Migration and Remittance Trends 2009-11 A better-than-expected outcome so far, but significant risks ahead Dilip Ratha (with Sanket Mohapatra and Ani Rudra Silwal) World Bank Global Forum for Migration and Development Athens November 3, 2009
Messages Crisis has impacted new migration flows, but existing migrants are not returning; global migration stock is still rising Remittances estimated to have declined by only 6.1% in 2009, but a shallower recovery is expected during 2010-2011 Risks to this outlook include uncertainty regarding duration of the crisis, jobless recovery, currency movements, and rising protectionism
Messages Crisis has impacted new migration flows, but existing migrants are not returning; global migration stock is still rising Remittances estimated to have declined by only 6.1% in 2009, but a shallower recovery is expected during 2010-2011 Uncertainties regarding duration of the crisis, jobless recovery, currency movements, and rising protectionism pose risks to the outlook
Stock-flow equation for migration Migrant stock today = Existing migrant stock Return migration + New migration Or M t = M t-1 - R t + N t M t = N t - R t
Return migration (R t ) Little evidence of return migration Incomes and opportunities back home not that high Migrants are unwilling to return fearing that they may not be able to re-enter
Duration of Mexican migration has increased return rate has declined as controls have been tightened at the US-Mexico border Border Patrol agents (left scale) Migration duration (right scale) Source: US Department of Homeland Security, Mexico Migration Project
Financial incentives for return migration not working Few availing of financial packages for voluntary return in Spain, Japan, Czech Republic Gulf employers also offering unpaid leave to encourage return until recovery; but few takers Migrants are losing legal status and likely going underground
New migration (N t ) Large fall in new deployments (e.g Bangladesh, Nepal, Tajikistan) Number of applications for H-1 B visas in the US has fallen sharply in 2009 Despite fall, new flows are still positive; migrant stocks still rising
Destination of migrants from developing countries High-income OECD 41% High-income non-oecd 12% Developing countries 47% Source: Ratha and Shaw (2007) South-South migration is larger than migration to high-income OECD countries
Messages Crisis has impacted new migration flows, but existing migrants are not returning; global migration stock is still rising Remittances estimated to have declined by only 6.1% in 2009, but a shallower recovery is expected during 2010-2011 Uncertainties regarding duration of the crisis, jobless recovery, currency movements, and rising protectionism pose risks to the outlook
Global remittances exceeded $338 billion in 2008, fell to $317 billion in 2009 575 $ billion 475 375 275 175 75-25 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e FDI Recorded Remittances ODA Pvt debt & port. equity
Remittance flows to developing countries $ billion 2007 2008 2009e Developing countries 289.4 337.8 317.2 East Asia and Pacific 71.3 86.1 84.8 Europe and Central Asia 50.8 57.8 49.3 Latin America and Caribbean 63.2 64.7 58.5 Middle-East and North Africa 31.4 34.7 32.2 South Asia 54.0 73.3 72.0 Sub-Saharan Africa 18.6 21.1 20.5 Growth rates Developing countries 22.9% 16.7% -6.1% East Asia and Pacific 23.8% 20.8% -1.5% Europe and Central Asia 36.0% 13.8% -14.7% Latin America and Caribbean 6.8% 2.3% -9.6% Middle-East and North Africa 20.1% 10.6% -7.2% South Asia 27.1% 35.6% -1.8% Sub-Saharan Africa 47.6% 13.4% -2.9%
A smaller-than-expected decline in 2009 overall, but differences across regions Larger-than-expected decline in remittances to Latin America and the Caribbean, but emerging signs of a bottoming out Better outcome in South Asia and East Asia, but emerging signs of a peaking Flows declining in Europe & Central Asia, and Middle East & North Africa Sub-Saharan Africa doing better
Top recipients of remittances $ billion, 2008 % of GDP, 2008 52 49 50 26 India China Mexico Philippines Poland Nigeria Romania 19 11 10 9 9 9 7 Bangladesh Egypt Vietnam 38 31 28 27 26 25 24 22 20 Tajikistan Tonga Moldova Kyrgyz Rep. Lesotho Samoa Lebanon Guyana Nepal Honduras
Remittances to Mexico started declining in early 2008, but there are emerging signs of a bottoming out 10 y-o-y growth rate of 3-month m.a. % 0-10 -20 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09
Remittances to Latin America and Caribbean appear to be bottoming out 15 y-o-y growth rate of 3-month m.a. % 5-5 -15-25 Mar-07 May-07 Jul-07 El Salvador Honduras Guatemala Dominican Rep Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09
Migrant employment in the US is stabilizing 3.1 2.9 2.7 (millions) Manufacturing Wholesale & retail trade 2.5 2.3 Restaurants & hotels 2.1 1.9 Construction Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 3-month moving average Source: Current Population Survey
US employment levels signs of recovery for migrant workers 125 124 123 122 121 120 119 118 117 Mar-08 (millions) (millions) May-08 migrants (right scale) Jul-08 Sep-08 natives (left scale) Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 25 24 23 22 21 3-month moving average Source: Current Population Survey
Remittances to Bangladesh, Pakistan and the Philippines are still growing, mainly from the GCC y-o-y growth rate of 3-month m.a. % 50 40 Bangladesh Pakistan Philippines 30 20 10 0 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09
Sale effect - Exchange rate effects encouraged investment-related remittances to India 55 Nominal exchange rate (Rupees/US$) 50 45 40 35 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09
Widening interest rate differentials sustained incentives to send remittances to India 10 8 Percent India policy rate 6 4 2 0 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 US policy rate
Currency effects Effects on consumption/investment motivation Valuation effects
Depreciation of the ruble has reduced remittance flows to Central Asian countries in US dollar terms (Tajikistan) y-o-y growth rate of 3-month m.a. % 100 80 60 40 20 0-20 -40-60 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Rubles US$
Weakness of the British pound may be related to a larger decline in remittances in US dollar terms 1,300 US$ millions USD/GBP 2.1 1,200 Exchange rate (right scale) 2 1.9 1.8 1,100 1,000 Remittance outflows (left scale) 1.7 1.6 1.5 1.4 1.3 900 1.2 2006-Q2 2006-Q4 2007-Q2 2007-Q4 2008-Q2 2008-Q4 2009-Q2 Source: IMF Balance of Payments and Development Prospects Group, World Bank.
Remittances to developing countries shrank in 2009 Percent 30% 20% 10% 2009 estimate: -6.1% 0% -10% 2005 2006 2007 2008 2009 2010 2011
Outlook for remittance flows for 2009-11 $ billion 2008 2009e 2010f 2011f Developing countries 337.8 317.2 321.6 334.2 East Asia and Pacific 86.1 84.8 85.4 88.6 Europe and Central Asia 57.8 49.3 50.6 53.2 Latin America and Caribbean 64.7 58.5 58.7 60.8 Middle-East and North Africa 34.7 32.2 32.7 33.8 South Asia 73.3 72.0 73.2 76.2 Sub-Saharan Africa 21.1 20.5 20.9 21.7 Growth rate (%) Developing countries 16.7% -6.1% 1.4% 3.9% East Asia and Pacific 20.8% -1.5% 0.8% 3.7% Europe and Central Asia 13.8% -14.7% 2.7% 5.0% Latin America and Caribbean 2.3% -9.6% 0.5% 3.5% Middle-East and North Africa 10.6% -7.2% 1.5% 3.3% South Asia 35.6% -1.8% 1.7% 4.1% Sub-Saharan Africa 13.4% -2.9% 1.8% 3.9%
Remittances remain resilient during downturns in host countries Remittances are sent by the stock (cumulated flows) of migrants Remittances are a small part of migrants incomes that can be cushioned against income shocks by migrants Duration of migration may increase in response to tighter border controls Safe haven factor or home-bias -- returnees will take back accumulated savings Sectoral shifts and fiscal stimulus packages may help some migrants
Messages Crisis has impacted new migration flows, but existing migrants are not returning; global migration stock is still rising Remittances estimated to have declined by only 6.1% in 2009, but a shallower recovery is expected during 2010-2011 Uncertainties regarding duration of the crisis, jobless recovery, currency movements, and rising protectionism pose risks to the outlook
Risks to the outlook Crisis could last longer (and be deeper) than expected Weak job markets in the destination countries may lead to further tightening of immigration controls. Currency movements are highly unpredictable
US housing starts affect remittance flows to Mexico with a 4-6 months lag Year-on-year growth Year-on-year growth 35% 25% 15% 5% -5% -15% Remittances to Mexico Housing starts (4-month lag, right scale) 20% 0% -20% -40% -25% -60% Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09
Policy Implications Anti-immigration sentiment may rise, but protectionism related to hiring of immigrant workers will hurt the recovery of firms Origin countries should provide business facilitation services to returnees International and intra-regional remittance flows should be facilitated
1. Monitoring, analysis, projection - Size, corridors, channels - Counter-cyclicality - Effects on poverty, education, health, investmen - Policy (costs, competition, exchange controls) 3. Financial access - Deposit and saving products - Loan products (mortgages, consumer loans, microfinance) - Credit history for MFI clients - Insurance products International Remittances Agenda 4. Capital market access - Private banks and corporations (securitization) - Governments (diaspora bonds) - Sovereign credit rating 2. Retail payment systems - Payment platforms/instruments - Regulation (clearing and settlement, capital adequacy, exchange controls, disclosure, crossborder arbitration) - Anti-money laundering/countering financing of terrorism (AML/CFT)
For more, please visit www.worldbank.org/prospects/migrationandremittances http://peoplemove.worldbank.org