44882 Migration and Development Brief 5 Development Prospects Group, Migration and Remittances Team July 10, 2008 Revisions to Remittance Trends 2007 Dilip Ratha, Sanket Mohapatra, K. M. Vijayalakshmi, Zhimei Xu Revised estimates show that remittance flows to developing countries were $251 billion in 2007, up 11 percent from 2006. This Brief discusses the slowdown in remittance flows to Mexico in the first part of 2008. Remittances to countries in Latin America and the Caribbean (El Salvador, Honduras, Guatemala) and Asia (Bangladesh, Pakistan and the Philippines) continue to grow robustly. Table 1: Remittance flows to developing countries, 2002-2007 ($ billion) Change Change INFLOWS 2002 2003 2004 2005 2006 2007 2006-07 2002-07 Developing countries 116 143 163 194 226 251 11% 118% East Asia and Pacific 29 35 39 47 53 59 11% 100% Europe and Central Asia 14 16 23 32 39 47 22% 246% Latin America and Caribbean 28 35 42 48 57 61 6% 117% Middle-East and North Africa 15 20 23 24 27 29 8% 89% South Asia 24 30 29 33 40 44 11% 82% Sub-Saharan Africa 5 6 8 10 11 12 7% 132% Low-income countries 15 17 20 24 29 33 15% 118% Middle-income countries 100 127 143 169 197 218 11% 118% Lower MICs 71 89 95 110 127 140 10% 99% Upper MICs 30 38 48 60 70 78 11% 162% High income OECD 53 61 67 68 72 81 12% 54% High income non-OECD 1 2 3 4 4 5 7% 304% World 170 206 234 266 303 337 11% 99% Change Change OUTFLOWS 2002 2003 2004 2005 2006 2007 2006-07 2002-07 All developing countries 19 22 30 34 42 52 23% 177% High income OECD 89 101 115 126 141 159 13% 78% High income non-OECD 24 23 22 24 27 28 2% 17% World 131 147 167 184 210 238 13% 81% Source: Authors' calculation based on data from IMF Balance of Payments Statistics Yearbook 2008 and data releases from central banks, national statistical agencies, and World Bank country desks. Remittances are defined as the sum of workers' remittances, compensation of employees, and migrant transfers ­ see www.worldbank.org/prospects/migrationandremittances for data definitions and the entire dataset. Remittances to developing countries reached $251 billion in 2007 Newly released data from some important recipient countries reveal that remittance flows to developing countries reached $251 billion in 2007, up from an earlier estimate of $240 billion (link). These data show that remittances received by developing countries grew by 11 percent between 2006 and 2007, and have more than doubled since 2002. Mexico and the Philippines, which are among the top four remittance recipients in the developing world, reported remittance inflows for 2007 as $25 billion and $17.2 billion respectively, very close to earlier estimates. The major revisions to the 2007 data came from higher actual figures compared to the estimates for Liberia, Poland and Romania. The actual remittance inflows for Poland at $11 billion in 2007, or 2.5 percent of GDP, were more than twice the amount estimated earlier. This change makes Poland the fifth largest remittance recipient among developing countries. Remittance inflows to Romania were also significantly higher at $9 billion in 2007 compared to the earlier estimate, and 27 percent higher compared to the amount received in 2006. Liberia started to report its remittances on the IMF Balance of Payments Statistics this year, with inflows data imputed the latest available figure of $685 million in 2006. Increase in real per capita incomes of some developing countries has also affected the composition of remittance flows across income groups. According to the latest World Bank's income classification, India, Mongolia, Sudan, and Timor-Leste are now considered middle income countries instead of as low income countries. Hungary and Slovak Republic are now high income members of the Organization of Economic Cooperation and Development. As a result of these upward revisions to incomes, especially for India, the largest remittance recipient among all developing countries, the share of remittances to low income countries is now smaller and the share of middle income countries larger. Recent trends in remittances to Mexico and other major recipient countries According to recently published official data, migrant remittances to Mexico declined by 3.4 percent in May (and by 2.6 percent during January-May 2008, compared to the same periods last year (see news item). A slowdown in the growth of remittances to Mexico has been a cause for concern as these flows (mostly from the United States) provide a lifeline to a large number of Mexican families. Three factors appear to be responsible for this slowdown: (a) high base effect - after more than doubling during 2002-2007, the rate of growth is beginning to slow; (b) tighter enforcement of immigration rules in the United States is likely to have caused a shift in remittance flows to hand carrying and unrecorded channels; and (c) the slowdown in the US economy, especially in the construction sector, has affected the employment and incomes of Mexican migrants in the US (see news item). Officially reported remittance flows to Mexico in the first five months of 2008 followed a similar trend to that of the previous two years, and they have remained almost unchanged from 2007 (chart 1). As highlighted in Migration and Development Brief 2, monthly remittances to Mexico show strong seasonality, reaching a peak during May on account of Mother's Day. Chart 1: Remittances received by Mexico 2.3 $ billion 2007 2008 1.9 2005 1.5 2006 1.1 n b r r y n l g p t v c Ja Fe Ma Ap Ju Ju Ma Au Se Oc No De Source: Banxico 2 Mexican migrants are still sending money home, if necessary by taking up whatever jobs they can find, postponing consumption, or drawing on savings. There are also anecdotal reports that stringent immigration enforcements have encouraged some remittances to shift to hand carry or informal channels. Thus, it cannot be ruled out that the true size of remittances to Mexico (including unrecorded flows) is probably increasing although at a slower rate than during the last year. It is also seen that remittance flows to El Salvador, Honduras and Guatemala appear to be less affected than those to Mexico, because the former countries are less affected by immigration restrictions, since many of them have temporary protected status or special immigration arrangements with the US (see chart 2 below). Chart 2: Remittances to other Latin American countries and Asian countries El Salvador Honduras $ million 250 $ million 2008 2007 350 2008 2007 200 2006 2006 250 2005 150 2005 150 100 b r r y n l g p t v c b r r y n l g p t v c Jan Fe Ma Ap Ju Ju Ju Ma Au Se Oc No De Jan Fe Ma Ap Ju Ma Au Se Oc No De Guatemala Bangladesh 450 $ million $ million 2007 750 2008 2008 2007 300 2006 2006 450 2005 2005 150 150 r r l t b r r y n g v c y n l g p t n v c b p Ja Ju Ju Jan De Fe Ma Ap Ju Ju Fe Ma Ap Au Se Oc Ma Au Se Oc No No De Ma Pakistan Philippines $ million 2008 1.5$ billion 2008 550 2007 2007 2006 2006 1.0 350 2005 2005 150 0.5 n b r r y n l p t c b r r y n l g p t c Ja Fe Ma Ap Ma Ju Ju Ju Aug Se Oc Nov De Jan Fe Ma Ap Ju Ma Au Se Oc Nov De Source: Central banks of the respective countries The chart also show that remittances to the Philippines and Pakistan are continuing to grow robustly, while Bangladesh has experienced a steep increase in 2008 compared to the previous three years. All three of these countries send a relatively large number of migrants 3 to the Gulf Cooperation Council (GCC) countries which are experiencing an economic boom due to high commodity prices, which is resulting in an increasing demand for migrant labor. The GCC countries have among the highest number of migrants as a share of population in the world: 78 percent in Qatar, 71 percent in the U.A.E, 62 percent in Kuwait, 41 percent in Bahrain, 26 percent in Saudi Arabia, and 24 percent in Oman (see Factbook 2008). Remittances from these migrants are helping mitigate the impact of high food and oil prices on the poor in many developing countries. Migration and Development Briefs are intended to be informal briefing notes for World Bank staff interested in the topic of migration, remittances, and development. Contributions are greatly welcome. The views expressed are those of the authors and may not be attributed to the World Bank Group. The latest data on remittances and other useful resources are available at www.worldbank.org/prospects/migrationandremittances. Feedback, and requests to be added to or dropped from the distribution list, may be sent to Dilip Ratha at dratha@worldbank.org. 4