Caribbean’s only region to see remittances growth: World Bank

Despite overall global declension, the World Bank says Latin America and the Caribbean was the only region to see growth in remittances in 2016.

The Washington-based financial institution said on Friday the regional growth was estimated at US$73 billion, an increase of 6.9 percent over 2015.

The bank said “remittance senders took advantage of the strong US labor market and beneficial exchange rates.”

It said robust remittance growth was estimated for Mexico, El Salvador and Guatemala.

In 2017, the World Bank projected remittances to the region to grow by 3.3 percent to US$75 billion.

But remittances to developing countries fell for a second consecutive year in 2016, a trend not seen in three decades, according to the latest edition of the Migration and Development Brief, released by the World Bank during it Spring Meetings.

The bank estimated that officially recorded remittances to developing countries amounted to US$429 billion in 2016, a decline of 2.4 percent over US$440 billion in 2015.

Global remittances, which include flows to high-income countries, contracted by 1.2 percent to US$575 billion in 2016, from US$582 billion in 2015, the World Bank said.

It said low oil prices and weak economic growth in the Gulf Cooperation Council (GCC) countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa.

The decline in remittances, when valued in US dollars, was made worse by a weaker euro, British pound and Russian ruble against the US dollar, the World Bank said.

As a result, it said many large remittance-receiving countries saw sharp declines in remittance flows. India, while retaining its top spot as the world’s largest remittance recipient, led the decline with remittance inflows amounting to US$62.7 billion last year, a decrease of 8.9 percent over $68.9 billion in 2015.

“Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” said Rita Ramalho, Acting Director of the World Bank’s Global Indicators Group.

In keeping with an improved global economic outlook, remittances to developing countries are, however, expected to recover this year, growing by an estimated 3.3 percent to US$444 billion in 2017, the World Bank said.

It said the global average cost of sending US$200 remained flat at 7.45 percent in the first quarter of 2017, although this was significantly higher than the United Nations’ Sustainable Development Goal (SDG) target of 3 percent. Sub-Saharan Africa, with an average cost of 9.8 percent, remains the highest-cost region.

The World Bank said a major barrier to reducing remittance costs is de-risking by international banks, when they close the bank accounts of money transfer operators, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime.

“This has posed a major challenge to the provision and cost of remittance services to certain regions,” the bank said.

It noted that several high-income countries that are host to many migrants are considering taxation of outward remittances, in part to raise revenue, and in part to discourage undocumented migrants.

But the bank said taxes on remittances are difficult to administer and likely to drive the flows underground.

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