BASSETERRE, St. Kitts – FOLLOWING an International Diaspora and Development Conference that ended on July 14, the World Bank issued a new migration and remittances brief, which reveal that remittance flows to developing countries are expected to decline by 7.3 percent.
The predicted decline would bring such remittance flows from US$328B to an estimated US$304B by the end of this fiscal year. According to the World Bank, remittances are “relatively resilient” because, while new migration flows have declined, the number of migrants living overseas has been relatively unaffected by the crisis.
However, the predicted decline may be further worsened due to the uncertainty about the length and depth of the current crisis, unpredictable movements in exchange rates, and the possibility that immigration controls may be tightened further in major destination countries.
According to Director of the World Bank’s Development Prospects Group Hans Timmer, “There is a risk that rising unemployment will trigger further immigration restrictions in major destination countries. Such restrictions would curb remittances more than forecast and would slow the global recovery in the same way as protectionism against trade would endanger a global upturn.”
Trends in the reduction in remittances have been recognised since the last quarter of 2008. However, following the downward revision of the World Bank’s forecast of global economic growth, the new update (2009-2011) shows an adverse impact on remittance flows. The updated report showed specific trends in countries and across broader regional groups.
Closer to home, according to the Wold Bank, remittance flows to Latin America and the Caribbean have been “falling in large part because of a slowdown in the US construction sector”. The new forecasts show a 6.9 percent decline in remittances for the Latin America and Caribbean region.
Sub-Saharan Africa has seen an 8.3 percent slowdown in remittance flows while countries like India, China and Mexico have maintained the strongest remittance flows. At the top of the list, smaller economies including Moldova, Tonga, Lesotho, and Guyana still have remittances making up most of their Gross Domestic Product (GDP).
According to Lead Economist in the Development Prospects Group of the World Bank Dilip Ratha, poor and small economies depend heavily on remittances as they provide the “lifeline” for such countries. He said, “Although they remain resilient, even a small decline of 7-10 percent can pose significant hardships to the people and to governments, especially those facing external financing gaps.”
The World Bank official indicated that it is critical for reducing remittance fees and developing innovative tools to be part of the Bank’s response to the financial crisis.
