipient nations facing balance of payments issues and the appearance of gaps between the official and market exchange rates, remittance flows could shift to informal channels. In such situations, the official data on remittances will underestimate the actual size of flows. This is probably true in several countries in South Asia and Sub-Saharan Africa.

 

Global Migration Trends

Migration flows remain at record levels in recent times. Border crossings are high in the US and Europe since the pre-COVID levels. The strengthening of border controls in some host nations has increased the number of transit migrants in many countries. Refugee flows have also spiked due to conflicts in Sudan and Ukraine. The number of internally displaced persons is also rising due to climate disasters (e.g. in the Sahel and the Horn of Africa).