In 2023, remittances to low and middle-income countries reached an impressive $669 billion, bolstered by the resilience of labor markets in advanced economies and Gulf Cooperation Council (GCC) countries. These funds are vital for migrants sending money back home. Latin America and the Caribbean saw an 8% increase in remittances, South Asia 7.2%, East Asia and the Pacific 3%, and Sub-Saharan Africa 1.9%. Conversely, the Middle East and North Africa experienced a 5.3% decline for the second consecutive year, primarily due to reduced flows to Egypt. Remittances to Europe and Central Asia also decreased by 1.4%, a significant shift from the 18% boom in 2022. The United States remains the top source of migrant remittances.
The leading recipients in 2023 are India ($125 billion), Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion), and Egypt ($24 billion). Remittances are particularly vital for economies like Tajikistan, Tonga, Samoa, Lebanon, and Nicaragua, where they constitute a substantial portion of GDP. This money is crucial for financing current account deficits and public finances. However, the global economic downturn is expected to slow the growth of remittances to low and middle-income countries to 3.1% in 2024.
Despite the significance of these funds, the World Bank’s database on international money transfer costs reveals high fees, with an average cost of 6.2% for sending $200. Banks are the most expensive intermediaries, followed by post offices, money transfer operators, and mobile service providers. Dilip Ratha, an economist and the report’s lead author, notes that remittances to developing countries have surpassed foreign direct investment and public development aid, and the gap is widening. Sub-Saharan Africa is expected to see a 1.9% increase in remittances in 2023, reaching $54 billion. Significant increases are projected for Mozambique, Rwanda, and Ethiopia. Nigeria remains a major recipient, with other countries like Ghana and Kenya also seeing increases. However, fixed exchange rates and capital controls often divert funds from official channels to informal ones.
Remittances to the Middle East and North Africa are declining, mainly due to a significant drop in flows to Egypt. However, increased remittances to Maghreb countries partly offset this decline. South Asia saw a 7.2% increase in remittances in 2023, with India receiving a significant share. The growth is driven by tight labor markets in the U.S. and Europe and reduced inflation in high-income countries. This growth is expected to slow down in 2024.
Latin America and the Caribbean are experiencing robust growth in remittances, particularly to Mexico and Nicaragua. However, this growth is expected to decelerate in 2024. Remittances to Europe and Central Asia have decreased, affected by the high levels in 2022 and the weakening flows to Russia and Ukraine. The devaluation of the Russian ruble has also impacted the value of money sent from Russia. East Asia and the Pacific regions have seen an estimated 3% increase in remittances, with significant growth excluding China. The Philippines, with its diverse diaspora, has contributed to this growth. Growth is expected to continue, albeit at a slower rate, in 2024. In summary, while remittances continue to be a critical lifeline for many countries, the high costs of sending money and the economic downturn pose challenges to this vital flow of funds.
