Global remittances to low- and middle-income countries in 2021 are projected to have increased 7.3%, the World Bank said in a report Wednesday, marking a stronger-than-expected growth.
This year’s figure is estimated to reach $589 billion, compared with $549 billion last year. For 2022, remittances are again expected to grow, but at a more tame 2.6% over 2021.
While remittances were initially estimated to crater in 2020, as the COVID-19 pandemic sent the world into recession, the actual decline was 1.7%, according to the latest data.
The cash flows in 2021 were aided by the sharp economic recovery in the United States and Europe, as well as higher oil prices benefiting regions such as the Gulf.
Cost of capital: The World Bank noted that the cost of sending money around the world “continued to be too high,” as it averaged 6.4% for a $200 transfer. The Sustainable Development Goal set a target of 3%. The most expensive region was sub-Saharan Africa at 8%, while transferring money to South Asia cost 4.6%.
Where’s it going: Many countries are highly dependent on remittances and for governments in low-income countries, the cash flows from abroad were a cushion during the pandemic.
In Tonga, remittances are 43.9% as a share of gross domestic product, while in El Salvador and Honduras, the flows are about 26% each. Mexico took in $52.7 billion, the largest haul in the Latin America region. Egyptians abroad sent home $33 billion. In sub-Saharan Africa, Nigeria receives the most inflows.
Globally, the top recipients in terms of dollar value are India and China, followed by the Philippines.
China’s impact: In the East Asia and Pacific region, remittances fell by 4%. However, excluding China, remittances to the region actually gained 1.4%.