Migration and Remittance Trends 2010

Dilip Ratha (with Sanket Mohapatra and Ani Rudra Silwal)

Webinar

World Bank, Washington D.C.

April 28, 2010

Messages

Remittances estimated to have declined by only 6%

in 2009, but expected to grow by 6.2% in 2010 and

7.1% in 2011

Remittances are now factored into sovereign

ratings in middle-income countries and debt

sustainability analysis in low-income countries

Risks to the outlook include jobless recovery,

currency movements, and rising protectionism

Remittance flows to developing countries declined in

2009, to recover at a modest pace in 2010 and 2011

-10%

0%

10%

20%

30%

2005 2006 2007 2008 2009 2010 2011

Percent

-6.0%

6.2%7.1%

-25

75

175

275

375

475

575

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$ billion

Pvt debt

& port.

equity

FDI

ODA

Recorded

Remittances

Remittances proved to be resilient compared to

other flows

Remittances remain resilient during

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 increased in response to tighter

border controls and increased difficulty of re-entry

“Safe haven” factor or “home-bias” -- returnees will take

back accumulated savings

Sectoral shifts – and fiscal stimulus packages –helped

some migrants

Regional trends

Remittances to Latin America and Caribbean have

bottomed out since 4Q 2009

Flows to South Asia and East Asia have continued

to grow, but at a markedly lower pace

Flows to Europe & Central Asia and Middle-East

and North Africa fell more than expected

Flows to Sub-Saharan Africa remained flat, judging

from sparse data

Remittances to Latin America and Caribbean have

bottomed out

-25

-15

-5

5

15

Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10

El SalvadorHondurasGuatemalaDominican Rep.Jamaica

percent*

*year-on-year growth of 3-month moving-averages

Remittances to Mexico started declining in early 2008,

but the pace of decline is slowing

-25

-15

-5

5

15

25

Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10

percent*

*year-on-year growth of 3-month moving-averages

Note: Mexico saw an unusual increase in remittances in October 2008 due to a sudden peso depreciation; this resulted in a 36 percent decline in

remittances in October 2009. The dotted line in the chart corrects for this anomaly by smoothening the remittance flow in October 2008.

-40

-20

0

20

40

60

2007

-Q2

2007

-Q3

2007

-Q4

2008

-Q1

2008

-Q2

2008

-Q3

2008

-Q4

2009

-Q1

2009

-Q2

2009

-Q3

2009

-Q4

Percent, year-on-year growth

Remittances to India grew through the crisis

except in Q1 2009

Note: Private transfers comprise mostly remittances from Indian migrants, but also include other transfers.

Remittances to Bangladesh and Pakistan are

decelerating, in a lagged response to crisis

(especially in GCC countries)

0

10

20

30

40

50

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

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

Bangladesh

Pakistan

Three observations

The more diverse the migration destinations, the

more resilient are remittances

The lower the barriers to labor mobility, the stronger

the link between remittances and economic cycles

in that corridor

Remittance outflows from UK, Spain, and Italy fell

but are recovering

-30

-10

10

30

50

70

2005

-Q1

2005

-Q3

2006

-Q1

2006

-Q3

2007

-Q1

2007

-Q3

2008

-Q1

2008

-Q3

2009

-Q1

2009

-Q3

Percent

Italy

Spain

UK

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

Remittances outflows from Russia are correlated

with oil prices

0

2

4

6

8

2002

Q4

2003

Q4

2004

Q4

2005

Q4

2006

Q4

2007

Q4

2008

Q4

2009

Q4

0

20

40

60

80

100

120

140

$ billions

Remittance outflows

(left scale)

Crude oil price

(right scale)

$/barrel

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

Remittance outflows from Saudi Arabia have been

uncorrelated with oil price since early 1990s

0

5

10

15

20

25

1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

0

20

40

60

80

100$ billions

Remittance outflows

from Saudi Arabia

Crude oil price

(right scale)

$/barrel

Three observations

The more diverse the migration destinations, the

more resilient are remittances

The lower the barriers to labor mobility, the stronger

the link between remittances and economic cycles

in that corridor

Exchange rate movements produce valuation

effects, but they also influence the consumption-

investment motive for remittances

“Sale effect” - Exchange rate changes encouraged

investment-related remittances to India

35

40

45

50

55

Mar

-07

Jun-0

7

Sep

-07

Dec

-07

Mar

-08

Jun-0

8

Sep

-08

Dec

-08

Mar

-09

Jun-0

9

Sep

-09

Dec

-09

Mar

-10

Nominal exchange rate (Rupees/US$)

Increasing interest in remittances and the

wealth of the diaspora

Some are considering securitization of future remittances

and payment rights

Many countries are issuing diaspora bonds

Remittances are becoming a factor in the analysis of

country risk ratings and debt sustainability

Remittances have contributed to reducing current

account deficits of low-income countries

0

5

10

15

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e

Percent of GDP

Current account deficit

Current account deficit

without remittances

0

10

20

30

Mexico India Pakistan Bangladesh Philippines Nepal

Percent of GDP Remittances

Trade deficit

Remittances have partially or fully offset

trade deficits in some large recipients

0%

100%

200%

300%

Leba

non

Haiti

Nep

al

Jam

aica

Sud

an

Moldo

va

Pak

ista

n

El S

alva

dor

Rom

ania

Arm

enia

Including remittances

Excluding remittances

Remittances contribute to sovereign

creditworthiness

Debt as a percent of exports

Structural and policy issues

Mobile phone technology – progress has been painfully

slow

AML/CFT and telecom/banking regulations continue to pose

road blocks

Remittances and microfinance links remain somewhat

tenuous

Outlook for remittance flows for 2009-11

$ billion 2008 2009 2010f 2011f

Developing countries 335.8 315.7 335.4 359.1East Asia and Pacific 86.1 85.7 94.1 102.7Europe and Central Asia 57.5 45.6 48.1 51.7Latin America and Caribbean 64.4 56.5 59.8 64.5Middle-East and North Africa 34.8 32.0 33.1 34.4South Asia 71.7 75.2 78.7 82.8Sub-Saharan Africa 21.3 20.7 21.6 22.9

Growth rate (%)

Developing countries 15.9% -6.0% 6.2% 7.1%East Asia and Pacific 20.7% -0.4% 9.8% 9.2%

Europe and Central Asia 13.3% -20.7% 5.4% 7.6%Latin America and Caribbean 2.1% -12.3% 5.7% 7.9%Middle-East and North Africa 9.8% -8.1% 3.6% 4.0%

South Asia 32.6% 4.9% 4.7% 5.2%Sub-Saharan Africa 14.1% -2.7% 4.4% 5.8%

Risks to the outlook

Weak job markets in the destination countries may

lead to further tightening of immigration controls

Currency movements are highly unpredictable

Changes to our forecast methodology

Income-elasticity of remittances is allowed to be

different from 1

Inflows-outflows migration matrix has been updated

Check out

Peoplemove Blog

International

Remittances

Agenda

1. Monitoring,

analysis, projection

2. Retail payment

systems

3. Financial

access

4. Capital

market access

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