In the ever-evolving dynamics of global economics, the World Bank’s Migration and Development Brief offers a comprehensive look at remittance trends in 2023. While the numbers indicate continued growth, a complex narrative emerges, revealing both positive strides and potential challenges.
According to the World Bank Report, remittances to low- and middle-income countries (LMICs) experienced a moderate 3.8% growth in 2023, marking a deceleration from the robust gains observed in the preceding two years.
This growth propelled the total to an estimated US$669 billion, a testament to the resilience of labor markets in advanced economies and Gulf Cooperation Council (GCC) countries, supporting the vital lifeline of migrants sending money back home.
That notwithstanding, regional disparities in remittance inflows paint a diverse picture. Latin America and the Caribbean witnessed an 8% surge, underlining the positive impact of a strong labor market in the United States. South Asia followed suit with a notable 7.2% growth, while East Asia and the Pacific and sub-Saharan Africa recorded more modest increases of 3% and 1.9%, respectively.
However, not all regions shared in the growth. The Middle East and North Africa faced a second consecutive year of decline, with a 5.3% reduction attributed primarily to a sharp drop in flows to Egypt. Remittances to Europe and Central Asia also fell by 1.4%, reversing the significant gains of the previous year.
Economic Concerns and Future Projections
The report raised alarms about the potential decline in real income for migrants in 2024. Global inflation and low growth prospects pose significant risks. The forecast for 2024 projects a further softening of remittance growth to LMICs, anticipating a 3.1% increase.
Contributing factors include slowing economic growth, weaker job markets in high-income countries, volatile oil prices, and fluctuations in currency exchange rates.
Persistent challenges in the remittance landscape include high costs, averaging 6.2% for sending $200 as of the second quarter of 2023. The breakdown by channels reveals that banks remain the costliest option at 12.1%, followed by post offices (7%), money transfer operators (5.3%), and mobile operators (4.1%).
Dilip Ratha, lead economist at the World Bank, underscores the importance of leveraging remittances for private capital mobilization to support development finance.
Despite high costs, remittances have surpassed the sum of foreign direct investment and official development assistance in recent years. This highlights their potential impact on a country’s sovereign ratings and debt repayment capabilities.
Remittances increased by an estimated 3% to US$133 billion in 2023, with a projected growth of 2.4% in 2024. Excluding China, the region experienced a 7% growth in remittances to reach US$83 billion in 2023.
Remittance flows declined by 1.4% to US$78 billion in 2023, attributed to an unusually high base level in 2022 and weakness in flows to Russia and Ukraine. Remittances are projected to decline by 1.2% in 2024.
Remittance flows are expected to increase by 8% to reach US$156 billion in 2023. Remittances to Mexico, the largest recipient, are projected to increase by 9.7%. Growth in remittances to the region is expected to slow to 4.4% in 2024.
Remittances are expected to decline by 5.3% to US$61 billion in 2023, driven by a sharp drop in flows to Egypt. A recovery is projected in 2024 with a 2.1% gain based on expected improvements in flows to Egypt.
Remittances are estimated to have grown by 7.2% in 2023 to reach US$189 billion. Growth is expected to fall to 5% in 2024 due to projected weaker economic growth in major host countries.
Remittance flows are expected to have increased by about 1.9% in 2023 to US$54 billion. Projections for 2024 indicate a 2.5% increase.
Te World Bank’s report underscores the crucial role of remittances as a source of private external finance. It calls for inclusive labor markets and social protection policies in host countries to support migrants, particularly during times of crisis. As the global economic landscape continues to evolve, understanding and addressing these trends becomes paramount for sustainable development.
READ ALSO: Multinational Force To Secure Trade In The Red Sea Launched
