A. SREENIVASA REDDY (ABU DHABI)
India tops the list of countries receiving remittances from their overseas workers in 2023, followed by Mexico, China, the Philippines and Pakistan, according to the World Bank's latest Migration and Development Brief.
India is estimated to have received a total of $120 billion remittances in 2023, Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion) and Pakistan got a total of $27 billion in remittances.
In some smaller countries, remittance inflows represent very large shares of gross domestic product (GDP), highlighting the importance of remittances for the functioning of the economy. Topping the list is Tonga (41% of GDP), followed by Tajikistan (39%), Lebanon (31%), Samoa (28%), and Nicaragua (27%).
The US has continued to be the largest source of remittances in the world, followed by Saudi Arabia and Switzerland. As a share of GDP, however, Saudi Arabia has a significantly larger volume of outward remittances than the US, says the annual World Bank report.
According to the report, outward remittances from the GCC countries to destination countries decreased by 13% in 2023 compared with a year earlier. Notably, outward remittances from the GCC countries showed an upward trend from 2010 to 2019, with some fluctuations, but a declining trend seems to have set in after 2019. The report attributes the decline to post-COVID adjustments, as well as Saudi Arabia's recent policy allowing foreign migrant workers to bring their families to the country when they work, possibly resulting in fewer remittances being sent to their home countries.
Remittances to the Middle East and North Africa fell by 15% to $55 billion in 2023, accentuating the impact of the 3.2% decline seen in 2022. The substantial drop of 2023 was largely driven by a sharp decline in flows to Egypt. It is likely that remittances have been diverted toward unofficial channels given the wide gap between exchange rates in the official and parallel foreign exchange markets.
Remittances to South Asia grew 5.2% in 2023 to reach $186 billion, tapering off from the more than 12% increase of 2022. The increase is attributable entirely to remittance flows to India, which increased by 7.5% to reach $120 billion in 2023.
If we look at the larger picture portrayed by the World Bank report, remittance flows to low- and middle-income countries (LMIC) moderated in 2023, reaching an estimated $656 billion.
The modest 0.7% growth rate reflects large variances in regional growth, but remittances remained a crucial source of external finance for developing countries in 2023
Looking ahead, remittances to LMICs are expected to grow at a faster rate of 2.3% in 2024 and and 2.8% in 2025, to reach $690 billion in 2025.
"Migration and resulting remittances are essential drivers of economic and human development," said Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank. "We are working on partnerships between countries sending and receiving migrants to facilitate training, especially for youth, to get the skills needed for better jobs and income at home and in destination countries."
"The resilience of remittances underscores their importance for millions of people," said Dilip Ratha, lead economist and lead author of the report. "Leveraging remittances for financial inclusion and capital market access can enhance the development prospects of recipient countries. The World Bank aims to reduce remittance costs and facilitate formal flows by mitigating political and commercial risks to promote private investment in this sector."
Sending remittances remains too costly in many countries, according to the World Bank report. In the fourth quarter of 2023, the global average cost of sending $200 was 6.4% of the amount being sent, slightly up from 6.2% a year earlier and well above the SDG target of 3%. Digital remittances had a lower cost of 5%, compared with 7% for non-digital methods, highlighting the benefits of technological advancements in reducing the financial burden on migrants.