Trends in Remittance

Trends in Remittance: Key Insights from the World Bank's Migration and Development Brief

1. Overview of Remittances

• Definition: Remittances are funds sent by migrants to their families or relatives in their home countries while they are working abroad. These transfers are vital for recipient countries, contributing significantly to household incomes and foreign exchange reserves.
• Methods: Remittances can be sent via wire transfer, electronic payment systems, mail, draft, or cheque.

2. Global Trends in Remittance Flows (2023)

• Overall Flows: After strong growth in 2021-2022, remittance flows to low- and middle-income countries (LMICs) moderated in 2023, totaling approximately $656 billion.
• Regional Trends:
• Latin America and the Caribbean: Increased by 7.7%.
• South Asia: Increased by 5.2%.
• East Asia and Pacific: Increased by 4.8% (excluding China).
• Sub-Saharan Africa: Slight decline of 0.3%.
• Middle East and North Africa: Significant drop of nearly 15%.
• Europe and Central Asia: Decline of 10.3%.

3. Future Projections

• Growth Rate: Remittances to LMICs are expected to grow at a rate of 2.3% in 2024, though growth will vary by region.
• Risks: Potential risks include weaker economic growth in high-income migrant-hosting countries and volatility in oil prices and currency exchange rates.

4. Costs of Sending Remittances

• Global Average Cost: As of Q4 2023, the average cost of sending $200 was 6.4%, up from 6.2% the previous year. This is still above the Sustainable Development Goal (SDG) target of 3%.
• Digital vs. Non-Digital Costs: Digital remittances are cheaper, with a cost of 5%, compared to 7% for non-digital methods.

5. Remittances to India

• Top Recipient: India remained the largest recipient of remittances globally, receiving $120 billion in 2023.
• Growth Rate: Growth in remittances to India is expected to slow to 3.7% in 2024 from 7.5% in 2023.
• Projections: Remittances to India are anticipated to rise to $124 billion in 2024 and $129 billion in 2025.
• Factors Influencing Flows:
• Labour Markets: Strong labor markets in the United States and Europe supported the high level of remittances.
• GCC Outflows: Reduced outflows from GCC countries due to declining oil prices and production cuts contributed to the slowdown.
• Diversified Migrant Pool: India's diversified migrant workforce, including both highly skilled workers in OECD markets and less-skilled workers in GCC countries, provides stability to remittance flows.
• UAE Contributions: Remittances from the UAE, which constitute 18% of India's total remittances, were boosted by the 2023 free trade agreement (FTA). The FTA promotes the use of local currencies and enhances payment and messaging systems between India and the UAE.

6. Strategic Implications

• FTAs and Local Currencies: The FTA with the UAE is instrumental in increasing remittances through formal channels by using dirhams and rupees for transactions, thus benefiting India's remittance inflows.

Overall, while global remittance flows have faced some challenges and variabilities, the strategic measures such as FTAs and the diversification of migrant sources help stabilize and potentially increase remittance flows to countries like India.