“Remittances” refers to when someone migrates to another country, works and earns money, and then sends some of that money back to people in their country of origin. In effect, some countries both exports goods and services, and receive payment from buyers in other countries, but also export worker, and receive payment from other countries. The World Bank has a Migration and Remittances Team, and it provides an update on the numbers in “Remittances Remain Resilient but Are Slowing” (Migration and Development Brief 38, June 2023).
Here’s the overall pattern. In 2000, the level of remittances was quite similar to “official development assistance” (ODA), while both of those were substantially lower than foreign direct investment (FDI). Now, remittances are roughly triple official development assistance. And if you take foreign direct investment going to China out of the picture, as shown in the bottom panel, remittances are roughly double the level of FDI going to all other low- and middle-income countries.
In short, remittances are a huge part of the capital flows between countries. However, they often don’t make the news. Development assistance from nation to nation or a big overseas investment by a US company can make headlines. But payments of remittances, often within families, are individually quite small–it’s just that they add up to big stuff.
The report provides lots of detail about remittances in regions and countries. Here’s one more chart. The left-hand panel shows remittances received by country. The right-hand panel shows remittances as a share of GDP, which is more than one-fifth of GDP for the countries listed there.
These flows also help to explain the interest, in many low- and middle-income countries, in finding ways to transfer money across international borders at lower cost, even if it involves using cryptocurrencies or other new financial technologies.
I’ll leave it for another day to write about whether remittances are “good” or “bad” (although personally, I lean heavily to the “good” side). On one side, there are concerns that countries sending migrants may suffer from “brain drain,” as those who are more educated or highly motivated may go other places. On the other side, when people of your country are earning and sending home tens of billions of dollars, or in some cases more than one-fifth of GDP, that’s not obviously a bad thing! Moreover, the skills learned by migrants and the economic connections they make can often be of considerable use to those who remained in the country of origin.
