Remittances to low- and middle-income countries are projected to grow by 2.3% in 2024, but with variations across regions.
Officially recorded remittance flows to low- and middle-income countries (LMICs) are estimated to reach $656 billion in 2023, according to a new study. World BankThe latest Migration and Development Profile of . It shows a modest growth rate of 0.7%, reflecting the wide variation in regional growth. However, remittances remained an important source of external financing for developing countries in 2023, boosting the current account balances of several countries facing food insecurity and debt problems. In 2023, remittances surpassed foreign direct investment (FDI) and official development assistance (ODA).
Growth predicted to accelerate in 2024, but risks remain
Going forward, remittances to low- and middle-income countries are projected to grow at a higher rate of 2.3 percent in 2024, although this growth rate varies across regions. Potential downside risks to these projections include weaker-than-expected economic growth in high-income migrant-receiving countries and volatility in oil prices and exchange rates.
Managed transition and skills development
“Migration and the associated remittances are important drivers of economic and human development,” said Ifas Sharif, Global Director of the World Bank’s Social Protection and Employment Global Practice. “Faced with global population imbalances and labor shortages on the one hand, and high unemployment and skills gaps on the other, many countries are turning to managed migration. We are building partnerships between sending and receiving countries to facilitate training, especially for young people, to help them gain the skills they need to get better jobs and incomes in their home and destination countries.”
Remittance trends by region
Regional remittance trends are mixed, with remittances to East Asia and the Pacific (excluding China) growing 4.8% to $85 billion, while those to Europe and Central Asia are expected to fall 10.3% to $71 billion. In Latin America and the Caribbean, growth in remittances is expected to slow to 7.7% in 2023, reaching $156 billion. Remittances to the Middle East and North Africa are expected to fall 15% to $55 billion, while those to South Asia are expected to grow 5.2% in 2023, reaching $186 billion. Remittances to Sub-Saharan Africa will reach $54 billion in 2023, a slight decrease of 0.3%.
Leveraging remittances for development
“The resilience of remittances underscores their importance to millions of people,” said Dilip Ratha, lead economist and lead author of the paper. Reports“Leveraging remittances for financial inclusion and access to capital markets can enhance the development prospects of recipient countries. The World Bank aims to reduce the cost of remittances by mitigating political and commercial risks, encourage formal capital flows, and spur private investment in the sector.”
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Reduce remittance costs
The cost of sending remittances remains high, with the global average cost of sending $200 standing at 6.4% of the amount sent in the fourth quarter of 2023, up slightly from 6.2% the previous year and well above the SDG target of 3%. The cost of digital remittances is lower at 5% compared to 7% for non-digital remittances, highlighting the benefits of technological advances in easing the financial burden on migrants.
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