Trends in migrant money remittances

| Monday, November 10th, 2014

Migrant Worker Remittances

Global migrant worker remittances are becoming an increasingly important driver of international money transfer. Remittances typically consist of money transfers sent by migrant workers and other individuals to their personal contacts abroad, but also include the compensation of foreign employees, including seasonal or other short-term workers. The annual volume of global remittances more than doubled in the last decade to reach US$551bn in 2013, up from US$192bn received in 2003. The World Bank’s latest forecasts, from October, see that remittances will rise to a record level of US$667bn by 2016, of which 75% will flow to developing countries.

Remittances tend to consist of lower-value, frequent money transfers sent home to support loved ones, predominantly for consumption rather than investment. As such, they have become a major source of funds for economic development and household income, exceeding global aid budgets. The United Nations (UN) estimates that the number of migrants living outside of their home country has increased by 50% since 1990 to reach 231.5bn in 2013, and it will only continue to grow - fuelling an ever-expanding pool of remittances. In some cases such as India, remittance inflows exceed those of foreign direct investment (FDI). In others, international money transfers for investment, trade – particularly by and for small and medium businesses (SMEs) – as well as those made by high net-worth individuals are comparable in volume. The World Bank does not include such transfers, but their developmental impact is no less significant as they support investment and job-creation.

#North to South

In the past, migration flows were dominated by movement from developing countries (referred to as the “global South”) to high-income, developed economies (“global North”). North America and Europe were two largest destinations for migrants from the South, which means that US dollar and the euro were most the frequently exchanged currencies as part of global remittance flows. However, the balance has begun to shift in the last decade, and understanding the direction that overseas money transfers will take in the future requires a closer look at global migration trends.

While North-South corridors continue to represent the majority of migration and associated money transfer flows, destination countries are becoming more diverse. In particular, key economies in Asia and the Gulf have emerged as major attractors of both high- and low-skilled migrants in the last decade. UN migration data show that developed countries still gained the largest number of new migrants in absolute terms between 2000-10; among these, Europe and North America added another 13m and 10.8m migrants over the period. However, the migrant stock in developing regions, particularly in Asia and Africa, has increased at a faster rate than in the North since 2000, which will have a strong impact on remittance flows in the future.

Remittance volumes

According to the World Bank, the US was the single largest source of remittances sent worldwide in 2013, amounting to over $52bn. It was followed by Russia (US$37.2bn), Saudi Arabia (US$35bn) and Switzerland (US$30.1bn). Several other economies in Europe (Germany, France, Luxembourg and the Netherlands) and in the Gulf (Kuwait and Qatar) rounded out the list of the top 10 sources of remittances. Just a decade ago, in 2003, Saudi Arabia and South Korea were the only countries among the top 10 that were not located in North America or Europe.

India currently ranks 15th on the list in terms of the total volume of outgoing remittances (US$6.4bn in 2013) and China 21st (US$4.4bn). However, the World Bank notes that India and China together accounted for nearly one-third of remittances sent to other developing countries in 2013, demonstrating their importance in South-South migration and foreign currency transfers. As higher numbers of migrants choose to relocate to fast-growing economies in the global South, the currencies and sending- and receiving-countries involved in global remittance flows will likely continue to diversify.

Sources:

  • UN International Migration Report 2013
  • World Bank Bilateral Remittance Matrix 2012
  • World Bank Migration and development brief 23, October 2014
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