Leveraging Remittances for Development Dilip Ratha World Bank OAS, Washington, DC April 17, 2012
Dilip Ratha - World Banksiteresources.worldbank.org/INTPROSPECTS/Resources/...Migration and...
Transcript of Dilip Ratha - World Banksiteresources.worldbank.org/INTPROSPECTS/Resources/...Migration and...
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