Outlook for migration and remittances 2012-15

Dilip RathaWorld Bank

November 27, 2012Development Prospects Group (DECPG) BBLWashington, D.C.

Outline Cyclical trends for 2012-15

Long-term structural trends

Global knowledge partnership - KNOMAD

Main messages Remittances to developing countries $406 bn in

2012 ; $534 bn by 2015

Remittance costs averaging 7.5% in top 20 remittance corridors; 9% worldwide; US Remittance Transfer Rule will increase transparency for consumers

Migration flows more responsive to economic cycle in host countries

0

100

200

300

400

500

600$ billions

Remittances to developing countries to reach $406 bn in 2012

Source: Development Prospects Group, World Bank

70 66

24 24 21 18 14 149 7

Top remittance recipients in 2012

$ million, 2012e as % of GDP, 2011

47

31 29 2723 22 21 21

18 18

Remittance flows to developing countries

$ billion 2010 2011 2012e 2013f 2014f 2015f

Developing countries 341 381 406 438 482 534East Asia and Pacific 95 106 114 123 136 152Europe and Central Asia 37 41 41 45 51 58Latin America and Caribbean 58 62 64 68 75 84Middle-East and North Africa 41 43 47 50 53 56South Asia 82 97 109 118 130 144Sub-Saharan Africa 29 31 31 33 36 39

Growth rateDeveloping countries 8.0% 11.7% 6.5% 7.9% 10.1% 10.7%

East Asia and Pacific 10.9% 12.3% 7.2% 8.2% 10.5% 11.3%Europe and Central Asia 0.0% 13.1% -0.9% 9.6% 14.8% 13.1%

Latin America and Caribbean 0.9% 7.3% 2.9% 7.6% 10.3% 11.0%Middle-East and North Africa 20.8% 6.3% 8.4% 5.5% 6.2% 6.8%

South Asia 9.5% 17.7% 12.5% 8.7% 9.9% 11.0%Sub-Saharan Africa 4.9% 6.8% 0.0% 6.2% 8.7% 9.2%

-20%

0%

20%

40%

Europe and Central Asia

Percent

Source: Development Prospect Group, the World Bank

Europe and Central Asia: Remittance Trends (y-o-y growth rate, %)

Remittance outflows from Western Europe has decelerated

-40%-30%-20%-10%

0%10%20%30%40%

UK

Italy

Spain

-70%-60%-50%-40%-30%-20%-10%

0%10%20%

Poland

Bosnia & Herz.

Romania

Growth in remittance outflows from Western European countries has been weak

Growth in remittance inflows to Eastern European countries has also been weak

-20%

0%

20%

40%

Latin America and Caribbean

Percent

Source: Development Prospect Group, the World Bank

Latin America and Caribbean: Remittance Trends (y-o-y growth rate, %)

-25

-15

-5

5

15

25

MexicoEl SalvadorHondurasGuatemalaDominican Rep.NicaraguaJamaica

y-o-y growth rate of 3-month m.a. %

Latin America and Caribbean: Remittance Trends (y-o-y growth rate, %)

In the US, employment is recovering faster for migrant workers than for natives*

Source: Current Population Survey

*3-month moving averages

21

22

23

24

116

118

120

122

124

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

millions millions

Natives (left scale)

Migrants (right scale)

However, unskilled migrants have been affected more than skilled and naturalized foreign-born workers in the US

-20%

0%

20%

40%

Construction Accomodation/food services

Trade Professional/tech. services

Total

Native-born Foreign born, non-citizens Foreign born, naturalized

Change in monthly average employment levels between Jan-Sep 2009 and Jan-Sep 2012

Source: US Current Population Survey

Migrant employment is more responsive to economic cycle than that of natives

4.2

1.71.0 1.4

1.0

-2.1 -1.9

-3.3

-6.3

-14.3

2.3

0.6 0.40.8

1.6

-1.1-0.7

-1.2

-5.4

-11.1

-15

-10

-5

0

5

Migrants Natives

Percentage points

Germany

Australia USA Belgium Canada

UK France Italy Spain Greece

Source: OECD International Migration Outlook 2012

Change in employment (Q1-2009 to Q4-2011)

-20%

0%

20%

40%

Sub-Saharan Africa

Percent

Source: Development Prospect Group, the World Bank

Sub-Saharan Africa: Remittance Trends (y-o-y growth rate, %)

-20%

0%

20%

40%

Middle-East and North Africa

Percent

Source: Development Prospect Group, the World Bank

Middle-East and North America: Remittance Trends (y-o-y growth rate, %)

Remittance growth declines in 2012 in most region

-20%

0%

20%

40%East Asia and PacificEurope and Central AsiaLatin America and CaribbeanMiddle-East and North AfricaSouth AsiaSub-Saharan Africa

Percent

Source: Development Prospect Group, the World Bank

Russia: Oil prices continue to provide a cushion for remittances to Asia

0

20

40

60

80

100

120

140

0.0

2.0

4.0

6.0

8.0

$ billions

Remittance outflows from Russia (left scale)

Crude oil price(right scale)

$/barrel

Source: IMF Balance of Payments and Development Prospects Group, World Bank.

Exchange rate depreciation has created additional incentives to send remittances

90.00

95.00

100.00

105.00

110.00

115.00

120.00

Mexican Peso

Bangladeshi Taka

Local currency/US$ (July 2010 = 100 )

Indian Rupee

Remittance costs remain persistently high

0%

2%

4%

6%

8%

10%

2008 Q1 2009

Q3 2009

Q1 2010

Q3 2010

Q1 2011

Q3 2011

Q1 2012

Q3 2012

Simple Average

Weighted average

Cost of sending $200 in top 20 largest bilateral remittance corridors

Source: World Bank Remittance Prices Worldwide database (November 2012)

Remittance costs remain persistently high

2%

4% 5% 5% 5% 5%6%

7%8% 8%

9%

12%13%

14%

17%

Cost of sending $200 from selected remittance source countries, Q3-2012

Source: World Bank Remittance Prices Worldwide database (November 2012)

US Remittance Rule likely to increase transparency and competition

The US Remittance rule may increase remittance cost in the short-run

Improves transparency, and may spur competition in the industry

Mobile remittances promises to reduce costs, but growth is stymied by unclear regulation Lack of clarity and mandate of regulation appears to

be a constraint to growth

AML/CFT and the “know-your-client” requirements raise regulatory burden and costs

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

International Remittances

Agenda

1. Monitoring, analysis, projection

- IMF BPM6

2. Retail payment systems

- Costs- AML/CFT

3. Financial access 4. Capital market access

- Governments (diasporabonds)

Global Knowledge Partnership on

Migration and Development(KNOMAD)

Objectives

• An open, multidisciplinary platform

• Generate a menu of policy choices based on evidence and peer-review

• Pilot policy operations and capacity building efforts

MIGRATION ANDDEVELOPMENT

Data on migration and

remittance flows

Skilled labor

migration

Unskilled labor

migration

Integration issues in host communities

Policy and institutional coherence

Migrant rights and

social aspects

Demographic changes

and migration

Remittances

Mobilizing other diaspora

resources

Climate change

and migration

Rural-urban migration

and urbanization

Migration and

security

Outputs of Migration Knowledge Platform

• Analytical research products• Operational toolkits, fact books• Web-based anthologies, archives, blogs• Best practices: A menu of policy choices for

the policy makers• Few pilot projects and capacity building

activities

International Logo Competition

KNOMAD Activities

• Global Experts Meetings: • Geneva Dec 3-4, 2012• Washington Dec 10-11, 2012

• Workshop on BPM 6 compilation of remittance data

• Migration and Remittances Factbook 2013