However, the growth in global remittances, including those to developing countries, will slow sharply in 2015 due to weak economic growth in Europe, deterioration of the Russian economy and the depreciation of the euro and ruble, says the latest issue of the World Bank's Migration and Development Brief.
Officially recorded remittances to the developing world are expected to reach $440 billion in 2015, an increase of 0.9% over the previous year. Global remittances, including those to high income countries, are projected to grow by 0.4% to $586 billion.
The 2015 remittance growth rates are the slowest since the global financial crisis in 2008/09. Nonetheless, the number of international migrants is expected to exceed 250 million in 2015, and their savings and remittances are expected to continue to grow.
The slowdown in the growth of remittances this year will affect most developing regions, in particular Europe and Central Asia where flows are expected to decline by 12.7% in 2015. The positive impact of an economic recovery in the U.S. will be partially offset by continued weakness in the Euro Area, the impact of lower oil prices on the Russian economy, the strengthening of the US dollar, and tighter immigration controls in many remittance source countries.
In line with the expected global economic recovery next year, the global flows of remittances are expected to accelerate by 4.1% in 2016, to reach an estimated $610 billion, rising to $636 billion in 2017. Remittance flows to developing countries are expected to recover in 2016 to reach $459 billion, rising to $479 billion in 2017.
The top five migrant destination countries continue to be the United States, Saudi Arabia, Germany, Russia and the United Arab Emirates (UAE). The top five remittance recipient countries, in terms of value of remittances, continue to be India, China, Philippines, Mexico and Nigeria.
The global average cost of sending $200 held steady at 8% of the value of the transaction, as of the last quarter of 2014. Despite its potential to lower costs, the use of mobile technology in cross-border transactions remains limited, due to the regulatory burden related to combating money laundering and terrorism financing, says the Brief. International remittances sent via mobile technology accounted for less than 2% of remittance flows in 2013, according to the latest available data.
In addition to sending money to their families, international migrants hold significant savings in their destination countries. 'Diaspora savings' attributed to migrants from developing countries were estimated at $497 billion in 2013, the latest data available.
"Total remittances in 2014 reached $583 billion. This is more than double the ODA in the world. India received $70 billion, China $64 billion, the Philippines $28 billion. With new thinking these mega flows can be leveraged to finance development and infrastructure projects," said Kaushik Basu, World Bank Chief Economist and Senior Vice President. He pointed out, "Israel and India have shown how macro liquidity crises can be managed by tapping into the wealth of diaspora communities. Mexican migrants have boosted the construction sector. Tajikistan manages to nearly double its consumption by using remittance money. Migrants and remittances are clearly major players in today's global economy."
In a special analysis on leveraging migration for financing development, the Brief estimates that as much as $100 billion in migrant savings could be raised annually by developing countries by reducing remittance costs and migrant recruitment costs, and mobilizing diaspora savings and philanthropic contributions from migrants.
"The moderation in the growth of remittances will be hard on many poor people. The affected countries may have to consider creative ways of smoothing the shock. Fortunately, migration and remittances can be leveraged for innovative financing," said Dilip Ratha, Lead Economist, Migration and Remittances, at the World Bank's Development Prospects Group and Head of the Global Knowledge Partnership on Migration and Development (KNOMAD). "As to long-term financing needs for the Post-2015 Development Goals, I would love to see a bullet train system in India, an international airport in Nigeria, another Suez Canal in Egypt, a hydro-project in Pakistan, a community development program in the Philippines, all financed by mobilizing the power of remittances and diaspora savings."
Future inflows of remittances can be used as collateral to facilitate international borrowings by national banks in developing countries. Remittances can also facilitate access to international capital markets by improving sovereign ratings and debt sustainability of recipient countries.
Because remittances are large and more stable than many other types of capital flows, they can greatly enhance the recipient country's sovereign credit rating, thus lowering borrowing costs and lengthening debt maturity, says the Brief. In a recent development, rating agencies have started accounting for remittances in country credit ratings, but given data difficulties, there is still room for further improvement.
And, the joint World Bank-IMF low-income country Debt Sustainability Framework now includes remittances in evaluating the ability of the countries to repay external obligations and their ability to undertake non-concessional borrowing from other private creditors.
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