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Despite the large windfall in remittance earnings in India and Nepal, the World Bank (WB) has forecast that the remittance flow will decline in Bangladesh and the rest of South Asia, primarily due to the adverse effects of commodities prices.
WB observed in its most recent report, “Remittances Brave Global Headwinds Special Focus: Climate Migration,” that while Nepal saw an increase of 4% and India had a gain of 12%, the remaining South Asian countries as a whole saw a decline of 10%.
According to the global lender’s prediction, Bangladesh will receive $21 billion in remittances this year, a decrease of $1 billion from 2021.
According to the report, the World Bank predicted growth in remittances to South Asia of 3.5% in order to reach $163 billion in 2022, a significant drop from the 6.7% increase in 2021 but benefiting from good performance in India and Nepal.
According to the World Bank prediction, among low and middle-income countries the eight top recipient countries for remittances in 2022 are expected to be India, Mexico, China, Philippines, Egypt, Pakistan, Bangladesh and Nigeria.
India, established a benchmark of $100 billion in the year, followed by Mexico with a tally of $60 billion (which replaced China in the second position in 2021).
Other top remittance earners are China ($51 billion), the Philippines ($38 billion), Egypt ($32 billion), Pakistan ($29 billion), Bangladesh ($21 billion) and Nigeria ($21 billion).
The easing of remittance returns reflects the discontinuation of the special incentives some regional governments had introduced to attract flows during the pandemic, as well as a deterioration of domestic conditions in some source countries (Bangladesh, Pakistan, and Sri Lanka).
The preference of migrants for informal, as opposed to formal means of currency exchange and money transmission, also reduces official remittance flows. Increased wages and a robust labour market in the United States and other OECD countries helped remittances to India.
Governments in the Gulf Cooperation Council (GCC) destinations ensured low inflation through direct assistance programs that safeguarded migrant workers’ ability to remit.
The bank in its latest report, “Remittances Brave Global Headwinds Special Focus: Climate Migration”, noted that while remittances exceeded pre-pandemic levels, they fell compared to 2021, exacerbating a balance of payments crisis.
It said, remittances to low- and middle-income countries (LMICs) increased by an estimated 5% in 2022, to $626 billion.
However, downside risks remain as migration flows are rebounding from the pandemic-induced decline of 2020–21.
Refugee flows have also increased, especially due to the Russia-Ukraine war.
In a special feature, the brief notes that climate change will increase migration, mostly within countries.
The poorest are likely to be most affected and national and regional development strategies need to be viewed through a climate migration lens.
Considering the global nature and expected trajectory of migration, the case for creating a global concessional financing facility for migration remains strong.
The report also stated that the growth of global remittance flows is expected to be 4.9% in 2022.
Remittance flows to developing regions were shaped by several factors in 2022, besides the determination of migrants to help their families back home, a gradual reopening of various sectors in host countries’ economies expanded many migrants’ income and employment situation.
On the other hand, rising prices adversely affected migrants’ real incomes and remittances.
In Russia, rising oil prices and continued demand for migrant workers increased the flow of remittances to Central Asian countries. The appreciation of the ruble against the US dollar translated into higher value, in US dollar terms, of outward remittances from Russia to Central Asia.
In Europe, a weaker Euro had the opposite effect, reducing the US dollar valuation of remittance flows to North Africa and elsewhere.
Remittances received by migrants in transit contributed to strong flows in Mexico and Central America.
Finally, in many countries that experienced scarcity of foreign exchange and multiple exchange rates, officially recorded remittance flows declined as flows shifted to alternative channels offering better exchange rates.
Growth in remittances is expected to moderate to 2% in 2023, as GDP growth in high-income countries continues to be slow.
Downside risks remain substantial, including a further deterioration of the war in Ukraine, volatile oil prices and currency exchange rates, and a deeper-than-expected downturn in major high-income countries.
(DT)
