In 2016, remittances to developing countries had dipped 2.4 per cent year-on-year - a second consecutive year of decline, which was a trend not seen in three decades. But according to the World Bank's latest Migration and Development Brief, last year saw a stronger-than-expected recovery in remittances, driven by growth in Europe, Russia and the US.
Global remittances, including flows to high-income countries, grew 7 per cent to $613 billion in 2017, while officially recorded remittances to low-and middle-income countries jumped up 8.5 per cent to reach $466 billion. The rebound was also helped by higher oil prices and a strengthening of the Euro and the Ruble, added the report.
But dip or no dip, the Indian diaspora tops the charts when it comes to sending money home. Remittances to India picked up sharply by 9.9 per cent in 2017 to reach about $69 billion, reversing the previous year's dip. In fact, India, the world's largest remittance recipient, had led the decline with remittance inflows amounting to $62.7 billion in 2016, a decrease of 8.9 per cent over $68.9 billion in 2015. The bad news is that we are still short of the $70.4 billion received in 2014. The World Bank has previously noted that although remittances as a share of GDP was not particularly significant for India - averaging around 2 per cent - there were subnational variations in the impact of remittances. For Kerala, as it had pointed out, remittances were estimated at 36.3 per cent of the net state domestic product and contributed significantly to household consumption.
The South Asia region at large posted a moderate 5.8 per cent jump in remittances last year, amounting to $117 billion. "Robust growth in South Asia mainly reflects strengthening growth in India as the effects of temporary policy driven disruptions (demonetization and a new tax on goods and services) fade," said the report. However, flows to Pakistan and Bangladesh were both largely flat in 2017, and Sri Lanka saw a small decline of less than 1 per cent. Meanwhile, the biggest rebound in remittances last year was seen in in Europe and Central Asia region (20.9 per cent).
The other countries that ranked high in the Top 5 in receiving remittances are China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion) and Nigeria ($22 billion). However, as a share of GDP for 2017, the top recipients were the smaller countries - the Kyrgyz Republic, Tonga, Tajikistan, Haiti and Nepal.
The projections for 2018 are broadly optimistic. The upsurge in remittances are expected to continue on the back of stronger economic conditions in advanced economies (particularly the US) and an increase in oil prices that should have a positive impact on the Gulf Cooperation Council nations - Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman. Remittances to the South Asia region are pegged to grow by 2.5 per cent to $120 billion. Global remittances are expected to post a better growth of 4.6 per cent to $642 billion in 2018.
"While remittances are growing, countries, institutions, and development agencies must continue to chip away at high costs of remitting so that families receive more of the money," said Dilip Ratha, lead author of the Brief and head of Global Knowledge Partnership on Migration and Development (KNOMAD).
According to the World Bank, the global average cost of sending home $200 was 7.1 per cent in the first quarter of 2018, more than twice as high as the Sustainable Development Goal target of 3 per cent. South Asia had the lowest average remittance costs of any world region (at 5.2 percent) in the first quarter of 2018. On the other hand, sub-Saharan Africa remains the most expensive place to send money to, with an average cost of 9.4 per cent. The factors contributing to high costs include de-risking measures taken by commercial banks and exclusive partnerships between national post office systems and a single money transfer operator. The World Bank added that these factors constrain the introduction of technologies, such as mobile apps and the use of cryptocurrency and blockchain, in remittance services. "Eliminating exclusivity contracts to improve market competition and introducing more efficient technology are high-priority issues," said Ratha.
The report significantly points out that despite the rebound in remittances, there are a few long-term risks. "In many remittance-source countries, anti-immigration sentiments are on the rise. Immigration policies are becoming stricter. Also, structural constraints, such as the de-risking behavior of international correspondent banks and increased regulatory burdens on money transfer operators, continue to hinder the growth of formal remittances," it said.
With agency inputs