Foreign workers in rich nations are sending less money home — and it's hurting poor economies
In 2016, for the first time in 30 years, remittances to developing nations from rich ones fell for a second straight year, a trend that is depriving poor countries of a key source of income, according a new report from the World Bank.
The World Bank estimates officially recorded remittances to the developing world at $429 billion in 2016, down 2.4% from $440 billion in 2015. Global remittances, which include flows to high-income countries, contracted by 1.2% to $575 billion in 2016, from $582 billion in 2015.
"Low oil prices and weak economic growth in the Gulf Cooperation Council countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa," the report said.
The decline in remittances, when valued in US dollars, was made worse by a weaker euro, British pound, and Russian ruble against the US dollar, the World Bank said. Many large countries with substantial remittances saw cutbacks. India led the decline, with remittances dropping by 8.9% to $62.7 billion last year, though it remained the world's top recipient.
"Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get healthcare, education, or proper nutrition," said Rita Ramalho, the acting director of the World Bank's Global Indicators Group.
The problem of rising migration raises new concerns about remittances since rich countries, including the US under President Donald Trump, have threatened to tax them. Trump says this is one way get Mexico to pay for his proposed border wall.
"Several high-income countries that are host to many migrants are considering taxation of outward remittances, in part to raise revenue, and in part to discourage undocumented migrants," the World Bank said. "However, taxes on remittances are difficult to administer and likely to drive the flows underground."
Still, forecasts for stronger economic growth should bolster remittances again this year, the World Bank added.
"In keeping with an improved global economic outlook," the World Bank said, "remittances to developing countries are expected to recover this year, growing by an estimated 3.3 percent to $444 billion in 2017."