Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2 percent this year to reach $630 billion. This follows an almost record recovery of 8.6 percent in 2021, according to the World Bank’s latest Migration and Development Brief released today.
Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to rise by over 20 percent in 2022. However, remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically. Thesedeclines, combined with rising food, fertilizer, and oil prices, are likely to increase risks to food security and exacerbate poverty in many of these countries.
“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks for a global economy that is still dealing with the impact of the COVID pandemic,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank. “Boosting social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the war’s economic impact, is a key priority to protect people from the threats of food insecurity and rising poverty.”
During 2021, remittance inflows saw strong gains in Latin America and the Caribbean (25.3 percent), Sub-Saharan Africa (14.1 percent), Europe and Central Asia (7.8 percent), the Middle East and North Africa (7.6 percent), and South Asia (6.9 percent). Remittances to East Asia and the Pacific fell by 3.3 percent; although excluding China, remittances grew 2.5 percent. Excluding China, remittance flows have been the largest source of external finance for LMICs since 2015.
The top five recipient countries for remittances in 2021 were India, Mexico (replacing China), China, the Philippines, and Egypt. Among economies where remittance inflows stand at very high shares of GDP are Lebanon (54 percent), Tonga (44 percent), Tajikistan (34 percent), Kyrgyz Republic (33 percent), and Samoa (32 percent).
“On the one hand, the Ukraine crisis has shifted global policy attention away from other developing regions and from economic migration. On the other hand, it has strengthened the case for supporting destination communities that are experiencing a large influx of migrants,” said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD. “As the global community prepares to gather at the International Migration Review Forum, the creation of a Concessional Financing Facility for Migration to support destination communities should be seriously considered. This facility could also provide financial support to origin communities experiencing return migration during the COVID-19 crisis.”
Globally, the average cost of sending $200 was 6 percent in the fourth quarter of 2021, double the SDG target of 3 percent, according to the Bank’s Remittances Prices Worldwide Database. It is cheapest to send money to South Asia (4.3 percent) and most expensive to send to Sub-Saharan Africa (7.8 percent).
The costs of sending money to Ukraine are high (7.1 percent from Czech Republic, 6.5 percent from Germany, 5.9 percent from Poland, and 5.2 percent from USA). The global goodwill towards refugees and migrants from Ukraine opens an opportunity to develop and pilot programs to facilitate their access to jobs and social services in host countries, apply simplified anti-money laundering and counter-terrorist financing procedures for small remittance transactions to help reduce remittance costs and mobilize diaspora bond financing.
The war in Ukraine has also affected the international payment systems with implications for cross-border remittance flows. The exclusion of Russia from SWIFT has added a national security dimension to participation in international payments systems.
“Lowering remittance fees by 2 percentage points would potentially translate to $12 billion of annual savings for international migrants from LMICs, and $400 million for migrants and refugees from Ukraine,” added Ratha. “The cross-border payment systems, however, are likely to become multipolar and less interoperable, slowing progress on reducing remittance fees.”
World Bank Launches International Working Group to Improve Data on Remittances
The COVID-19 pandemic and the war in Ukraine have further highlighted the need for frequent and timely data. In April, the World Bank, under the auspices of KNOMAD and in collaboration with countries where remittances provide a financial lifeline, launched an International Working Group to Improve Data on Remittance Flows. Having improved data on remittances can directly support the Sustainable Development Goal indicators on reducing remittance costs and help increase the volume of remittances. This will also support the first Objective of the Global Compact on Migration, to improve data.
Regional Remittance Trends
Remittance flows to the East Asia and Pacific region fell 3.3 percent following a 7.3 percent drop in 2020. Flows reached $133 billion in 2021, close to 2017 levels. Excluding China, remittances to the region grew by 2.5 percent in 2021. Remittances to the Phillipines benefitted from job creation and wage gains in the United States where a large number of Filipino migrants live. Among economies where remittance inflows constitute a high percentage of their GDP are Tonga, Samoa, the Marshall Islands, the Philippines, and Fiji. Excluding China, remittance inflows are projected to grow by 3.8 percent in 2022. The average cost of sending $200 to the region fell to 5.9 percent in the fourth quarter of 2021 compared to 6.9 percent a year earlier.
Remittance inflows to Europe and Central Asia increased by 7.8 percent in 2021, reaching historic highs of $74 billion. The growth was due in large part to stronger economic activity in the European Union and rebounding energy prices. In 2021, Ukraine received inflows of $18.2 billion, driven by receipts from Poland, the largest destination country for Ukrainian migrant workers. Personal transfers constitute a vital source of finance and growth for the economies of Central Asia, for which Russia is the prime source. As a share of GDP, remittance receipts in Tajikistan and the Kyrgyz Republic were 34 percent and 33 percent respectively in 2021. Near-term projections for remittances to the region, which are expected to fall by 1.6 percent in 2022, are highly uncertain, dependent on the scale of the war in Ukraine and the sanctions on outbound payments from Russia. By contrast, remittance flows to Ukraine are expected to increase by over 20 percent in 2022. The average cost of sending $200 to the region fell to 6.1 percent in the fourth quarter of 2021 from 6.4 percent a year earlier.
Remittance flows to Latin America and the Caribbean surged to $131 billion in 2021, up 25.3 percent from 2020 due to the strong job recovery for foreign-born workers in the United States. Countries registering double-digit growth rates included Guatemala (35 percent), Ecuador (31 percent) Honduras (29 percent), Mexico (25 percent), El Salvador (26 percent), Dominican Republic (26 percent), Colombia (24 percent), Haiti (21 percent), and Nicaragua (16 percent). Recorded flows to Mexico include funds received by transit migrants from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba, and others. Remittances are important as a source of hard currency for several countries for which these flows represent at least 20 percent of GDP, including El Salvador, Honduras, Jamaica, and Haiti. In 2022, remittances are estimated to grow by 9.1 percent, though downside risks remain. The average cost of sending $200 to the region was mostly unchanged at 5.6 percent in the fourth quarter of 2021 compared to a year earlier.
Remittances to the developing countries of the Middle East and North Africa region grew by 7.6 percent in 2021 to $61 billion, driven by robust gains into Morocco (40 percent) and Egypt (6.4 percent). Factors supporting the flows were economic growth in host countries in the European Union as well as transit migration which further boosted inflows to temporary host countries such as Egypt, Morocco, and Tunisia. In 2022, remittance flows will likely ease to a 6 percent gain. Remittances have long made up the largest source of external resource flows for developing MENA—among ODA, FDI, and portfolio equity and debt flows—accounting for 61 percent of total inflows in 2021. The cost of sending $200 to MENA fell to 6.4 percent in the fourth quarter of 2021 from 6.6 percent a year ago.
Remittances to South Asia grew 6.9 percent to $157 billion in 2021. Though large numbers of South Asian migrants returned to home countries as the pandemic broke out in early 2020, the availability of vaccines and opening of Gulf Cooperation Council economies enabled a gradual return to host countries in 2021, supporting larger remittance flows. Better economic performance in the United States was also a major contributor to the growth in 2021. Remittance flows to India and Pakistan grew by 8 percent and 20 percent, respectively. In 2022, growth in remittance inflows is expected to slow to 4.4 percent. Remittances are the dominant source of foreign exchange for the region, with receipts more than three times the level of FDI in 2021. South Asia has the lowest average remittance cost of any world region at 4.3 percent, though this is still higher than the SDG target of 3 percent.
Remittance inflows to Sub-Saharan Africa soared 14.1 percent to $49 billion in 2021 following an 8.1 percent decline in the prior year. Growth in remittances was supported by strong economic activity in Europe and the United States. Recorded inflows to Nigeria, the largest recipient country in the region, gained 11.2 percent, in part due to policies intended to channel inflows through the banking system. Countries registering double-digit growth rates include Cabo Verde (23.3 percent), Gambia (31 percent), and Kenya (20.1 percent). Countries where the value of remittance inflows as a share of GDP is significant include the Gambia (27 percent), Lesotho (23 percent), Comoros (19 percent), and Cabo Verde (16 percent). In 2022, remittance inflows are projected to grow by 7.1 percent driven by continued shift to the use of official channels in Nigeria and higher food prices – migrants will likely send more money to home countries that are now suffering extraordinary increases in prices of staples. The cost of sending $200 to the region averaged 7.8 percent in the fourth quarter of 2021, a small decline from 8.2 percent a year ago.
Unlocking the Triple Returns from Social, Tech and Green Jobs
New insights and initiatives at the World Economic Forum’s Annual Meeting 2022 seek to launch a jobs recovery to strengthen resilience and dynamism in economies, businesses and societies in the midst of a turbulent outlook.
Investing in education, health and care jobs can yield a triple dividend – boosting economic activity, expanding employment opportunities and generating social mobility. New modelling of the United States economy suggests that investing $1 in social jobs would yield a $2.3 return. The model estimates that $1.3 trillion in the social jobs of tomorrow could unlock $3.1 trillion in GDP returns and create 11 million jobs by 2030.
These jobs include 4.2 million teaching jobs, 1.8 million jobs for personal care and service workers, and 900,000 jobs in healthcare. These are the key findings of the World Economic Forum’s new report Jobs of Tomorrow: The Triple Returns of Social Jobs in the Economic Recovery, published at the World Economic Forum Annual Meeting 2022 today.
Developed in collaboration with Accenture, the report finds that the associated increases in productivity, increased GDP and tighter labour markets will lead to a parallel increase in real wages. Aided by technology and better skills, the jobs of tomorrow have the potential to lift living standards globally. After more than two years of turmoil in the global economy and a continued uncertain outlook, leaders need to support workers in pivoting towards a future which works for everyone. Higher wage, higher-quality, future-ready jobs are possible and benefit companies, workers and economies alike.
Good Work in the New Economy
As many employers and workers seek a “new normal” after the disruptions of the past few years, there is an opportunity to develop a new vision for the future of work, one that is ready for the new economy and society. Five key issues have emerged that need to be addressed to ensure better work for workers and employers alike: volatility in wages and the cost of living; divergence on the demand for flexibility; silent pandemic in well-being; an erosion of diversity, equity and inclusion gains; and the need for a reskilling revolution.
The Good Work Framework, a second report released at the Annual Meeting, drawing from the views of employers, unions and experts and developed in collaboration with Mercer, proposes enhancing job quality through five objectives and associated goals: promote fair pay and social justice; provide flexibility and protection; deliver on health and well-being; drive diversity, equity and inclusion; and foster employability and learning culture.
The Jobs Consortium
To support this broad agenda and to mobilize the required investments globally, the first meeting of the Jobs Consortium was held at the World Economic Forum’s Annual Meeting in Davos. The initiative comprises CEOs and ministers championing productive employment, growth in the jobs of tomorrow, new standards in the workplace and better wages for all.
Underpinning the Jobs Consortium is a shared understanding of the need to expand opportunity and quality in the jobs of tomorrow, with a particular focus on social, green and tech jobs as the high-growth, job-creating sectors of the future. The initiative is supported by insight products, action frameworks and a collaboration platform, which develop expert knowledge to drive tangible change, and will work closely with initiatives on developing skills for the global workforce.
Refugee Employment and Employability
Refugees are a particularly vulnerable group, often excluded from the labour markets of host economies. Over 6 million refugees have left Ukraine since February 2022, adding to the estimated 31 million people worldwide who have been forcibly displaced across borders.
As businesses mobilize to assist refugees with integration into host communities and workforces, the World Economic Forum’s Chief Human Resources Officers community, drawn from over 140 organizations, has launched a Refugee Employment and Employability Initiative. The initiative will pilot its work with supporting learning and job opportunities for Ukrainian refugees in Europe in its first phase and draw best practices to build a methodology for supporting system-wide global support from employers for refugees.
“Our ambition is to lead with action and we know that refugees bring a broad set of skills, experience and perspectives that benefit societies and businesses. Helping people find work isn’t just a humanitarian effort, it’s also good for business,” said Jesper Brodin, CEO of Ingka Group.
New Initiative to Strengthen Cross-Border Investment in the Digital Economy
A pioneering effort to facilitate cross-border investment in the digital economy was launched this week at the World Economic Forum Annual Meeting 2022.
The new initiative on digital foreign direct investment, the Digital FDI initiative, will implement projects in several countries to help grow Digital FDI, as the reforms to attract such investment must take place at a country level. The first digital FDI project will take place in Nigeria.
Over the past few years, the Forum has worked to find the right partners to guide the work, develop principles published in the white paper launched in 2020 and share the potential for cooperation at the G20 and other platforms of corporation.
Attracting Digital FDI requires creating digital-friendly investment climates through targeted and country-specific policies, regulations and measures. These investments involve new business models, often based on data and technology, and platform economies, as well as using non-traditional assets. The Digital FDI initiative will aim to identify and implement enabling reforms through public-private projects in emerging markets and developing countries.
“Global FDI is rebounding, following the COVID-19 pandemic, and investment in the digital economy could not come at a better time. These country projects will help grow FDI into the digital economy, which is key for long-term growth, competitiveness and sustainable development”, said Børge Brende, President, World Economic Forum.
The Digital FDI initiative will be delivered as a joint effort between the World Economic Forum and the Digital Cooperation Organization (DCO), a new international organization that seeks to enable digital prosperity for all.
“As the first and only global multilateral focused on enabling digital prosperity for all, the DCO is partnering with the Forum on a Digital Foreign Direct Investment initiative to help countries develop digital FDI-friendly investment climates. We invite digital innovators with a commitment to economic development and inclusion to join us,” said Deemah Al Yahya, Secretary-General, DCO.
Post-COVID, Latin American Leaders Say their Countries Are Open for Business
Rising food and energy prices and a migration crisis are posing significant economic and social challenges in Latin America, according to several leaders from the region speaking on a presidential panel at the World Economic Forum Annual Meeting 2022. However, they remain confident that investing in their economies will remain attractive.
“We cannot be indifferent in front of this humanitarian tragedy,” said Colombian President Ivan Duque, referring to challenges linked to Venezuelan migration to his country, which has seen close to 2 million cross the border over the past several years after fleeing economic hardship. Duque announced that Colombia would issue over 1 million temporary status cards to Venezuelan migrants.
Rising food and energy prices also pose threats to Latin American populations. President Luis Rodolfo Abinader Corona of the Dominican Republic noted that his government would soon authorize subsidies for corn to offset rising food prices and the increasing cost of poultry. The nation has already implemented fertilizer subsidies and support for wheat prices would likely follow.
While the region has experienced economic growth in recent years, the combined effects of the COVID-19 pandemic and supply chain and price shocks linked to Russia’s invasion of Ukraine have raised questions about future growth for a range of countries. Despite the challenges, many Latin American countries continue to tout their economies and to encourage foreign business for investment and “near-shoring”.
“Not red tape, but red carpet,” said President Rodrigo Chaves Robles of Costa Rica, on his nation’s readiness to welcome foreign investors. “Costa Rica is open for business. I will break all bottlenecks…. I will open all doors.”
Likewise, Dina Ercilia Boluarte, Peru’s Vice-President and Minister of Development and Social Inclusion, stressed the nation’s readiness for outside investors. “We will welcome you with a stable economy and legal guarantees.”
The focus of many Latin American nations is now on climate and environmental sustainability. In tourism-intensive nations, such as the Dominican Republic, the sector constitutes an essential part of GDP and employs 20% of the population. Diversifying beyond “sun-and-beach” tourism could ensure the sector remains resilient even in the face of intensifying climate change.
In addition, the region can accelerate investments in climate mitigation and renewable energy. Chaves said: “We’re improving our electricity grid to more renewables even though we have over-invested in the power generation with fossil fuels.” Transitioning energy sources in a time of rising prices poses serious challenges, he added, so the nation will need to proceed with its reforms in a way that balances current growth with sustainability goals.
Educational reform is another way Latin American leaders are preparing for digital and green energy transformations. Colombia recently completed training for 100,000 programmers, and Costa Rica is working to improve the efficiency of its education spending. Currently, the country spends twice as much as Viet Nam to educate students. While Viet Nam ranks eighth in students’ math scores, Costa Rica ranks near the bottom in terms of students’ maths performance.
Peru is promoting social inclusion by transforming how the state delivers social services to rural communities. One programme involves putting state services – such as vaccines, health supplies and training materials to reduce violence against women – on boats so officials can reach hard-to-access communities in dense Peruvian forests and remote villages. “We are bringing services of the state to our brothers and sisters to improve their quality of life,” Boluarte said.
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