DUSHANBE, April 15, 2015, Asia-Plus — The World Bank’s
Migration and Development Brief
, released on April 13, notes that growth in global remittances, including those to developing countries, will slow sharply this year due to weak economic growth in Europe, deterioration of the Russian economy and the depreciation of the euro and ruble.
Officially recorded remittances to the developing world are expected to reach $440 billion in 2015, an increase of 0.9 percent over the previous year. Global remittances, including those to high income countries, are projected to grow by 0.4 percent 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 percent 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 percent 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.
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.
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.
Remittances to developing countries in the Europe and Central Asia region will continue to decline sharply for a second consecutive year in 2015. Inflows are expected to total $42 million this year, a decrease of 12.7 percent over 2014 when remittances declined by 6.3 percent. The economic contraction in Russia, a major remittance source country, has resulted in migrant job losses while the depreciation of the ruble has reduced the real incomes of migrant workers in Russia and reduced the value of remittances in US dollar terms. Central Asian countries are the hardest hit, due to their heavy dependency on remittances from Russia. In 2014, remittances to Ukraine contracted by 27 percent, to Uzbekistan by 16 percent, Armenia 11 percent and Tajikistan 8 percent, with dramatic declines occurring in the fourth quarter of the year. Tajikistan is the world’s most remittance dependent country, with remittances constituting 49 percent of GDP in 2013. Inflows to the region are expected to recover to $45 billion in 2016 and $48 billion in 2017.
