Migration and Remittances Unit World Bank
November 8, 2010
Outlook for Remittance Flows 2011-12 Recovery after the crisis, but risks lie ahead By Sanket Mohapatra, Dilip Ratha and Ani Silwal1
Officially recorded remittance flows to developing countries are estimated to increase by 6 percent to $325 billion in 2010. This marks a healthy recovery from a 5.5 percent decline registered in 2009. Remittance flows are expected to increase by 6.2 percent in 2011 and 8.1 percent in 2012, to reach $374 billion by 2012. (Note that the World Bank’s definition of developing countries has changed: Poland, which is estimated to have received $9.1 billion in 2010, is no longer classified as a developing country.) This outlook for remittance flows, however, is subject to the risks of a fragile global economic recovery, volatile currency and commodity price movements, and rising anti-immigration sentiment in many destination countries. From a medium-term view, three major trends are apparent: (a) a high level of unemployment in the migrant-receiving countries has prompted restrictions on new immigration; (b) the application of mobile phone technology for domestic remittances has failed to spread to cross-border remittances; and (c) developing countries are becoming more aware of the potential for leveraging remittances and diaspora wealth for raising development finance.
Recent trends and outlook for 2011-12 Newly available data show that officially recorded remittance flows to developing countries fell to $307 billion in 2009, registering a 5.5 percent decline (table 1).2 The decline in remittances during the global financial crisis was modest compared to a 40 percent decline in foreign direct investment (FDI) between 2008 and 2009 and a 80 percent decline in private debt and portfolio equity flows from their peak in 2007 (figure 1). Thus, remittance flows became more important as a source of external financing in many developing countries. Recorded remittance flows to developing countries are estimated to have fully recovered to the pre-crisis level of $325 billion in 2010. In line with the World Bank’s outlook for the global economy, remittance flows to developing countries are expected to increase by 6.2 percent in 2011 and 8.1 percent in 2012, to reach $346 billion in 2011 and $374 billion in 2012 respectively.3 The resilience of remittances during the global economic crisis of 2008-09, as we have highlighted in previous Briefs, is due to many factors (box 1). Two important points are worth reiterating. While new migration flows fell significantly in many corridors due to the crisis, the net flow of migration remained positive and the stock of existing migrants did not fall, 4 lending persistence to remittance 1
We would like to thank Hans Timmer for extensive discussions, Sonia Plaza, Elina Scheja and Emiko Todoroki for useful comments on an earlier draft, and Uranbileg Batjargal for assistance with updating remittances data. 2 For comparison with aggregate data published in earlier Briefs, it should be noted that Poland, which is estimated to have received $9.1 billion in 2010, has been reclassified by the World Bank as a high-income country. 3 The forecasting methodology is based on estimates of bilateral remittances and the World Bank’s outlook for the global economy. This is described in “Forecasting migrant remittances during the global financial crisis” by Mohapatra and Ratha, Migration Letters, October 2010. 4 Migrant stocks in the US have plateaued since 2008 while illegal border crossings along the Mexico-US border are significantly below pre-crisis levels, according to a BBC-MPI report “Migration and Immigrants Two Years after the Financial Collapse”
flows. Existing migrants did not return to extent desired by many countries (e.g., Spain and Japan) despite incentives offered to induce return migration.5 Also countries that had migrants in the GCC...