Lao PDR: economic recovery tested by debt and rising prices

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Officially recorded remittance flows to low- and middle-income countries (LMICs) are expected to increase by 4.2% this year to $630 billion. This follows a near-record recovery of 8.6% in 2021, according to the latest World Bank report on migration and development released today.

Remittances to Ukraine, which is the largest recipient in Europe and Central Asia, are expected to increase by more than 20% in 2022. However, remittance flows to many countries in Asia power plant, the main source of which is Russia, will likely fall dramatically. These declines, combined with rising food, fertilizer and oil prices, are likely to increase food security risks and exacerbate poverty in many of these countries.

“The Russian invasion of Ukraine has triggered large-scale humanitarian, migration and refugee crises and risks to a global economy still dealing with the impact of the COVID pandemic,” mentioned Michal Rutkowski, Global Director of the Global Social Protection and Employment Practice at the World Bank. “Strengthening social protection programs to protect the most vulnerable, including Ukrainians and Central Asian families, as well as those affected by the economic impact of war, is a key priority to protect people from threats food insecurity and growing poverty.

In 2021, remittances recorded strong increases in Latin America and the Caribbean (25.3%), Sub-Saharan Africa (14.1%), Europe and Central Asia (7.8%), Middle East and North Africa (7.6%) and South Africa. Asia (6.9%). Remittances to East Asia and the Pacific fell 3.3%; although excluding China, remittances increased by 2.5%. Outside of China, remittance flows have been the main source of external financing for LMICs since 2015.

The top five receiving countries for remittances in 2021 were India, Mexico (replacing China), China, the Philippines and Egypt. Economies where remittances account for very high shares of GDP include Lebanon (54%), Tonga (44%), Tajikistan (34%), Kyrgyz Republic (33%) and Samoa (32%). ).

“On the one hand, the Ukraine crisis has distracted global policy attention from other developing regions and economic migration. On the other hand, it has strengthened the case for supporting destination communities experiencing a large influx of migrants,” mentioned Dilip Ratha, Lead Author of the Migration and Remittances Report and Director of KNOMAD. “As the global community prepares to convene at the International Migration Review Forum, the creation of a concessional funding mechanism for migration to support communities of destination should be seriously considered. This facility could also provide financial support to communities of origin facing return migration during the COVID-19 crisis.

Globally, the average cost of sending $200 was 6% in the fourth quarter of 2021, double the SDG target of 3%, according to the Global Remittance Price Database. the bank. It is the cheapest to send money to South Asia (4.3%) and the most expensive to send money to Sub-Saharan Africa (7.8%).

Costs to send money to Ukraine are high (7.1% from the Czech Republic, 6.5% from Germany, 5.9% from Poland, and 5.2% from the United States ). The global goodwill towards refugees and migrants from Ukraine opens up the possibility of developing and piloting programs to facilitate their access to jobs and social services in host countries, to apply simplified procedures for combating money laundering and terrorist financing for small remittance transactions to reduce remittances. costs and mobilize diaspora bond financing.

The war in Ukraine has also affected international payment systems, with implications for cross-border remittance flows. Russia’s exclusion from SWIFT has added a national security dimension to participation in international payment systems.

“Reducing remittance fees by 2 percentage points would potentially translate to $12 billion in annual savings for international migrants from LMICs and $400 million for migrants and refugees from Ukraine,” added Ratha. “Cross-border payment systems, however, are likely to become multi-polar and less interoperable, which will slow progress in reducing remittance fees.”

World Bank launches international task force to improve data on remittances

The COVID-19 pandemic and the war in Ukraine have further underscored the need for frequent and timely data. In April, the World Bank, under the auspices of KNOMAD and in collaboration with countries where remittances are a financial lifeline, launched an international task force to improve data on remittance flows. Improving data on remittances can directly support the Sustainable Development Goal indicators on reducing the cost of remittances and help increase the volume of remittances. This will also support the first objective of the Global Compact on Migration, namely to improve data.

Regional trends in remittances

Fund transfers to the East Asia and the Pacific The region fell 3.3% after a 7.3% drop in 2020. Flows reached $133 billion in 2021, close to 2017 levels. Excluding China, remittances to the region increased by 2.5% in 2021. Remittances to the Philippines have benefited from job creation and wage gains in the United States, where a large number of Filipino migrants live. Economies where remittances represent a high percentage of their GDP include Tonga, Samoa, Marshall Islands, Philippines and Fiji. Excluding China, remittances are expected to increase by 3.8% in 2022. The average cost of sending $200 in the region fell to 5.9% in the fourth quarter of 2021, from 6.9% a year earlier. earlier.

Remittances to Europe and Central Asia grew 7.8% in 2021, reaching all-time highs of $74 billion. The growth was largely due to stronger economic activity in the European Union and rising 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 are a vital source of financing and growth for Central Asian economies, of which Russia is the primary source. As a percentage of GDP, remittances to Tajikistan and the Kyrgyz Republic were 34% and 33% respectively in 2021. Short-term projections of remittances to the region, which are expected to fall by 1.6% in 2022, are highly uncertain, dependent on the scale of the war in Ukraine and sanctions on outgoing payments from Russia. In contrast, remittance flows to Ukraine are expected to increase by more than 20% in 2022. The average cost to send $200 to the region fell to 6.1% in Q4 2021 from 6 .4% a year earlier.

Fund transfers to Latin America and the Caribbean jumped to $131 billion in 2021, up 25.3% from 2020 due to the strong employment recovery for foreign-born workers in the United States. Countries with double-digit growth rates are Guatemala (35%), Ecuador (31%), Honduras (29%), Mexico (25%), El Salvador (26%), Dominican Republic (26%), Colombia (24%). , Haiti (21%) and Nicaragua (16%). Recorded flows to Mexico include remittances received by migrants in transit 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% of GDP, including El Salvador, Honduras, Jamaica and Haiti. In 2022, remittances are expected to increase by 9.1%, although downside risks remain. The average cost to send $200 in the region was virtually unchanged at 5.6% in the fourth quarter of 2021 from a year earlier.

Remittances to developing countries in the Middle East and North Africa The region grew 7.6% in 2021 to $61 billion, driven by solid gains in Morocco (40%) and Egypt (6.4%). Factors supporting the flows have been economic growth in European Union receiving countries as well as transit migration which has further stimulated flows to temporary receiving countries such as Egypt, Morocco and the Tunisia. In 2022, remittance flows are likely to decline to a 6% gain. Remittances have long been the main source of external resource flows for the developing MENA region – among ODA, FDI, and equity and portfolio debt flows – accounting for 61% of total inflows in 2021. The cost to send $200 to MENA fell to 6.4% in the fourth quarter of 2021 from 6.6% a year ago.

Payments to South Asia increased by 6.9% to reach $157 billion in 2021. Although a large number of South Asian migrants returned to their countries of origin when the pandemic broke out in early 2020, the availability of vaccines and the opening of Gulf Cooperation Council economies have enabled a gradual return to host countries in 2021, supporting larger remittance flows. Improving economic performance in the United States was also a major contributor to growth in 2021. Remittance flows to India and Pakistan increased by 8% and 20%, respectively. In 2022, remittance growth is expected to slow to 4.4%. Remittances are the main 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 cost of remittances of any region in the world, at 4.3%, although this remains above the SDG target. by 3 percent.

Remittances to Sub-Saharan Africa climbed 14.1% to $49 billion in 2021 after falling 8.1% the previous year. Growth in remittances was supported by strong economic activity in Europe and the United States. Inflows to Nigeria, the largest recipient country in the region, increased by 11.2%, in part due to policies aimed at channeling inflows through the banking system. Countries with double-digit growth rates are Cabo Verde (23.3%), Gambia (31%) and Kenya (20.1%). Countries where the value of remittances as a share of GDP is significant are The Gambia (27%), Lesotho (23%), Comoros (19%) and Cabo Verde (16%). In 2022, remittances are expected to increase by 7.1% due to the continued shift to using official channels in Nigeria and rising food prices – migrants are likely to send more money to countries in which are currently experiencing extraordinary increases in commodity prices. The cost to send $200 within the region averaged 7.8% in Q4 2021, down slightly from 8.2% a year ago.

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