In a press release published last week on 13 April regarding its latest edition of the ‘Migration and Development Brief’, the World Bank said it found that remittances to developing countries grew only marginally in 2015, as weak oil prices and other factors strained the earnings of international migrants and their ability to send money home to their families.
Officially, recorded remittances to developing countries amounted to USD 431.6bn in 2015, an increase of 0.4% over USD 430bn in 2014. The growth pace in 2015 was the slowest since the global financial crisis. Global remittances, which include those to high-income countries, contracted by 1.7% to USD 581.6bn in 2015, from USD 592bn in 2014. The slowing in remittances growth, which began in 2012, was exacerbated in 2015 by low oil prices, which are taking a toll on many oil-exporting remittance-source countries, such as Russia and the Gulf Cooperation Council (GCC) states, said the brief. As a result, many remittance-receiving countries, including India, the world’s largest remittance recipient, and Egypt saw remittances contract in 2015, as flows from the GCC countries slowed considerably. Remittances contracted by 20% to countries in the Europe and Central Asia region, with the heaviest impacts on Tajikistan and Ukraine, as a struggling Russian economy, and depreciation of the Russian ruble against the dollar contributed to the decline in remittances to the region. India retained its top spot in 2015, attracting about USD 69bn inremittances, down from USD 70bn in 2014. Other large recipients in 2015 were China, with USD 64bn, the Philippines (USD 28bn), Mexico (USD 25bn), and Nigeria (USD 21bn).
“Remittances are an important and fairly stable source of income for millions of families and of foreign exchange to many developing countries. However, if remittances continue to slow, and dramatically as in the case of Central Asian countries, poor families in many parts of the world would face serious challenges including nutrition, access to health care and education,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group.
Looking at SSA specifically, the brief found that remittance flows to the region have been affected by slow economic recovery in high-income countries and the adverse impact of the commodity price decline on regional remittance-source countries such as South Africa and Nigeria. The estimated 1% rise in remittances to SSA in 2015 represents some recovery from the 0.2% rise in 2014. Remittances to Nigeria, accounting for around two-thirds of total remittance inflows to the region, are estimated to have declined by 0.8% to USD 20.7bn, and remittances to South Africa are estimated to have fallen by 5.2% to USD 0.9bn. Regional growth in remittances in 2015 was largely driven by strong remittance growth in Kenya (8.3% to USD 1.6bn) and Uganda (21.1% to USD 1.1bn). Remittance flows to the region are projected to rise by 3.4 and 3.7% in 2016 and 2017, respectively. The projected moderate growth in remittances reflects the limited recovery in Europe, as well as slow growth in major remittance-source countries within the region (e.g., Nigeria and South Africa), in part due to falling commodity prices. On the other hand, remittances should be supported by improving prospects for growth in the United States.
Source: Migration and Remittances Factbook 2016
As the graph above shows, remittances have become more and more important as a source of external financial flows for developing countries, and in the context of falling commodity prices will continue to be so. More should thus be done, in our view, to encourage reducing the costs of sending for SSA, with the report finding that while the global average cost of sending USD 200 was about 7.4% in the fourth quarter of 2015, down slightly from the previous quarter and 0.6pp below the end of 2014, SSA, with an average cost of 9.5%, unfortunately remains the highest-cost region.