Poor nations seen to get lower inflows

MANILA, Philippines – A study by the World Bank is projecting that remittance flows to developing countries will reach $317 billion in 2009, down by 6.1 percent from the $338 billion in 2008. The projection was based on data for the first three quarters of 2009.

The WB study forecasts that remittances will expand by 1.4 percent in 2010, and by 3.9 percent in 2011.

“Economic growth is beginning to recover after the global slump that began in 2008. But growth will remain weak in 2010 and 2011, and is unlikely to reach the brisk pace seen before the crisis,” it said.

According to the bank, one risk is that the crisis could last longer than expected.

“The emerging recovery in construction and other sectors in the US may not be sustained after the effects of the stimulus package wears out,” the study noted.

Countries (such as the Philippines) sending their nationals to the Gulf Cooperation Council (GCC) countries may likewise experience some difficulties.

“While a recovery in oil prices and fiscal stimulus implemented by GCC governments is likely to help maintain employment levels for existing migrants, new migration flows are unlikely to grow over the next two years. Remittances from the GCC may therefore remain stable, but they are unlikely to grow rapidly for a year or two,” the study stated.

For the East Asia and Pacific region, the study expects remittances to amount to a mere $85 billion in 2009, for a 1.1 percent decline from the $86 billion recorded in 2008. The bank estimates that remittances will remain flat in 2010 before increasing by 3.7 percent to $89 billion in 2011.

The Bangko Sentral ng Pilipinas (BSP) estimates that remittances from overseas Filipinos will grow by over four percent in 2009, and nearly double this growth rate in 2010.

In its study, the WB noted that remittances to the East Asia and the Pacific region as well as South Asia have proved stronger than expected in the first nine months of 2009. The Philippines is averaging over four-percent growth as of October, while Bangladesh and Nepal are recording growths of 16 percent and 13 percent, respectively.

The numbers are expected to go even higher as the last quarter of the year is usually one of the strongest due to Christmas spending. In the case of the Philippines, support for losses due to typhoons Ondoy and Pepeng will boost remittances aside from Christmas spending.

In contrast, dramatic declines in remittance inflows were reported in countries in Latin America and the Caribbean region. Mexico, which is the third largest recipient of remittances, reported declines reaching 13.4 percent in the first nine months of 2009.

The study estimates that the top three recipients will still be India, China and Mexico followed by the Philippines, Poland, Nigeria, Romania, Bangladesh, Egypt, and Vietnam.

In 2008,the top recipients in terms of the share of remittances in gross domestic product (GDP) include many smaller economies such as Tajikistan, Tonga, Moldova, Kyrgyz Republic, Lesotho, Samoa and Lebanon. In these countries, remittances represented more than a quarter of their GDPs, providing a lifeline for the poor.

Remittance flows to Europe and Central Asia show a similar decline. Flows to Central Asian countries, where remittance flows are large relative to their gross domestic product, have declined sharply.

Flows to Armenia and Tajikistan have declined by more than 30 percent in the first half of 2009. Poland and Romania in Eastern Europe have also experienced a sharp slowdown in flows.

Remittances to Middle East and North Africa region were weaker than expected.

Remittance flows to Egypt, the largest recipient in the region, declined by 20 percent in the first half of 2009 on a year on year basis. Morocco experienced a similar rate of decline in the first eight months of 2009.

Flows to Sub-Saharan Africa are doing better than forecast, with flows to Nigeria, Kenya and Uganda showing higher growth or smaller declines than anticipated. Remittances to Cape Verde, Senegal and Mali have also declined in the first half of 2009, but flows to these countries account for a small share of overall remittances to Sub-Saharan Africa. –Ted P. Torres (The Philippine Star)