Remittances – the money and goods sent by migrant workers to family and friends in their home countries – are a lifeline to people around the world, and add up to more than what is spent on development aid.
Remittances can prove particularly vital during times of crisis, and remittance flows have remained resilient during the coronavirus pandemic amid a global economic downturn, new data from the World Bank shows.
Recorded remittance flows to low- and middle-income countries totalled $540 billion in 2020, only 1.6% below the 2019 total of $548 billion. That was at the same time as foreign direct investment flows to low- and middle-income countries (excluding China) fell by over 30%.
The World Bank had previously predicted global remittances would fall by around 20% in 2020 due to the reduced wages and employment of migrant workers.
MoneyTransfers.com wanted to understand the relationship between a country’s wealth and its receipt of remittances. Using the World Bank’s data, we found the 10 countries with the highest GDP per capita received $17.8 billion in remittances in 2020, compared to the $6.2 billion received by the 10 countries with the lowest GDP per capita.
Unsurprisingly, this counted for a greater share of overall GDP in the poorer countries, including a huge 35.3% in war-torn Somalia. Excluding this outlier, remittances counted for an average 2.43% of GDP in the other nine countries, while it counted for just 0.55% on average among the ten richest countries.
Yet among the richer and poorer countries, there were big differences in levels of remittances sent. The United States received by far the highest overall figure in remittances, at $6.2 billion. Due to the enormous size of the country’s economy – which remains the world’s biggest – remittances accounted for just 0.03% of GDP, the lowest in the top ten.
Conversely, Iceland received the lowest amount in remittances – $166 million – but this counted for the highest share of its overall GDP among the rich countries, at 0.8%.
While the US receives a large sum in remittances, it also has the world’s highest rate of outbound remittances, sending a massive $68 billion overseas in 2020. This is due to its high number of migrant workers and economic corridor with Mexico.
India remained the country with the highest inflow of remittances, receiving $83 billion in 2020. This was down only slightly year-on-year, by 0.2%.
China and Mexico followed, receiving $59.5 billion and $42.9 billion respectively. In China this represented a 13% year-on-year drop; in Mexico it was actually a 9.9% increase.
Strict curbs on the movement of Chinese nationals from early in the pandemic may explain this sharp drop. The increase in remittances to Mexico was likely due to Mexicans with relatives in the US receiving additional support to help them through the country’s sharp economic contraction and public health crisis, even as the US faced its own struggles.
Globally, remittance inflows rose by 6.5% in Latin America and the Caribbean, 5.2% in South Asia, and 2.3% in the Middle East and North Africa. They fell by 7.9% in East Asia and the Pacific, 9.7% in Europe and Central Asia and 12.5% in Sub-Saharan Africa, largely due to a drop in Nigeria.
European economies also see substantial rates of inbound and outbound remittances, though these tend to be less significant to their economies.
While Switzerland is a modest recipient of remittances, at $2.6 billion, it is by far the biggest sender of remittances out of the ten biggest European economies. In 2020 it sent $28 billion overseas, accounting for a huge 3.7% of its GDP.
Turkey falls at the low end of the scale for both inbound and outbound remittances, which totalled $795 million and $1.3 billion respectively in 2020.
Turkey and Switzerland have similar-sized economies by overall GDP, between $700 and $800 billion, but Switzerland’s GDP per capita dwarfs that of Turkey’s, at $81,867 vs $9,126.
Turkey has a huge refugee population – the world’s biggest – yet this potential source of remittances does not match those of other countries with higher employment rates and more lucrative job markets. Switzerland, which ticks these boxes, also has a high foreign-born population at 25%, official figures show.
While the UK has the second-biggest economy in Europe by GDP, its outbound remittances are lower than in nearby big economies like Germany, France and the Netherlands. Past data from Migration Observatory has shown that the biggest recipients of UK remittances are India and Nigeria – two countries formerly under British rule – followed by France, Pakistan and China.
World Bank data on global remittance flows, published in May 2021, was compared with rankings of countries’ GDP per capita, which was taken from the International Monetary Fund World Economic Outlook (October – 2020) via Statistics Times and the World Bank.
Singapore was excluded from the 10 countries with highest GDP per capita due to lack of data on remittances.
Keith is a digital specialist with a background in the financial industry, both as a marketeer and a journalist. Keith joined MoneyTransfers.com in order to take the business to the next level and expand our offering in multiple international money transfer markets.