Officially recorded remittance flows to low- and middle-income countries (LMICs) reached in 2023 an estimated $656 billion, according to the World Bank‘s latest Migration and Development Brief. This represents a modest 0.7 percent growth rate, reflecting large variances in regional growth. However, remittances remained a crucial source of external finance for developing countries in 2023, boosting the current accounts of several countries facing food insecurity and debt issues. In 2023, remittances surpassed foreign direct investment (FDI) and official development assistance (ODA).
Projections for faster growth in 2024, but risks remain
Looking ahead, remittances to LMICs are expected to grow at a faster rate of 2.3 percent in 2024, although this growth will be uneven across regions. Potential downside risks to these projections include weaker than expected economic growth in high-income migrant-hosting countries and volatility in oil prices and currency exchange rates.
Managed migration and skill development
“Migration and resulting remittances are essential drivers of economic and human development,” said Iffath Sharif, global director of the Social Protection and Jobs Global Practice at the World Bank. “Many countries are interested in managed migration in the face of global demographic imbalances and labour deficits on the one hand, and high levels of unemployment and skill gaps on the other. We are working on partnerships between countries sending and receiving migrants to facilitate training, especially for youth, to get the skills needed for better jobs and income at home and in destination countries.”
Regional remittance trends
Regional remittance trends show varying patterns, with remittances to East Asia and Pacific (excluding China) growing by 4.8 percent to $85 billion, while those to Europe and Central Asia fell by 10.3 percent to $71 billion. In Latin America and the Caribbean, remittance growth slowed to 7.7 percent in 2023, reaching $156 billion. Remittances to the Middle East and North Africa fell by 15 percent to $55 billion, while those to South Asia grew by 5.2 percent in 2023, reaching $186 billion. Remittances to Sub-Saharan Africa reached $54 billion in 2023, a slight decrease of 0.3 percent.
Leveraging remittances for development
“The resilience of remittances underscores their importance for millions of people,” said Dilip Ratha, lead economist and lead author of the report. “Leveraging remittances for financial inclusion and capital market access can enhance the development prospects of recipient countries. The World Bank aims to reduce remittance costs and facilitate formal flows by mitigating political and commercial risks to promote private investment in this sector.”
Read more: UAE residents may soon have to pay more for remittances
Reducing the cost of sending remittances
Sending remittances remains too costly, with the global average cost of sending $200 at 6.4 percent of the amount being sent in the fourth quarter of 2023, slightly up from 6.2 percent a year earlier and well above the SDG target of 3 percent. Digital remittances had a lower cost of 5 percent, compared with 7 percent for non-digital methods, highlighting the benefits of technological advancements in reducing the financial burden on migrants.
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