ISLAMABAD: The remittance outlook for South Asia in 2023 is highly uncertain, warns a new World Bank report, which says it is unlikely that the strong growth in remittances in the region in 2020 and 2021 can be sustained through 2023.
In Pakistan, remittances are projected to grow by eight per cent in 2023, while in India, it is expected to grow by 5pc in 2023 and Bangladesh by 2pc, and for Afghanistan, remittance flows will remain flat, according to the World Bank’s latest report, Migration and Development Brief, released on Thursday.
Remittance flows to Pakistan increased at 20pc in 2021 to $31 billion, while in Bangladesh these grew by only 2.2pc to $22bn. Growth in remittances was powered mainly by government incentives, support from migrants to their families back home, and inflows intended for Afghan refugees in Pakistan.
High-frequency monthly data has marked a consistent downward trend since September 2021. Formally recorded remittances to Pakistan are likely to grow at 8 per cent to $34 billion in 2022. In Bangladesh, except for a 24pc spike in March 2022 to mark the start of Ramazan, monthly remittance growth has been decreasing over the past eight months. Remittances are anticipated to gain 2pc in 2022.
Remittances to South Asia grew 6.9pc to $157bn in 2021. Though large numbers of South Asian migrants returned to home countries as the pandemic broke out in early 2020, the availability of vaccines and opening of Gulf Cooperation Council economies enabled a gradual return to host countries in 2021, supporting larger remittance flows. Better economic performance in the United States was also a major contributor to the growth in 2021.
In 2022, growth in remittance inflows is expected to slow to 4.4pc. Remittances are the dominant source of foreign exchange for the region, with receipts more than three times the level of FDI in 2021. South Asia has the lowest average remittance cost of any world region at 4.3pc, though this is still higher than the SDG target of 3pc.
The report says South Asia has the lowest remittance costs of all regions in the world, but they are still about 50pc above the SDG target of 3pc.
In the fourth quarter of 2021, the costs of remitting $200 to South Asia were on average 4.3pc. However, the costs of sending money through formally recorded channels did not decline uniformly from all host countries.
South Asia’s outlook for remittances in 2022 suggests a winding down in growth driven as much by domestic as global economic and geopolitical forces. The region is largely shielded presently from the direct impacts of the ongoing Russia-Ukraine war.