Diaspora inflows on the rise despite a global downturn

Kenya is recording a substantial increase in diaspora remittances despite a downturn in other sub-Saharan countries.

The World Bank figures released this week show that the growth of remittances to sub-Saharan Africa is projected to slow to 0.9 per cent this year, amounting to $33 billion.

However, continuing growth in its economy means that Kenya is bucking the regional trend in terms of remittance inflows.

The World Bank says that Kenya saw a 10.7 per cent growth in remittances last year and Uganda a 6.8 per cent increase. Both are expected to continue to grow this year.

Only South Africa, at 7.1 per cent saw a similar high level of increase with Nigeria, which accounts for around two-thirds of total remittance inflows to the region, seeing its remittances remain flat in 2014, at roughly $21 billion.

The World Bank says that the level of remittance dependency varies across countries in Africa. Remittances in the Gambia, Lesotho, Liberia and Comoros equal about 20 per cent of GDP in 2013, the latest data shows.

Remittance flows to the region are expected to pick up to $34 billion in 2016 and $36 billion in 2017.

The World Bank says that world-wide the growth in global remittances, including those to developing countries, “will slow sharply this year due to weak economic growth in Europe,” deterioration of the Russian economy and the depreciation of the euro and rouble.

Officially recorded remittances to the developing world are expected to reach $440 billion in 2015, an increase of 0.9 per cent over the previous year.

Global remittances, including those to high income countries, are projected to grow by 0.4 per cent to $586 billion, the World Bank’s Migration and Development Brief report said.
The 2015 remittance growth rates are the slowest since the global financial crisis in 2008/09. Nonetheless, the number of international migrants is expected to exceed 250 million in 2015, and their savings and remittances are expected to continue to grow.

IMMIGRATION CONTROLS

The slowdown in the growth of remittances this year will affect most developing regions, in particular Europe and Central Asia where flows are expected to decline by 12.7 per cent.

The positive impact of an economic recovery in the US will be partially offset by continued weakness in the euro area, the impact of lower oil prices on the Russian economy, the strengthening of the US dollar, and tighter immigration controls in many remittance source countries.

In line with the expected global economic recovery next year, the global flows of remittances are expected to accelerate by 4.1 per cent in 2016, to reach an estimated $610 billion, and rise to $636 billion in 2017.

Remittance flows to developing countries are expected to recover in 2016 to reach $459 billion, rising to $479 billion in 2017.

The top five migrant destination countries continue to be the US, Saudi Arabia, Germany, Russia and the United Arab Emirates. The top five remittance recipient countries, in terms of value of remittances, continue to be India, China, Philippines, Mexico and Nigeria.

The global average cost of sending $200 held steady at 8 per cent of the value of the transaction, as of the last quarter of 2014.

Despite its potential to lower costs, the use of mobile technology in cross-border transactions remains limited, due to the regulatory burden related to combating money laundering and terrorism financing, says the brief.

International remittances sent via mobile technology accounted for less than two per cent of remittance flows in 2013, the data notes.

“Total remittances in 2014 reached $583 billion. India received $70 billion, China $64 billion, the Philippines $28 billion. With new thinking these mega flows can be leveraged to finance development and infrastructure projects,” said World Bank Chief Economist and Senior Vice-President Kaushik Basu.