World Bank Group has reported that remittances to Sub-Saharan Africa,the region most highly exposed to the effects of the global crisis, grew an estimated 5.2 per cent to $53 billion in 2022, compared with 16.4% last year (due mainly to strong flows to Nigeria and Kenya). Remittances in 2023 are projected to soften to 3.9% growth as adverse conditions in the global environment and regional source countries persist. Remittances as a share of GDP are significant in the Gambia (28%), Lesotho (21%), and Comoros (20%). Sending $200 to the region cost 7.8% on average in the second quarter of 2022, down from 8.7% a year ago. Remitting from countries in the least expensive corridors is on average 3.4% compared to 25.2% for the costliest corridors.
According to the Bank remittances to low- and middle-income countries (LMICs) withstood global headwinds in 2022, growing an estimated 5% to $626 billion. This is sharply lower than the 10.2% increase in 2021, according to the latest World Bank Rutkowski, World Bank Global Director for Social Protection and Jobs. By region, Africa stands to be the most severely exposed to the concurrent crises, including severe drought and spikes in global energy and food commodity prices. Remittances to Sub-Saharan Africa are estimated to have increased 5.2% compared with 16.4 per cent last year. In other regions, remittance flows are estimated to have increased 10.3 per cent to Europe and Central Asia, where rising oil prices and demand for migrant workers in Russia supported remittances, in addition to the currency valuation effect. In Ukraine, remittance growth is estimated at 2%, lower than earlier projections as funds for Ukrainians were sent to countries hosting them, and hand-carried money transfers likely increased. Growth in remittance flows is estimated at 9.3% for Latin America and the Caribbean, 3.5% in South Asia, 2.5% in the Middle East and North Africa, and 0.7% in East Asia and the Pacific. In 2022, for the first time a single country, India, is on track to receive more than $100 billion in yearly remittances.
Remittances to the East Asia and Pacific region are estimated to have increased by 0.7% to $134 billion in 2022, arresting the decline of the previous two years. Labor shortages in the hospitality and health sectors of high-income economies and higher oil prices benefiting Gulf Cooperation Council countries boosted demand for workers in 2022, which supported remittances. However, remittances to China are estimated to have dropped by nearly 4%, driven by restrictions on workers from traveling abroad due to COVID-related policies. Remittances as a share of GDP are significant in Tonga (50%) and Samoa (34%). In 2023, remittances are projected to decline by 1% due to weaker conditions in migrants’ destination countries. The cost of sending $200 to the region rose to 6.2% on average in the second quarter of 2022 from 5.8% a year earlier.
Remittance flows to Europe and Central Asia are estimated to have increased by 10.3% to $72 billion in 2022. Rising oil prices and demand for migrant workers increased the flow of remittances from Russia to Central Asian countries. The appreciation of the ruble against the U.S. dollar translated into higher value, in dollar terms, of outward remittances from Russia to Central Asia. Remittances to the Kyrgyz Republic and Tajikistan exceed 30% of GDP. In 2023, remittance receipts are projected to moderate further to 4.2% growth due to a softer outlook for major remittance-sending countries. The cost of sending $200 to the region rose slightly to 6.4% on average in the second quarter of 2022 (data excludes corridors originating in Russia).
Remittances to Latin America and the Caribbean are estimated to have grown 9.3% in 2022 to $142 billion. Data for the first nine months of 2022 show a 45% increase for Nicaragua, 20% for Guatemala, 15% for Mexico, and 9% for Colombia. Stronger employment of migrants from Latin America in the United States contributed to remittance flows. Remittances received by migrants in transit also contributed to strong flows in Mexico and Central America. As a share of GDP, remittances exceed 20% in El Salvador, Honduras, Jamaica, and Haiti. In 2023, remittances will likely moderate to 4.7% growth due to a weaker economic outlook for the United States, Italy, and Spain. Sending $200 to the region cost 6% on average in the second quarter of 2021, up from 5.6% a year ago.
Remittances to the developing countries of the Middle East and North Africa are estimated to have grown 2.5% in 2022 to $63 billion, compared to a 10.5% growth last year. Slower growth in remittances is partly tied to the erosion of real wage gains in the Euro Area, even as demand for remittances in home countries increased amid deteriorating conditions, including drought in the Maghreb and high imported wheat prices. As a share of GDP, remittances are significant in Lebanon (38%) and West Bank and Gaza (19%). Remittance inflows are projected to grow by 2% in 2023. Sending $200 to the region cost 6.3% on average in the second quarter of 2022.
Remittances to South Asia grew an estimated 3.5% to $163 billion in 2022, but there is large disparity across countries, from India’s projected 12% gain—which is on track to reach $100 billion in receipts for the year–to Nepal’s 4% increase, to an aggregate decline of 10% for the region’s remaining countries. The easing of flows reflects the discontinuation of special incentives some governments had introduced to attract flows during the pandemic, as well as preferences for informal channels offering better exchange rates. Remittances to India were enhanced by wage hikes and a strong labor market in the United States and other OECD countries. In the Gulf Cooperation Council destination countries, governments ensured low inflation through direct support measures that protected migrants’ ability to remit. Sending $200 to the region cost 4.1% on average in the second quarter of 2022, down from 4.3% a year ago.
Remittances are a vital source of household income for LMICs. They alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher school enrollment rates for children in disadvantaged households. Studies show that remittances help recipient households to build resilience, for example through financing better housing and to cope with the losses in the aftermath of disasters. Remittance flows to developing regions were shaped by several factors in 2022. A reopening of host economies as the COVID-19 pandemic receded supported migrants’ employment and their ability to continue helping their families back home. Rising prices, on the other hand, adversely affected migrants’ real incomes. Also influencing the value of remittances is the appreciation of the ruble, which translated into higher value, in U.S. dollar terms, of outward remittances from Russia to Central Asia. In the case of Europe, a weaker euro had the opposite effect of reducing the U.S. dollar valuation of remittance flows to North Africa and elsewhere. In countries that experienced scarcity of foreign exchange and multiple exchange rates, officially recorded remittance flows declined as flows shifted to alternative channels offering better rates.
