Mon | May 16, 2022

Remittances to region projected to reach record high

Published:Thursday | November 18, 2021 | 3:41 PM
Overall, the World Bank said remittances to low-and-middle-income countries are projected to have grown a strong 7.3 per cent to reach $589 billion in 2021.

WASHINGTON, 2021 – Remittance flows into Latin America and the Caribbean will likely reach a new high of US$126 billion in 2021, registering a solid advance of 21.6 per cent compared to 2020, according to estimates from the World Bank's Migration and Development Brief released on Thursday.

Growth was exceptionally strong due to economic recovery in the United States and additional factors, including migrants' responses to natural disasters in their countries of origin and remittances sent from home countries to migrants in transit.

Mexico, the region's largest remittance recipient, received 42 per cent ($52.7 billion) of the regional total.

The value of remittances as a share of GDP exceeds 20 per cent for several smaller economies: El Salvador (26.2 per cent), Honduras (26.6 per cent), Jamaica, (23.6 per cent), and Guatemala (18 per cent).

The World Bank said the adverse effects of COVID-19 and Hurricanes Grace and Ida contributed to higher remittance flows to Mexico and Central America.

“Other main drivers include recovery in employment levels and fiscal and social assistance programmes in hosting countries, particularly the United States,” it added.

In 2022, remittances are expected to grow at 4.4 per cent, mainly due to a weaker growth outlook for the United States.

Overall, the World Bank said remittances to low-and-middle-income countries are projected to have grown a strong 7.3 per cent to reach $589 billion in 2021.

This return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 percent despite a severe global recession due to COVID-19, it noted.

“The immediate impact of the crisis on remittance flows was very deep. The surprising pace of recovery is welcome news. To keep remittances flowing, especially through digital channels, providing access to bank accounts for migrants and remittance service providers remains a key requirement. Policy responses also must continue to be inclusive of migrants especially in the areas of access to vaccines and protection from underpayment,” said Dilip Ratha, lead author of the brief and head of the Global Knowledge Partnership on Migration and Development.

For a second consecutive year, remittance flows to low-and-middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).

The World Bank said this underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants' countries of origin.

“Remittance flows from migrants have greatly complemented government cash transfer programmes to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.

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