A recent report from the World Bank indicates that remittances to South Asia are expected to experience a slowdown in growth in 2023. After a robust growth of 12.2 percent in 2022, the region is projected to see a growth rate of 7.2 percent in the coming year. This regional average is influenced by the varying growth rates in different countries within South Asia.
Countries such as Bangladesh, India, Nepal, and Sri Lanka are expected to continue experiencing strong growth in remittances. However, other countries like Afghanistan, Bhutan, the Maldives, and Pakistan are projected to have lower growth rates.
The key factors contributing to the growth in remittances in 2023 include the historically tight labor market in the United States, increased employment growth in Europe due to worker retention programs, and lower inflation in high-income countries.
The World Bank attributes the anticipated slowdown in remittance growth from the Gulf to Asia, Egypt, and other countries in 2023 to the economic downturn in Saudi Arabia and Kuwait. These countries are expected to experience a decline in remittance growth from 8 percent to 1.5 percent. Additionally, other Gulf countries are projected to have a 50 percent drop in growth due to declining oil prices and OPEC Plus production cuts.
The report also highlights the significant role of the United Arab Emirates (UAE), Saudi Arabia, Kuwait, Oman, and Qatar in remittance flows to India. These countries collectively account for 11 percent of total remittances to India.
Furthermore, the report reveals that remittance growth to low- and middle-income countries is projected to slow down to 3.8 percent in 2023, following an average growth rate of around 9 percent in the previous two years.
Surpassing expectations outlined in the Migration and Development Brief of June 2023, the value of remittances to low- and middle-income countries is estimated to reach $669 billion. The report attributes this success to the resilient labor markets in OECD and Gulf Cooperation Council countries, which have supported migrants’ ability to send money back to their home countries.
However, the World Bank expresses concern about the potential risk of a decline in migrants’ real income in 2024 due to global inflation and low growth expectations. While remittance flows to low- and middle-income countries are expected to reach $669 billion in 2023, there are uncertainties about the future.
The report highlights the varying growth rates of remittance flows to different regions. Latin America and the Caribbean experienced an 8 percent increase, while East Asia and the Pacific saw a 3 percent growth. Sub-Saharan Africa, on the other hand, had a modest growth rate of 1.9 percent.
However, the Middle East and North Africa region experienced a reduction in funds transferred for the second consecutive year. Financial flows to Egypt significantly decreased, contributing to the overall decline in remittance flows to the region.
Remittance flows to Europe and Central Asia also decreased by 1.4 percent after a notable 18 percent increase in 2022. The World Bank’s Global Remittance Rates Database indicates that remittance costs remain high, with an average cost of 6.2 percent for sending $200 in the second quarter of 2023.
Compared to the previous year, sending money to all regions, including the Middle East (excluding North Africa), became more expensive. Among the channels for sending remittances, banks remain the most expensive option, with an average cost of 12.1 percent. Post offices follow with a cost of 7 percent, while money transfer offices and mobile operators have costs of 5.3 percent and 4.1 percent, respectively.
Overall, the World Bank’s report provides insights into the expected trends in remittance growth in South Asia and other regions. It highlights the factors influencing these trends and raises concerns about the potential risks for migrants’ real income in the future.
Source: TimesKuwait
