Remittances to low- and middle-income countries rebounded to a record level in 2017 after two consecutive years of decline, says the World Bank’s latest Migration and Development Brief.
The Bank estimates that officially recorded remittances to low- and middle-income countries reached $466 billion in 2017, an increase of 8.5 percent over $429 billion in 2016. Global remittances, which include flows to high-income countries, grew 7 percent to $613 billion in 2017, from $573 billion in 2016.
The stronger than expected recovery in remittances is driven by growth in Europe, the Russian Federation, and the United States. The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the euro and ruble.
Remittance inflows improved in all regions and the top remittance recipients were India with $69 billion, followed by China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion), and Egypt ($20 billion).
Remittances are expected to continue to increase in 2018, by 4.1 percent to reach $485 billion. Global remittances are expected to grow 4.6 percent to $642 billion in 2018.
Longer-term risks to growth of remittances include stricter immigration policies in many remittance-source countries. Also, de-risking by banks and increased regulation of money transfer operators, both aimed at reducing financial crime, continue to constrain the growth of formal remittances.
The global average cost of sending $200 was 7.1 percent in the first quarter of 2018, more than twice as high as the Sustainable Development Goal target of 3 percent. Sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4 percent. Major barriers to reducing remittance costs are de-risking by banks and exclusive partnerships between national post office systems and money transfer operators. These factors constrain the introduction of more efficient technologies—such as internet and smartphone apps and the use of cryptocurrency and blockchain—in remittance services.
“While remittances are growing, countries, institutions, and development agencies must continue to chip away at high costs of remitting so that families receive more of the money. Eliminating exclusivity contracts to improve market competition and introducing more efficient technology are high-priority issues,” said Dilip Ratha, lead author of the Brief and head of KNOMAD.
In a special feature, the Brief notes that transit migrants—who only stay temporarily in a transit country—are usually not able to send money home. Migration may help them escape poverty or persecution, but many also become vulnerable to exploitation by human smugglers during the transit. Host communities in the transit countries may find their own poor population competing with the new-comers for low-skill jobs.
“The World Bank Group is mobilizing financial resources and knowledge on migration to support migrants and countries with the aim of reducing poverty and sharing prosperity. Our focus is on addressing the fundamental drivers of migration and supporting the migration-related Sustainable Development Goals and the Global Compact on Migration,” said Michal Rutkowski, Senior Director of the Social Protection and Jobs Global Practice at the World Bank.
Multilateral agencies can help by providing data and technical assistance to address adverse drivers of transit migration, while development institutions can provide financing solutions to transit countries. Origin countries need to empower embassies in transit countries to assist transit migrants.
The Global Compact on Migration, prepared under the auspices of the United Nations, sets out objectives for safe, orderly and regular migration. Currently under negotiation for final adoption in December 2018, the global compact proposes three International Migration Review Forums in 2022, 2026 and 2030. The World Bank Group and KNOMAD stand ready to contribute to the implementation of the global compact.
Regional Remittance Trends
Remittances to the East Asia and Pacific region rebounded 5.8 percent to $130 billion in 2017, reversing a decline of 2.6 percent in 2016. Remittance to the Philippines grew 5.3 percent in 2017 to $32.6 billion. Flows to Indonesia are expected to grow 1.2 percent to $9 billion in 2017, reversing the previous year’s sharp decline. Stronger growth in transfers from countries in Southeast Asia helped offset lower remittance flows from other regions, particularly the Middle East and the United States. Remittances to the region are expected to grow 3.8 percent to $135 billion in 2018.
Remittances to countries in Europe and Central Asia grew a rapid 21 percent to $48 billion in 2017, after three consecutive years of decline. Main reasons for the growth are stronger growth and employment prospects in the euro area, Russia, and Kazakhstan; the appreciation of the euro and ruble against the U.S. dollar; and the low comparison base after a nearly 22 percent decline in 2015. Remittances in 2018 will moderate as the region’s growth stabilizes, with remittances expected to grow 6 percent to $51 billion.
Remittances flows into Latin America and the Caribbean grew 8.7 percent in 2017, reaching another record high of nearly $80 billion. Main factors for the growth are stronger growth in the United States and tighter enforcement of U.S. immigration rules which may have impacted remittances as migrants remitted savings in anticipation of shorter stays in the United States. Remittance growth was robust in Mexico (6.6 percent), El Salvador (9.7 percent), Colombia (15 percent), Guatemala (14.3), Honduras (12 percent), and Nicaragua (10 percent). In 2018, remittances to the region are expected to grow 4.3 percent to $83 billion, backed by improvement in the U.S. labor market and higher growth prospects for Italy and Spain.
Remittances to the Middle East and North Africa grew 9.3 percent to $53 billion in 2017, driven by strong flows to Egypt, in response to more stable exchange rate expectations. However, the growth outlook is dampened by tighter foreign-worker policies in Saudi Arabia in 2018. Cuts in subsidies, increase in various fees and the introduction of a value added tax in Saudi Arabia and the United Arab Emirates have increased the cost of living for expatriate workers. In 2018, growth in remittances to the region is expected to moderate to 4.4 percent to $56 billion.
Remittances to South Asia grew a moderate 5.8 percent to $117 billion in 2017. Remittances to many countries appear to be picking up after the slowdown in 2016. Remittances to India picked up sharply by 9.9 percent to $69 billion in 2017, reversing the previous year’s sharp decline. Flows to Pakistan and Bangladesh were both largely flat in 2017, while Sri Lanka saw a small decline (-0.9 percent). In 2018, remittances to the region will likely grow modestly by 2.5 percent to $120 billion.
Remittances to Sub-Saharan Africa accelerated 11.4 percent to $38 billion in 2017, supported by improving economic growth in advanced economies and higher oil prices benefiting regional economies. The largest remittance recipients were Nigeria ($21.9 billion), Senegal ($2.2 billion), and Ghana ($2.2 billion). The region is host to several countries where remittances are a significant share of gross domestic product, including Liberia (27 percent), The Gambia (21 percent), and Comoros (21 percent). In 2018, remittances to the region are expected to grow 7 percent to $41 billion.
Asia and Pacific on course to miss all Sustainable Development Goals
Unless progress is accelerated, Asia and the Pacific are on course to miss all of the 17 Goals of the UN’s 2030 Agenda for Sustainable Development, the Executive Secretary of the UN regional commission for Asia and the Pacific (ESCAP), told UN News at the Organization’s Headquarters on Wednesday.
Under-Secretary-General Armida Salsiah Alisjahbana was in New York to take part in the High-Level Political Forum on Sustainable Development, the main UN platform for monitoring the progress that countries are making towards the Agenda, which is the UN’s blueprint for ending poverty and preserving the planet.
ESCAP’s latest Sustainable Development Goals Progress Report shows that, when it comes to some of the Goals, the region is actually going backwards. These are the goals related to access to clean water and sanitation (Goal 6), decent work and economic growth (Goal 8), and responsible consumption and production (Goal 11).
There are, said Ms. Alisjahbana, several reasons for this: “There is water scarcity, because of the pressure of urbanization, and the management of natural resources and the environment are making the situation worse. As for moving towards sustainable consumption, that has to do with behaviour and lifestyle. With increasing wealth you consume more, but what you consume is something that is actually not sustainable.
Governments, said the head of ESCAP, must ultimately be responsible for investments in sustainable development. Investing in basic infrastructure costs money, but there is a considerable multiplier effect, that has a positive effect on the economy. Countries with smaller financial resources should look at raising money through fiscal reforms rather than looking for aid, and risking becoming dependent, she added.
The Progress Report complains about a lack of data, an important point because, says Ms. Alisjahbana, without the correct data you can’t track progress, or evaluate the best actions to take going forward. Improved data must go hand in hand with improved capacity for analysing data, which means national statistical offices, and SDG monitoring.
Despite the many challenges facing the region’s efforts to achieve the Goals, Ms. Alisjahbana remains optimistic. The situation, she believes, can be turned around, through better cooperation, as well as the abundant talent and expertise found in the region.
Asia and Pacific Growth Steady Amid Global Trade Tensions
Developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions, according to a new Asian Development Bank (ADB) report released today.
In a supplement to its Asian Development Outlook (ADO), ADB maintains growth forecasts for developing Asia at 5.7% in 2019 and 5.6% in 2020—unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9% growth in 2018. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook has been revised down from 6.2% to 6.1% in 2019 and maintained at that rate in 2020.
Deepening trade tension between the People’s Republic of China (PRC) and the United States (US) remains the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume.
“Even as the trade conflict continues, the region is set to maintain strong but moderating growth,” said ADB Chief Economist Mr. Yasuyuki Sawada. “However, until the world’s two largest economies reach agreement, uncertainty will continue to weigh on the regional outlook.”
The growth outlook for East Asia in 2019 has been revised down to 5.6% because of slower than expected activity in the Republic of Korea. The subregion’s growth outlook of 5.5% for 2020 is unchanged from April. Growth for the subregion’s largest economy, the PRC, is also unchanged, with forecasts of 6.3% in 2019 and 6.1% in 2020, as policy support offsets softening growth in domestic and external demand.
In South Asia, the economic outlook is robust, with growth projected at 6.6% in 2019 and 6.7% in 2020, albeit lower than forecast in April. The growth outlook for India has been cut to 7.0% in 2019 and 7.2% in 2020 because the fiscal 2018 outturn fell short.
The outlook for Southeast Asia has been downgraded slightly to 4.8% in 2019 and 4.9% in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up to 4.3% on account of an improved outlook for Kazakhstan. Central Asia’s growth outlook of 4.2% for 2020 is unchanged from April. The growth outlook in the Pacific—3.5% in 2019 and 3.2% in 2020—is unchanged, as the subregion continues to rebound from the effects of Cyclone Gita and an earthquake in Papua New Guinea, the subregion’s largest economy.
The major industrial economies have had slight revisions to their growth forecasts, with the US revised up to 2.6% for 2019 and the Euro area revised down to 1.3%. The growth outlook for Japan is unchanged at 0.8% in 2019 and 0.6% in 2020.
Developing Asia’s inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestic factors, such as the continuing outbreak of African swine fever in several Asian economies, which is expected to drive up pork prices in the PRC.
How to measure blockchain’s value in four steps
To help organizations identify the value of blockchain technology and build a corresponding business case, the World Economic Forum, the International Organization for Public-Private Cooperation, has released the Blockchain Value Framework as part of the white paper, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits.
Co-designed with Accenture, the Blockchain Value Framework is the second in a series of white papers for organizations to better understand that blockchain technology is a tool deployed to achieve a specific purpose, not a goal in itself. This new framework provides organizations with the tools to begin measuring blockchain’s value, including key questions to consider. It is the first visual roadmap of its kind and is based on a global survey of 550 individuals across 13 industries, including automotive, banking and retail, public-sector leaders, chief executive officers and an analysis of 79 blockchain projects.
“In our last paper, we stressed that blockchain deployment is not the end goal,” said Sheila Warren, Head of Blockchain at the World Economic Forum. “We wanted to get beyond the hype. This new framework is for those business leaders that have figured out blockchain is the right solution for a specific problem, but don’t know what to do next.”
“Organizations need to make business decisions and investments with confidence and that requires proof of the value-add and an analysis of why, or why not, they should consider something new,” said David Treat, Managing Director and Global Blockchain Lead at Accenture. “Through this new framework, we aim to educate businesses and challenge them to rethink their current business models, relationships between ecosystem partners, customers and their investments in technology. The path to blockchain adoption starts here with evaluating the technical and strategic priorities and aligning them with investments in innovation.”
The framework starts with questions on blockchain’s role and desired impact. Assessing potential pain points and areas for opportunity without thinking about the technology is essential. Next is to examine the three key dimensions of blockchain’s role alongside its capabilities. The roadmap can assist organizations in moving from current-state assessment to future blockchain opportunity, and to identify where the value will be created and delivered. Cost savings, increased revenue and improved customer experience are all possible business case results.
According to the global survey conducted in conjunction with the new framework, 51% of survey respondents identified “missing out on developing new products/services” as the number one expectation if they do not invest in blockchain technology in the near future. The other two most common answers were missing out on speed/efficiency gains (23%) and missing out on cost savings (15%). The interviews highlighted the potential of the technology to simplify and optimize complete value chains through the sharing of simplified real-time data with increased efficiency. However, the paper also cautions businesses to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in the Blockchain Beyond the Hype white paper, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue.
In nine of the industries surveyed, the full traceability and integrity of the data were the top two potential advantages of using blockchain technology. Most of the industries surveyed could benefit from smart contracts and automation provided by blockchain. Surprisingly, few organizations selected “new business products or services” as one of the benefits. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities.
“We may be moving beyond the hype, but blockchain isn’t going away. Central banks are experimenting with digital currencies and supply chain networks are piloting blockchain policies. We are also seeing companies like Facebook and Starbucks entering the blockchain and cryptocurrency space. This means practical use cases of the technology will become more widespread,” Warren said. “A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters.”
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