5-8% drop in remittance

Written by Cai U. Ordinario / Reporter

Sunday, 29 March 2009 21:42

THE World Bank estimates an overall 5-percent to 8-percent drop in remittances by migrant workers to their respective countries as an effect of the global financial crisis. In its Migration and Development (MD) Brief 9 released recently by the bank’s Development Prospects Group Migration and Remittances Team, the bank revised its projections downward in light of the decline in the bank’s growth projections for 2009 and said their estimate may even be higher than what may really happen. “We have revised our forecasts for remittance flows to developing countries in the light of a downward revision to the World Bank’s global economic outlook. We now expect a sharper decline of 5 percent to 8 percent in 2009 compared with our earlier projections,” said World Bank lead economist Dilip Ratha in a blog post. “This decline in nominal dollar terms is small relative to the projected fall in private capital flows or official aid to developing countries. However, considering that officially recorded remittances registered double-digit annual growth in the past few years to reach an estimated $305 billion in 2008, an outright fall in the level of remittance flows as projected now will cause hardships in many poor countries,” he added. Both low-income and middle-income countries are expected to see a similar decline of about 5 percent in remittance inflows in 2009. Developing countries like the Philippines will also post significant declines in remittance growth until 2010 and show a slight recovery in 2011. With the low case forecast, the Migration and Remittances Team said developing countries will post contractions until 2010. In 2009 the MD Brief data showed that remittances will post a contraction of 8.2 percent and in 2010, a contraction of 0.2 percent. Remittances will only post positive growth of around 3.2 percent in 2011. However, the exact figures for the Philippines also vary since under the forecasts for East Asia and the Pacific, remittances will post a contraction of 4.2 percent in 2009, while positive growth of 1.9 percent and 5.6 percent could be seen in 2010 and 2011, respectively. In the low case forecast, countries in the East Asia and the Pacific will post a contraction in 2009 of 7.5 percent and 2010 by 1.3 percent. However, by 2011, remittances are seen to grow 2.1 percent, lower than the average for developing countries. Ratha cautioned, however, that if the effect of the crisis on migrants will be worse, the 5 percent to 8 percent estimated decline in remittances could drop because of the unpredictable movements of exchange rates. Ratha said if the exchange rates of remittance sources continue to weaken relative to the US dollar, it would also result in an even greater decline in remittance flows to developing countries. Further, Ratha said weak job markets in destination countries could also lead to tightening of immigration controls, thereby reducing remittances sent to destination countries because of lesser deployment of workers. The net effect of these reduced remittances is to put more pressures on developing countries. “It is almost certain that in many developing countries remittances will become even more important as a source of external financing as private flows dry up,” said Ratha. In 2008 the Philippines was fourth among the world’s top five recipients of remittances with P18 billion. The others were India, first with $45 billion; China, second with $34 billion; Mexico, third with $26 billion, and Poland, fifth with $11 billion.