One in eight people in the world depends on remittances from diasporas. Two hundred million migrant workers participate in improving the living conditions of around 800 million members of their families remaining in the country. They send an average of $200 to $300 every month or two, or 15% of their salary. These sums represent up to 60% of the total income of a recipient household, according to the World Bank.
Remittances from emigrants “have grown rapidly in recent years and now represent the largest source of foreign income for many developing economies,” explains John Plassard, investment specialist at Mirabaud in a recent note.
In 2022, flows to low- and middle-income countries increased by 8% according to the World Bank to $647 billion (out of a total of $831 billion). This jump is due to the high level of oil prices in the member countries of the Gulf Cooperation Council which boosted the income of active migrants; to the significant flows from Russia to the countries of Central Asia and finally to the dynamism of the labor market in the United States, the first country of reception of these workers.
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India is the largest recipient country ($111 billion in 2022), followed by Mexico (61 billion), China (51 billion), the Philippines (38 billion) and Pakistan (30 billion).
The 2022 increase is itself preceded by a notable improvement in global remittances, 10.6% in 2021, a rebound from the low due to the Covid pandemic. However, these flows are expected to increase very little this year (1.5%) and in 2024.
This loss of vigor can be explained by the succession of crises, Covid-19, war in Ukraine and inflation which has led to violent monetary tightening around the world. The decline in activity in certain sectors, combined with rising prices, limits the ability of migrants to send money home.
“About 75 percent of the money is used to put food on the table and cover medical bills, tuition or housing expenses,” says John Plassard. This financial windfall is a real lifeline for developing countries, the amounts representing a more important source of financing than public or private development aid.
A sign of the importance of their contribution to reducing current account deficits, these fund transfers represent, on average for low-income countries, 4% of their GDP. With very strong disparities. Thus, the Samoa Islands depend on it for 34%, Lebanon on 36%, Tonga on 44% and Tajikistan, a significant part of whose nationals work in Russia, on 51%.
