Remittances data of the last 20 years indicates that the USA continues to be the leading source of global remittances while India continues to be the leading destination of inward remittances. Gulf countries have also emerged as leading sources of remittances. Data also indicates the impact of economic crises in leading sources on the quantum of inward remittances.
In the earlier story, we reviewed the trend in ‘Global Inward remittances’ during 2020, the year when the pandemic ravaged most countries in the world. We also looked at the estimates for 2021 based on the 35th edition of World Bank Group’s Migration and Development Brief.
As per the estimates for 2021, the remittances to Low- & Middle-Income countries (LMICs) are set to increase by 7% after a slight fall in 2020. In this story, we look at the trends in remittances across the world over the past twenty years and analyse trends for the top sources & destinations for remittances.
Share of remittances to LMICs increased by around 20% in the last 20 years
In 2021, the value of Global inward remittances is estimated at USD 751.2 billion, marking a recovery from the fall in 2020 when it was USD 705.5 billion. This is 3.5 times higher than the value of global inward remittances 20 years ago, i.e., USD 163.5 billion in 2002.
During the last 20 years i.e., 2002-2021, the highest growth rates were seen during the first 6 years until 2009, following which there was a fall in the global inward remittances. It fell by USD 22.7 billion in 2009 compared to 2008. The Global Financial Crisis of 2007-08, and the resulting impact on economies around the world, especially in some of the more developed countries in the world, could be the prime reason for the fall in remittances in 2009. While there was a positive growth rate in the ensuing years, the growth rate failed to reach the levels of pre-2008 i.e., before the global financial crisis.
There was a negative growth of remittances in 2015 & 2016 as well. The impact of low oil prices on the economies of countries like Saudi Arabia & other Gulf countries is considered the major reason for the fall in the remittances during these years. Gulf countries are some of the major sources of remittances.
Remittances picked up in the ensuing years only to fall in 2020, due to the impact of COVID-19. As highlighted in the earlier story, the remittances to LMICs form the major chunk of the global inward remittances. The trend in inward remittances to LMICs is reflective of the global trends.
A significant trend of the last 20 years is the increase in the share of remittances to LMICs. In 2002, remittances to LMICs accounted for around 59% of the global remittances, which is estimated to be more than 78% in 2021. A slight fall in the share of LMICs in global remittances was observed in 2009 & 2015. Except in these years, their share has consistently increased over the last 20 years.
India maintains its position as the leading destination for remittances, China & Egypt emerge as leaders
As indicated in the earlier story, India is the top destination for inward remittances. In 2021, remittances to India are estimated to be around USD 87 billion, after a slight fall in 2020. All through the 20 years between 2002 & 2021, India has remained as the top destination for inward remittances except on odd occasions. The value of remittances to India grew by 4.5 times during this period.
The global financial crisis had only a marginal impact on remittances to India, with remittances in 2009 falling to USD 49.2 billion compared to USD 49.98 billion in 2008. Comparably, a considerable impact was observed in 2015 & 2016. In 2016, the remittances fell to USD 62.7 billion from USD 68.9 billion in 2015. The value for 2015 itself was lower than the previous year. As pointed out earlier, the economic impact on petroleum-dependent economies of Gulf countries resulted in a substantial fall in inward remittances. The increased impact in 2016 than in 2009 proves India’s greater reliance on gulf countries for inward remittances compared to the others.
The trend over the past twenty years varies across the countries. Here is a snapshot of the trends.
- China has emerged as the second top destination for remittances since 2005. At the beginning of the review period i.e., during 2002, the remittances to China were only USD 2.35 billion and are ranked 19th. In 2005, there was an exponential increase in the remittances which propelled it to second place and continued to maintain the position. Neither the Global financial crisis nor the impact on Gulf countries had any influence on the increasing trend in China. However, the COVID-19 pandemic had a major impact on remittances to China, from which it has yet to recover. The remittances to China are estimated to fall in successive years of 2020 & 2021.
- Like China, Egypt has also seen an increase in inward remittances over the 20-year period. It currently ranks 5th and the increasing trend is observed since 2010. The remittances fell ever so slightly in 2015 indicating the reliance on the gulf countries.
- Mexico along with India has remained as a leading country for inward remittances although it lost the second position to China. However, it is among the very few countries whose remittances have increased even during the pandemic. The Global financial crisis of 2008 had a major impact on remittances to Mexico, because of its significant population being based in the USA. As highlighted in the earlier story, the post-COVID-19 recovery in countries like the USA seems to have translated into increased remittances to Mexico even in 2020 & 2021.
- Guatemala, another Central American country dependent on the USA, has also shown a similar trend.
- South Asian countries of Pakistan & Bangladesh have seen consistent growth in the value of their remittances as well as their position. The emergence of these new countries is at the cost of a few European counties which lost their position as top destinations for remittances. These include France, Germany, Belgium, etc.
- Among the African countries, Nigeria is the highest receiver of remittances. Nigeria has also seen an upswing in remittances since 2005. Compared to the earlier crises, COVID-19 had a significant impact on remittances to Nigeria from which it is yet to make a full recovery.
UAE & Kuwait record increased outward remittances in the past 20 years
The USA continues to be the source for the highest outward remittances over the past 20 years. The outward remittances from the USA reduced post the global financial crisis in 2008 and continued until 2011. Since then, there has been a continuous increase in the outward remittances from the USA, except for 2020. The estimates for 2021 aren’t available yet, but there could be a recovery if the increased estimates for inward remittances are any indication.
Most of the leading countries for outward remittance have witnessed an increase post the global financial crisis. The Gulf countries of UAE, Kuwait, Qatar have improved their position as leading sources of outward remittances. Kuwait along with Saudi Arabia has experienced a fall in outward remittances during the 2014-16 period. This is reflected in the fall in inward remittances of the countries dependent on these, as highlighted earlier in the story.
However, the outward remittances of UAE did not witness any fall even during the low oil price period (2014-16). A slight fall in outward remittances from UAE was observed only during the COVID-19 pandemic. This could mean that UAE’s economy is not solely dependent on oil.
China, which is one of the leading destinations for inward remittances also witnessed an increase in its outward remittances for the past few years. Switzerland is another country that has seen consistent and exponential growth in outward remittances.
Any economic disruption in major source countries has a domino effect in the destination countries
The review of the data over the twenty-year period highlights the emergence of new countries as leading destinations for inward remittances. This can be corroborated with the increase in outward remittances from countries where a substantial number of immigrants from the source countries have found employment. Mexico’s migrants in USA and Indian migrants in the Gulf economies are the major source of inward remittances in their respective countries.
Also evident is the impact the economic situation in source countries has on the quantum of inward remittances. The global financial crisis of 2008 impacted inward remittances in countries largely dependent on the USA while the lower oil prices in 2015-16 affected inward remittances in countries dependent on the gulf countries.
Data indicates that COVID-19 may have had a global impact with most countries witnessing an economic slowdown resulting in reduced inward remittances. With the increase of migrants in European countries, due to the crisis in Syria and other middle-eastern countries, there could be a shift in the trend of inward/outward remittances in the times to come.