World Bank sees inflows falling 7.3% in developing world

MANILA, Philippines - The World Bank has estimated that remittances to developing countries will drop 7.3 percent to $304 billion this year, from $328 billion recorded last year.

“There is a risk that rising unemployment will trigger further immigration restrictions in major destination countries. Such restrictions would curb remittances more than forecast and would slow the global recovery in the same way as protectionism against trade would endanger a global upturn,” Hans Timmer, director of the World Bank’s Development Prospects Group, explained.

He said additional risks include uncertainty about the depth and duration of the current crisis, unpredictable movements in exchange rates, and the possibility that immigration controls may be tightened further in major destination coun-tries.

Remittance flows to Latin America have been falling in part because of a slowdown in the US construction sector. The new forecasts show a negative 6.9 percent decline in remittances for the Latin America and Caribbean region. Sub-Saharan Africa is also likely to experience a negative 8.3 percent slowdown in its remittance flows.

However, while flows to South Asia and East Asia have been strong, remittances are expected to slightly decline in 2009.

India, China and Mexico retain their positions as the top recipients of migrant remittances among developing countries.

But remittance inflows from overseas Filipinos coursed through the country’s banking system, have been going against forecasts as they have been able to sustain the growth momentum.

Based on the latest data released by the Bangko Sentral ng Pilipinas (BSP), remittance inflows grew 2.8 percent to $6.98 billion in the first five months of 2009.

In May alone, remittances surged to a record $1.48 billion.

The major sources of remittances were the US, Canada, Saudi Arabia, Japan, Singapore, United Arab Emirates, Italy, Germany, and the United Kingdom.

The BSP said the growth was “underpinned by the steady demand for Filipino workers abroad, specifically professional and skilled workers.”

Demand for Filipino workers is expected to hold up as a result of hiring agreements forged between the Philippines and some host countries such as Qatar, Saudi Arabia, Canada, Australia, South Korea and Japan. Recently, the Department of Labor and Employment (DOLE) reported that the Philippine Overseas Labor Office in Tripoli has started talks with the Libyan Health Ministry for the recruitment of about 4,000 Filipino medical workers in Libya.

The World Bank, meanwhile, said remittances would still outstrip the capital markets as well as official development aid.

The approximately 200 million migrants around the world sent to their respective homes $283 billion in 2008, or 6.7 percent higher than the $265 billion in 2007.

Official development funds have been averaging more than $100 billion annually.

“Remittances will prove more resilient than capital flows or perhaps even official aid between now and 2010,” the global financial institution added.