North Macedonia growth expected to be higher, but the economy still faces risks
Remittances to low- and middle-income countries are expected to have increased by 7.3% to reach $ 589 billion in 2021. This return to growth is more robust than previous estimates and follows the resilience of flows in 2020 when remittances fell only 1.7%. despite a severe global recession due to COVID-19, according to estimates from the World Bank’s Migration and Development Note released today.
For a second year in a row, remittances to low- and middle-income countries (excluding China) are expected to exceed the sum of foreign direct investment (FDI) and overseas development assistance ( APD). This underscores the importance of remittances in providing a vital lifeline by supporting household spending on essential items such as food, health and education during times of economic hardship in countries of origin. migrants.
“Migrant remittances have largely complemented government cash transfer programs to support economically struggling families during the COVID-19 crisis. Facilitating the flow of remittances to ease strained household budgets should be a key part of government policies aimed at supporting a global recovery from the pandemic, ” said Michal Rutkowski, World Bank’s global director for social protection and employment.
Factors contributing to the strong growth in remittances are the determination of migrants to support their families in times of need, aided by the economic recovery in Europe and the United States, which in turn has been supported by stimulus programs budget and employment support. In the Gulf Cooperation Council (GCC) countries and Russia, the resumption of overseas remittances has also been facilitated by the rise in oil prices and the resulting upturn in economic activity.
Remittances grew strongly in most regions. Flows increased by 21.6% in Latin America and the Caribbean, 9.7% in the Middle East and North Africa, 8% in South Asia, 6.2% in sub-Saharan Africa and 5.3% in Europe and Central Asia. In East Asia and the Pacific, remittances fell 4% – although excluding China, remittances grew 1.4% in the region. Growth in Latin America and the Caribbean has been exceptionally strong due to the economic recovery in the United States and additional factors, including migrants’ responses to natural disasters in their countries of origin and remittances sent from there. their country of origin to migrants in transit.
The cost of sending $ 200 across international borders remained too high, averaging 6.4% of the amount transferred in the first quarter of 2021, according to the Bank’s Global Remittance Price Database. global. This is more than double the sustainable development goal of 3% by 2030. Sending money to sub-Saharan Africa (8%) is the most expensive and lowest in South Asia (4.6% ). Data shows that costs tend to be higher when remittances are sent through banks than through digital channels or through remittances that offer cash payment services.
“The immediate impact of the crisis on remittances was very profound. The surprising pace of the recovery is good news. To sustain remittances, especially through digital channels, providing access to bank accounts to migrants and remittance service providers remains a key requirement. Policy responses must also continue to include migrants, particularly in the areas of access to vaccines and protection against underpayment ”, said Dilip Ratha, senior author of the Brief and director of KNOMAD.
Remittances are expected to continue growing 2.6% in 2022, in line with global macroeconomic forecasts. A resurgence of COVID-19 cases and the reimposition of mobility restrictions pose the biggest downside risk to the prospects for global growth, jobs and remittances to developing countries. The dismantling of fiscal stimulus and employment support programs, as economies recover, may also dampen remittances.
Trends in regional remittances
Officially recorded remittances to the East Asia and Pacific region are expected to decline 4% in 2021 to $ 131 billion. Excluding China, remittances to the region increased by 1.4% in 2021 and are expected to increase by 3.3% in 2022. As a percentage of gross domestic product (GDP), the region’s main recipients are more economies. small like Tonga (43.9%). , Samoa (21.1%) and the Marshall Islands (12.8%). Remittance costs: The average cost of sending $ 200 in the region fell to 6.7% in the first quarter of 2021, from 7.1% a year earlier. The five cheapest corridors in the region averaged 2.7% for transfers mainly to the Philippines; while the five most expensive corridors, excluding South Africa to China, which is an outlier, averaged 15%.
After falling 8.6% in 2020, remittances to Europe and Central Asia are expected to rise 5.3% to $ 67 billion in 2021 due to stronger economic activity in the European Union and soaring energy prices. Remittances are expected to increase 3.8% in 2022. Remittances are currently the main source of external funding in the region. Inflows were greater than or equal to the sum of FDI, portfolio investment and ODA in 2020 and 2021. As a percentage of GDP, remittances to the Kyrgyz Republic and Tajikistan exceed 25%. Remittance costs: The average cost of sending $ 200 in the region edged up to 6.6% in the first quarter of 2021, from 6.5% a year earlier, largely reflecting a large increase costs in the Turkey-Bulgaria corridor. Russia is one of the cheapest shippers in the world, with costs falling from 1.8% to 1%.
Remittances to Latin America and the Caribbean are likely to reach a new high of $ 126 billion in 2021, registering a solid 21.6% increase from 2020. Mexico, largest recipient of remittances region, received 42% ($ 52.7 billion) of the regional total. . The value of remittances as a percentage of GDP exceeds 20% for several small economies: El Salvador (26.2%), Honduras (26.6%), Jamaica (23.6%) and Guatemala (18%) ). 19 and Hurricanes Grace and Ida contributed to the increase in remittances to Mexico and Central America. Other major drivers include recovering employment levels and tax and social assistance programs in host countries, particularly the United States. An increase in the number of migrants in transit in Mexico and other countries, and the remittances they received from abroad to cover their living and travel costs, appear to be a major factor behind of the sharp increase. In 2022, remittances are forecast to increase 4.4%, mainly due to weaker growth prospects for the United States. Remittance costs: Sending $ 200 to the region cost an average of 5.5% in the first quarter of 2021, up from 6% a year earlier. Mexico remained the cheapest recipient country in the G20 group, with average costs of 3.7%. But the transfer costs are exorbitant in small corridors.
Remittances to developing countries in the Middle East and North Africa region are expected to increase by around 9.7 percent in 2021 to reach $ 62 billion, supported by a return to growth in host countries of the European Union (especially France and Spain) and the surge in world oil prices which positively affected the GCC countries. The increase was driven by strong influx gains to Egypt (12.6% to $ 33 billion) and Morocco (25% to $ 9.3 billion), respectively return migration and transit migration, playing an important role in favorable outcomes. Remittances to the Maghreb (Algeria, Morocco and Tunisia) jumped 15.2%, driven by growth in the euro area. Flows to several countries fell in 2021, notably Jordan (down 6.9%), Djibouti (down 14.8%) and Lebanon (down 0.3%). For the developing MENA region, remittances have long been the largest source of external resource flows among ODA, FDI, portfolio equity and debt flows. The outlook for remittances in 2022 is for slower growth of 3.6% due to risks from COVID-19. Remittance costs: The cost of sending $ 200 to the MENA region fell to 6.3% in the first quarter of 2021, down from 7% a year ago.
Remittances to South Asia likely increased by around 8% to reach $ 159 billion in 2021. Rising oil prices have helped economic recovery and led to surge in countries’ remittances. of the GCC who employ more than half of South Asian migrants. The economic recovery and stimulus packages in the United States also contributed to growth. In India, remittances grew by about 4.6% in 2021 to reach $ 87 billion. Pakistan experienced another record year of remittances with growth of 26% and levels reaching $ 33 billion in 2021. In addition to common drivers, the Government’s Remittances Initiative to Pakistan to support transmission through formal channels attracted significant flows. In addition, the fragile situation in Afghanistan emerged as an unexpected cause of remittances in 2021 for Afghan refugees in Pakistan as well as families in Afghanistan. Remittances are the main source of foreign exchange for the region, with revenues more than twice as large as FDI in 2021. Remittance costs: South Asia has the lowest average costs of all countries. regions of the world at 4.6%. But sending money to South Asia through official channels is expensive compared to the informal channels that remain popular. Cost-cutting policies would create a win-win situation welcomed by migrants and governments in South Asia.
Remittances to sub-Saharan Africa resumed growth in 2021, increasing 6.2% to $ 45 billion. Nigeria, the region’s largest recipient, is seeing a moderate rebound in remittances, in part due to the growing influence of policies aimed at channeling inflows through the banking system. Countries where the value of remittances as a percentage of GDP is significant are The Gambia (33.8%), Lesotho (23.5%), Cabo Verde (15.6%) and Comoros (12.3%) %). In 2022, remittances are forecast to increase 5.5% due to the continued economic recovery in Europe and the United States. Remittance costs: Costs were on average 8% in the first quarter of 2021, up from 8.9% a year ago. Although intra-regional migration accounts for over 70 percent of cross-border migration, the costs are high due to low amounts of formal flows and the use of black market exchange rates.