WASHINGTON— Remittances to low- and middle-income countries are projected to have grown a strong 7.3 percent to reach $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 percent despite a severe global recession due to COVID-19, according to estimates from the World Bank’s Migration and Development Brief released today.
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.
“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.
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 percent in Latin America and the Caribbean, 9.7 percent in the Middle East and North Africa, 8 percent in South Asia, 6.2 percent in Sub-Saharan Africa, and 5.3 percent 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 percent 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 $200 across international borders continued to be too high, averaging 6.4 percent 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 percent by 2030. It is most expensive to send money to Sub-Saharan Africa (8 percent) and lowest in South Asia (4.6 percent). Data reveal that costs tend to be higher when remittances are sent through banks than through digital channels or through money transmitters offering cash-to-cash services.
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 percent compared to 2020.
Mexico, the region’s largest remittance recipient, received 42 percent ($52.7 billion) of the regional total. The value of remittances as a share of GDP exceeds 20 percent for several smaller economies: El Salvador (26.2 percent), Honduras (26.6 percent), Jamaica, (23.6 percent), and Guatemala (18 percent). The adverse effects of COVID-19 and Hurricanes Grace and Ida contributed to higher remittance flows to Mexico and Central America.
Other main drivers include recovery in employment levels and fiscal and social assistance programs in hosting countries, particularly the United States. An increase in the number of transit migrants in Mexico and other countries, and the remittances they received from overseas to support their living and travel costs, appears to be a significant factor behind the strong increase.
In 2022, remittances are expected to grow at 4.4 percent, mainly due to a weaker growth outlook for the United States.
