Global remittances grew by just 0.7% in 2023 to reach around $656 billion, according to figures presented this Wednesday by the World Bank. The increase in this crucial capital in the recipient countries has remained below what the international organization estimated at the end of that same year. In addition, it represents a significant moderation with respect to the strong increase in capital remittances by emigrants to low- and middle-income countries in 2021 and 2022. However, remittances directed to Latin America and the Caribbean grew at a rate of 8% with shipments of about 155,000 million dollars, thanks mainly to the strength of the United States labor market. The 66,200 million dollars that migrants sent to their families make Mexico the country that receives the most money in the region and the second in the world behind India, which received 120 billion dollars. Shipments to Mexico grew by 7.8% in 2023. In Latin America, the 44.5% growth in remittances to Nicaragua contrasts, while those from Argentina fell by 13.4%. The World Bank expects that next year remittances will grow at a rate of 2.7% in the region. Despite the data from Latin America, the global slowdown is the result of strong regional variations that will remain in place. 2024 and 2025, years for which a recovery of 2.3% and 2.8% respectively is expected in global terms. In two years, shipments are expected to total $690 billion, although the World Bank believes there are risks that this forecast will not materialize. This organization pays special attention to the economic stability of the countries where migrants settle, the escalation of war conflicts in the Middle East and problems in energy or financial markets that could once again put upward pressure on inflation and reduce growth.In South Asia, the 168 billion that their emigrants sent, especially to India, represented an increase of 5.2%, below the 12% rate of the previous year. But it is an increase that contrasts with the 15% drops in remittances in the Middle East and North Africa regions and as well as those destined for Europe and Central Asia due to the effects of Russia's war in Ukraine. These flows of money were affected last year by a combination of cyclical and structural factors in the countries from which they are issued and received. Among these factors, the World Bank explains that the most important are the labor market for migrants in the nations of establishment, their immigration policies, transit routes and their employment prospects in addition to currency exchanges. In this sense, The recovery of employment after the covid in high-income countries has been one of the drivers of remittances, particularly because the job improvement has reached immigrants sooner than the natives of the countries. In fact, the strength of remittances to Latin America and the Caribbean has benefited from a labor market in the United States close to what is considered full employment. The main destinations of the estimated 302 million international migrants in 2023 are the United States, Germany, Saudi Arabia, Russia and the United Kingdom. India, Ukraine, China, Mexico and Venezuela are, in this order, the main countries of origin and the corridor from Mexico to the United States is the busiest in the world, followed by the nations bordering Europe. The number of refugees and asylum seekers due to war, violence and persecution has reached 50 million people
Crucial money for development
Despite its lower growth, last year the sending of remittances by the migrant population was crucial for many developing economies. Currently and thanks to migratory flows, the capital sent to the countries of origin exceeds foreign direct investment and development aid. It is expected that direct investment, which has been on the decline since 2012, will continue in this trend and with this the economic weight of remittances and migration will expand in much of the world. These shipments not only have a positive impact on the current accounts of recipient countries but also provide relief for food insecurity and debt. The most extreme case is the island of Tonga, where this money that comes from migrants represents 41% of the GDP. Dilip Ratha, chief economist and author of this World Bank remittances report, explains that leveraging remittances “for financial inclusion and capital market access can improve the development prospects of recipient countries.”
Shipping still expensive
Thanks to technology and the development of the Internet, many migrants can talk to their families for free, but sending money to them is still very expensive because there is little competition between providers and inadequate cross-border interoperability, according to the World Bank, which admits that the data is not entirely complete because of the existence of informal channels such as carrying money in hand when migrants return to their countries.
An immigrant sends money to Cuba from a Western Union branch, in Miami (Florida), in a file photograph. Joe Raedle (Getty Images)Despite its importance for families and low- or middle-income countries, the cost of a $200 transaction in the fourth quarter of 2023 was 6.4% ($12.8). Where it is most expensive to send this money is to the area of Sub-Saharan Africa, countries like Gambia, Lesotho or Cape Verde. An average commission rate of 7.9% is applied to these countries (almost 16 dollars for every 200 sent). In remittances to Latin America the average cost was 5.9% (11.8 dollars for sending 200 dollars ). The commissions in this region remained the same as they were a year ago but in global terms they have not only increased slightly but are also further away from the UN sustainable development goal of 3%. World Bank economist Dilip Ratha says that the objective of this institution is “to reduce costs by facilitating formal flows, reducing political and commercial risks that promote private investment in the sector.” The costs are much lower (5%) in digital transactions than those that are not (7%). Banks continue to be the most expensive channels for these shipments with an average cost of 12%, which drops to 7.7% if the transaction is made at a post office. Transfer operators usually charge around 5.5% and mobile operators, one percentage point less. They are the cheapest but according to data managed by the World Bank they only represent 1% of the total volume.