Remittances to low and middle income countries (LMICs) withstood global headwinds in 2022, growing an estimated 5.0 per cent to $626 billion.
This is sharply lower than the 10.2 per cent increase in 2021, according to the latest World Bank Migration and Development Brief.
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, reports BSS.
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.
The Brief said remittances to South Asia grew an estimated 3.5 per cent to $163 billion in 2022, but there is a large disparity across countries, from India's projected 12 per cent gain-which is on track to reach $100 billion in receipts for the year--to Nepal's 4.0 per cent increase, to an aggregate decline of 10 per cent 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 labour 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 per cent on average in the second quarter of 2022, down from 4.3 per cent a year ago.
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.
"Migrants help to ease tight labour markets in host countries while supporting their families through remittances. Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the COVID-19 pandemic. Such policies have global impacts through remittances and must be continued," said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.
By region, Africa stands to be the most severely exposed to concurrent crises, including severe drought and spikes in global energy and food commodity prices. Remittances to Sub-Saharan Africa are estimated to have increased by 5.2 per cent 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 2.0 per cent, 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 per cent for Latin America and the Caribbean, 3.5 per cent in South Asia, 2.5 per cent in the Middle East and North Africa, and 0.7 per cent 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.
In a special feature on climate-driven migration, the Brief notes that rising pressures from climate change will both drive increases in migration within countries and impair livelihoods.
The poorest are likely to be most affected as they often lack the resources necessary to adapt or move. Studies show that migration can play a role in coping with climate impacts, for example, by providing an escape from disasters and also through remittances and other forms of support to affected households.
Changes in the international legal norms and institutional frameworks for migration may be required to cope with the challenge of climate-related migration, particularly in the context of cross-border mobility, as is the case for small island nations.
Also reported in the Brief is the cost of sending $200 across international borders to LMICs, which remains high at 6.0 per cent on average in the second quarter of 2022, according to the Remittances Prices Worldwide Database.
It is cheapest to send via mobile operators (3.5 per cent), but digital channels account for less than 1.0 per cent of total transaction volume. Digital technologies allow for significantly faster and cheaper remittance services.