Global Remittances’ Staggered Movements
The World Bank’s Remittances Unit estimated a 6 percent increase in developing country flows this year to $400 billion and a medium term ascent to over $500 billion while criticizing “still high” transaction costs at an average 7.5 percent. In contrast with private capital allocation the channel has been “remarkably resilient” since 2009, and is now triple the annual sum of official development aid. All regions led by South Asia and the Middle East from strong GCC performance benefited, although Europe-based workers suffered from recession and unemployment. China and India were the top recipients at $70 billion each while as a portion of output Central Asian and African countries got one-third of GDP from the source. The US is the largest sender and high-skilled jobs have recovered, but Mexican transfers are flat on tighter immigration control and peso appreciation against the dollar. The migrant out-of-work rate in Spain is 30 percent and Eastern Europeans such as Poles and Romanians are returning home with the West’s crisis. North and Sub-Sahara Africa have likewise been hit but expatriates have stayed despite threats of deportation. Outward remittances from Russia have boomed at the opposite extreme to $5 billion with the world oil price around $100/barrel. The exchange rate has slowed activity in the Philippines, with overseas workers on all continents who have traditionally assumed peso depreciation at odds with the current trend of record foreign investor portfolio exposure. In the main 20 remittance “corridors” expenses remain steep despite the commitment to reduce them 5 percent over the next five years. The African toll is 12.5 percent of the amount transmitted, and Russia’s is cheapest at 2 percent, with the Gulf and UK in the middle. New anti-money laundering and terror funding rules from the FATF will add burdens likely to be reflected in pricing, and mobile business continues to be constrained with only one-fifth of providers with cross-border links. Central banks and telecom authorities must cooperate to bolster the segment as in Kenya and the Philippines, the document recommends. For the Pacific Islands an Australian website lists the range of sending options to assist individuals and companies as a useful initiative.
Next February stricter money transfer disclosure goes into effect in the US under the Dodd-Frank law, following a similar EU directive. It introduces consumer protections as to cancellation and refunds and error correction, and itemizes fee, currency and tax charges. The tight identification requirement may hurt the poor without such access, and agents may delay until refund periods expire which could inject undesired inefficiency into the technologically-advanced process. Among single countries, the report cites a post-Arab spring “surge” in Egypt to almost $20 billion this year offsetting other weak balance of payments elements as the outline $5 billion IMF deal comes with a supporting remit.
