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Outlook for Remittances 2009-11: Resilience in the face of crisis
Dilip Ratha(with Sanket Mohapatra)World Bank
BSP International Research Conference on Remittances Manila, PhilippinesMarch 30, 2009
Outline
Recent trends
Outlook for 2009-11
Policy options
-25
25
75
125
175
225
275
325
375
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
e
$ billion Private debt and portfolio equity
FDI
ODA
RecordedRemittances
Remittances exceeded $300 billion in 2008
Remittance flows to developing countries
6%44%*37%Sub-Saharan Africa 27%31%20%South Asia8%22%6%Middle-East and North Africa0%7%18%Latin America and Caribbean5%31%23%Europe and Central Asia7%23%13%East Asia and Pacific9%23%*17%Developing countries
Growth rate (%)201913Sub-Saharan Africa 665240South Asia343126Middle-East and North Africa636359Latin America and Caribbean535038Europe and Central Asia706553East Asia and Pacific305281229Developing countries
2008e20072006US$ billion
Remittance flows to developing countries
Share of GDP (%)*
5.2%5.5%4.9%Low-income countries1.9%2.1%2.0%Developing countries
2.7%2.8%2.6%Middle-income countries
8%22%16%Middle-income countries13%29%29%Low-income countries
9%23%17%Developing countries
Growth rate (%)
260241198Middle-income454031Low-income countries
305281229Developing countries
2008e20072006US$ billion
*Only countries with estimates and forecasts of remittances and nominal GDP for 2008-11
45
34
26
18
11 10 9 9 9 7
0
10
20
30
40
50
India
China
Mexico
Philippin
es
Poland
Niger
ia
Egypt
Romania
Banglad
esh
Pakista
n
Top recipients of remittances
46
3835
2924 24 24 23
20 19
0
10
20
30
40
50
Tajiki
stan
Mold
ova
Tonga
Lesoth
o
Honduras
Leban
on
Guyana
Jordan
Haiti
Jamaica
$ billion, 2008e % of GDP, 2007
Near-term outlook
The current crisis is unique, the environment extremely uncertain
Slowdown in remittance flows in 2008 -- expected to deepen further in 2009
Flow – not the stock – of migration to decrease
Remittance flows to Mexico have slowed
-20
-10
0
10
20
30
Fe
b-0
5A
pr-
05
Ju
n-0
5A
ug
-05
Oc
t-0
5D
ec
-05
Fe
b-0
6A
pr-
06
Ju
n-0
6A
ug
-06
Oc
t-0
6D
ec
-06
Fe
b-0
7A
pr-
07
Ju
n-0
7A
ug
-07
Oc
t-0
7D
ec
-07
Fe
b-0
8A
pr-
08
Ju
n-0
8A
ug
-08
Oc
t-0
8D
ec
-08y-o-y growth rate of 3-month m.a. %
Mexican peso/US $ exchange rate
9
10
11
12
13
14
Jan-0
6
Mar
-06
May
-06
Jul-06
Sep-06
Nov-06
Jan-0
7
Mar
-07
May
-07
Jul-07
Sep-07
Nov-07
Jan-0
8
Mar
-08
May
-08
Jul-08
Sep-08
Nov-08
US employment: job losses are not different between natives and migrants
120
121
122
123
124
125
Dec-07
Feb-0
8
Apr-08
Jun-08
Aug-08
Oct-0
8
Dec-08
22
23
24
25
26 (millions)
migrants (right scale)
natives (left scale)
3-month moving averageSource: Current population survey.
Sharp decline US migrant employment in construction and manufacturing; switch to wholesale and retailand restaurants
2.1
2.3
2.5
2.7
2.9
3.1
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
(millions)Manufacturing
Wholesale & retail trade
Construction
Restaurants & hotels
3-month moving averageSource: Current population survey.
Remittance flows to the Philippines have surged in recent years to about $18 billion in in 2008
0
10
20
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
e
$ billion
Remittance flows to the Philippines have also slowed, but much less so than Mexico
0
5
10
15
20
25
30
35
Mar
-05
May
-05
Jul-0
5
Sep-0
5
Nov-0
5
Jan-0
6
Mar
-06
May
-06
Jul-0
6
Sep-0
6
Nov-0
6
Jan-0
7
Mar
-07
May
-07
Jul-0
7
Sep-0
7
Nov-0
7
Jan-0
8
Mar
-08
May
-08
Jul-0
8
Sep-0
8
Nov-0
8
Jan-0
9
y-o-y growth rate of 3-month m.a. %
Remittances have grown outside Latin America, but are expected to slow
-3.6
2.54.7 4.5
6.67.6
13.7
17.2
36.9
-10
0
10
20
30
40
Mexi
co
El Sal
vador
Domin
ican
Rep
Guatem
ala
Hondura
s
Kenya
Philippin
es
Pakist
an
Bangla
desh
Estimates for2008
Year-on-year growth rate (%)
Growth relative to same period last year. Jan-Dec for all countries, except Dominican Republic (Jan-Sep actual data and estimates for remaining months)
Outlook for 2009-2010
Medium-term outlook for remittance flows to developing countries
Magnitude of the growth moderation or decline difficult to predict
Remittances as a share of GDP are expected to fall, although not to the same extent as private flows or official aid.
Migration flows from developing countries may slow as a result of the global growth slowdown, but the stock of international migrants is unlikely to decrease.
Remittances will be resilient w r to downturns in host countries
Remittances are sent by the stock (cumulated flows) of migrants
Remittances are a small part of migrants’ incomes that can be cushioned against income shocks by migrants
Duration of migration may increase in response to tighter bordercontrols
“Safe haven” factor or “home-bias” -- returnees will take back accumulated savings
Sectoral shifts – and fiscal stimulus packages – may help some migrants
Documented migrants are likely to try to make up for a fall in remittances by undocumented migrants
Growth of remittance flows to developing countries will moderate significantly in 2009
-10%
0%
10%
20%
30%
2005 2006 2007 2008 2009 2010 2011
Percent
Base case-5%
Growth of remittance flows to regions
-12%
8%
28%
48%
2006 2007 2008 2009 2010 2011
East Asia andPacific
Europe and CentralAsia
Latin America andCaribbean
Middle-East andNorth Africa
South Asia
Sub-Saharan Africa
Percent
Remittance flows to developing countries
-7.9%-7.3%-5.2%-7.7%-12.7%-7.5%-8.2%
186132584664280
Low case 2009
forecast
-4.4%6.3%Sub-Saharan Africa
-4.2%26.7%South Asia
-1.4%7.6%Middle-East and North Africa-4.4%0.2%Latin America and Caribbean
-10.1%5.4%Europe and Central Asia-4.2%6.6%East Asia and Pacific-5.0%8.8%Developing countries
Growth rate (%)
1920Sub-Saharan Africa 6366South Asia
3334Middle-East and North Africa
6063Latin America and Caribbean
4853Europe and Central Asia
6770East Asia and Pacific290305Developing countries
$ billion
Base case 2009
forecast
2008e
Growth of remittance flows to developing countries will moderate significantly in 2009
-10%
0%
10%
20%
30%
2005 2006 2007 2008 2009 2010 2011
Percent
Base case-5%
Low case-8%
Slowdown sharper in low-income countries
-10%
0%
10%
20%
30%
2005 2006 2007 2008 2009 2010 2011
Percent
LICs -5.4%MICs -4.9%
Remittance outflows from Saudi Arabia appear to
be uncorrelated with oil price since early 1990s
0
5
10
15
2019
70
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
0
20
40
60
80US$ billion
Remittance outflows from Saudi Arabia
Crude oil price (right
US$/barrel
Policy options
Facilitate remittance flows
Avoid protectionism in the labor market
Migration depends on two factors:
Willingness to migrate (income difference)
Ability to migrate (border control)
Border controls increase the segmentation of labor markets and increase wage gaps…
…leading to even greater pressures for migration
Some thoughts on border controls and migration
Income differences are zero when border controls are absent, and maximum when border controls are fully effective
Income differences
Maximum0Border controls
The migration curve
Migration
Maximum0Border controls
A B
No incentive to migrate No ability to migrate
Migration peaks long before income differences become zero
Migration
Maximum0Income difference
between sending and receiving
A B
International Remittances
Agenda
1. Monitoring, analysis, projection
2. Retail payment systems
3. Financial access for households
4. Capital market access for institutions
International Remittances
Agenda
1. Monitoring, analysis, projection- Size, corridors, channels- Counter-cyclicality - Effects on poverty, education, health,
investmen- Policy (costs, competition, exchange
controls)
2. Retail payment systems- Payment platforms/instruments- Regulation (clearing and settlement, capital
adequacy, exchange controls, disclosure, cross-border arbitration)
- Anti-money laundering/Countering financing of terrorism (AML/CFT)
3. Financial access- Deposit and saving products- Loan products (mortgages,
consumer loans, microfinance)
- Credit history for MFI clients- Insurance products
4. Capital market access- Private banks and
corporations (securitization)
- Governments (diaspora bonds)
- Sovereign credit rating
Remittances will moderate significantly, causing hardships to the poor and macroeconomic challenges to governments
Slowdown in migration flows will exacerbate the need for more jobs at home
This is a wrong time for tightening immigration
For more, please visit
http://www.worldbank.org/prospects/migrationandremittances
http://peoplemove.worldbank.org (blog)
Summary
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