KUALA LUMPUR (June 27): After a period of strong growth from 2021 to 2022, officially recorded remittance flows to low- and middle-income countries (LMICs) moderated to an estimated US$656 billion (RM3.1 trillion) in 2023, said the World Bank.
In its latest Migration and Development Brief, released Wednesday, the bank said the modest 0.7% growth rate reflects large variances in regional growth, but remittances remained a crucial source of external finance for developing countries in 2023, bolstering the current accounts of several countries grappling with food insecurity and debt issues.
It said that in 2023, remittances surpassed foreign direct investment (FDI) and official development assistance (ODA).
Looking ahead, the report said remittances to LMICs are expected to grow at a faster rate of 2.3% in 2024, although this growth will be uneven across regions.
It said potential downside risks to these projections include weaker than expected economic growth in high-income migrant-hosting countries and volatility in oil prices and currency exchange rates.
World Bank global director of social protection and jobs global practice Iffath Sharif said migration and resulting remittances are essential drivers of economic and human development.
“Many countries are interested in managed migration in the face of global demographic imbalances and labour deficits on the one hand, and high levels of unemployment and skill gaps on the other.
“We are working on partnerships between countries sending and receiving migrants to facilitate training, especially for youth, to get the skills needed for better jobs and income at home and in destination countries,” said Iffath.
In 2023, remittance flows increased most to Latin America and the Caribbean (7.7%), followed by South Asia (5.2%), and East Asia and Pacific (4.8%, excluding China).
Sub-Saharan Africa saw a slight decline of 0.3%, while the Middle East and North Africa experienced a nearly 15% drop. Europe and Central Asia saw a 10.3% fall.
Meanwhile, lead economist and lead author of the report Dilip Ratha said the resilience of remittances underscores their importance for millions of people.
“Leveraging remittances for financial inclusion and capital market access can enhance the development prospects of recipient countries.
“The World Bank aims to reduce remittance costs and facilitate formal flows by mitigating political and commercial risks to promote private investment in this sector,” said Ratha.
According to the report, remittances to South Asia grew by 5.2% in 2023, reaching US$186 billion, tapering off from a 12% increase in 2022.
Growth was driven by India, which saw a 7.5% increase to US$120 billion, supported by strong labour markets in the US and Europe.
Reduced outflows from the Gulf Cooperation Council countries, impacted by declining oil prices and production cuts, contributed to the slowdown.
Flows are projected to grow by 4.2% in 2024. The cost of sending US$200 to the region averaged 5.8%, up from 4.2% a year before.