PRESS RELEASE

Remittances to Developing Countries Resilient in the Recent Crisis

November 8, 2010

WASHINGTON, DC, November 8, 2010 – Remittances to developing countries were a resilient source of external financing during the recent global financial crisis, with recorded flows expected to reach $325 billion by the end of this year, up from $307 billion in 2009, according to the World Bank’s latest Migration and Remittances Factbook 2011. Worldwide, remittance flows are expected to reach $440 billion by the end of this year.

The World Bank estimates that, after recovering by the end of this year, recorded remittances to developing countries will rise further in 2011 and 2012, possibly exceeding $370 billion in two years’ time.

“Remittances are a vital source of financial support that directly increases the income of migrants’ families,” said Hans Timmer, director of development prospects at the World Bank. “Remittances lead to more investments in health, education, and small business. With better tracking of migration and remittance trends, policy makers can make informed decisions to protect and leverage this massive capital inflow which is triple the size of official aid flows,” Timmer said.

The top remittance sending countries in 2009 were the United States, Saudi Arabia, Switzerland, Russia, and Germany. Worldwide, the top recipient countries in 2010 are India, China, Mexico, the Philippines, and France. As a share of GDP, however, remittances are more significant for smaller countries—more than 25 percent in some countries.

While high-income countries remain the main source of remittances, migration between developing countries is larger than that from developing countries to high-income countries belonging to the Organisation for Economic Cooperation and Development (OECD).

Regionally, there is significant variation across developing regions, with larger-than-expected falls in remittances to Europe and Central Asia[1], Latin America and the Caribbean, the Middle East and North Africa, and Sub-Saharan Africa regions in 2009. Flows to South Asia in 2009 grew more than expected, and those to East Asia and Pacific rose modestly.

“Remittances in 2008 and 2009 became even more of a lifeline to poor countries, given the massive decline in private capital flows sparked by the crisis,” said Dilip Ratha, manager of the migration and remittance unit at the World Bank. “However, high unemployment is prompting many migrant-receiving countries to tighten immigration quotas, which would probably slow the growth of remittance flows. Also uncertain currency movements can have unpredictable effects on remittance flows,” Ratha added.

In addition to crisis-related risks, there are major structural and regulatory changes in the global remittance market. Regulations to combat financial crime have become a roadblock to the adoption of new mobile money transfer technologies for cross-border remittances. “There is urgent need to reassess regulations for remittances through mobile phones and mitigate the operational risks,” Ratha said.

According to the Factbook 2011, the top migrant destination country is the United States, followed by Russia, Germany, Saudi Arabia, and Canada. The top immigration countries relative to population are Qatar (87 percent), Monaco (72 percent), the United Arab Emirates (70 percent), Kuwait (69 percent), and Andorra (64 percent). Mexico–United States is expected to be the largest migration corridor in the world this year, followed by Russia–Ukraine, Ukraine–Russia, and Bangladesh–India.

Table 1: Outlook for remittance flows to developing countries, 2011-12

  2007 2008 2009 2010e 2011f 2012f
$ billion            
Developing countries 278 325 307 325 346 374
East Asia and Pacific 71 85 86 91 98 106
Europe and Central Asia 39 46 35 37 39 43
Latin America and Caribbean 63 65 57 58 62 69
Middle-East and North Africa 32 36 34 35 37 40
South Asia 54 72 75 83 87 92
Sub-Saharan Africa 19 21 21 21 22 24
Low-income countries 17 22 22 24 26 29
Middle-income countries 262 303 285 301 319 345
World 385 443 416 440 464 499
Growth rate (%)            
Developing countries 22.8% 16.7% -5.5% 6.0% 6.2% 8.1%
East Asia and Pacific 23.7% 20.2% 0.3% 6.4% 7.2% 8.5%
Europe and Central Asia 38.5% 16.5% -22.7% 3.7% 6.5% 10.4%
Latin America and Caribbean 6.9% 2.2% -12.0% 2.0% 7.6% 10.0%
Middle-East and North Africa 21.5% 11.8% -6.3% 5.3% 4.5% 6.7%
South Asia 27.1% 32.5% 4.5% 10.3% 5.1% 6.3%
Sub-Saharan Africa 46.7% 14.9% -3.7% 4.4% 4.5% 6.7%
Low-income countries 27.6% 32.5% 2.4% 8.2% 8.7% 9.0%
Middle-income countries 22.5% 15.7% -6.0% 5.8% 6.0% 8.0%
World 21.1% 15.1% -6.1% 5.8% 5.4% 7.5%

e= estimate; f=forecast Source: World Bank staff estimates based on data from IMF Balance of Payments Statistics Yearbook 2009 and data releases from central banks, national statistical agencies, and World Bank country desks.

[1] Since 2009, Europe and Central Asia’s developing region excludes Poland which has been reclassified as a high-income country. The trends analysis accounts for the reclassification of Poland.

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PRESS RELEASE NO:
2011/168/DEC