Does the Old Chinese Saying Opposes Migrants Remittances’ Idea?

Remittance and migration are highly related. Remittance contribution usually falls between the official development assistance and the foreign direct investments (FDIs). Migrants’ remittances represent about 90% of global remittances. Remittance represents an essential financial element in the countries’ economic growth and balance of payment statements, especially in developing countries.

Unleashing Economics Relation with Migrants Through Remittance - Act for Displaced

As per the old Chinese saying, “It is better to teach a skill than offer a fish”, there has been an open debate in studies, discussing the importance of migrants’ remittances. Remittance can be a two-sided weapon. Thus, some researchers and experts think it is not useful for a nation to depend on a certain source, which might be vulnerable to international crises and fluctuations. While others think that remittance from migrants is important socially and economically, affecting consumption, savings, and investments.

The dominating opinion supports the importance of migrants’ remittance. Migrants can increase the hosting countries’ trade movements, boost investments, promote consumption and accordingly improve the country’s Gross Domestic Product (GDP). Those vulnerable people can also attract aids, funds, and more humanitarian investments; which will accordingly help in the country’s development process.

On the other hand, many studies have been conducted reflecting that remittances have no clear impact on economic growth. Remittances also might cause stagflation in the long run.  

Remittance Trap Versus Domino & Multiplier Effects[1]

Generally, as remittance inflows increase, the country’s financial and capital account improves which might help in decreasing deficit; accordingly enhance financial development and economic growth. On a microeconomic level, remittances improve the families’ status, by covering their basic needs. Remittances create the multiplier effect on expenditures and household consumption process at the sectoral level. As a result, this boosts the economy.

At the same time, migrants’ remittances to their families can reduce the interest of these families to find jobs and accordingly reduces export competitiveness. A decline in competitiveness can cause a recession and higher costs. This puts the countries’ economies in an unended cycle, between social and economic effects.

Catching up Migrants’ Remittances Inflows Track Until 2020[2]

In 2020, migrants’ remittances reached 508 billion in low- and middle-income countries (LMICs), representing 76.32% of global remittances inflows. LMICs’ inward remittances recorded a decline of about 7% compared to 2019. Thus, such decline was due to the persistence of the pandemic which impacted the loss of jobs. The pandemic’s impact was greater than the global financial crisis in 2008, which showed a decline by only 5% in 2009.

In 2019, migrants’ remittances inflows to LMICs increased by 3.6% to about $548 billion compared to $529 billion in 2018, representing about 76.4% of global remittances inflows.  

By focusing on the top 10 receiving countries for migrants’ remittances, the countries’ ranking is almost constant over the years. The top 10 hosting countries receive 51 % of total inward remittances, representing $ 339.52 billion in 2020. India is considered the largest recipient of migrants’ remittances throughout 2018, 2019, and 2020. Remittances to India reached $75.92 billion, representing about 11.39% of global inward remittances in 2020 and 11.63% in 2019. Then, China, Mexico, the Philippines, France, and Egypt come next representing about 8.9%, 6.1%, 5%, 3.8%, and 3.7% respectively of global remittances in 2020. Afterward, Pakistan comes contributing by 3.6% in 2020.

Analyzing Migrants’ Remittances Outflows throughout 2018 & 2019[3]

Global outward remittances for migrants have been acquiring an increasing trend since 1980, with unstable growth rates. It is worth noting that inward remittances and outward remittances are not equal due to the commissions and fees deducted from the outward remittances. In 2019, global outward remittances reached $ 487.49 billion with a decline of 0.8% compared to $ 491.38 billion.

Through spotting the lights on the top 10 remittances’ sending countries, the countries’ ranking is almost constant over the years. The top 5 countries contributed about 41% of total outward remittances, reaching about $ 199.96 billion in 2019. While the top 10 countries represent 54.5%, contributing by about $ 266.643 billion.  The United States (US) is considered as the largest source of remittances, contributing by 14.67 % of global outward remittances. Then, the United Arab Emirates (UAE) is the second-largest source of remittances, contributing by 9.2% of total outward remittances. Afterward, Saudi Arabia (KSA), Switzerland, Germany, Russia, China, Kuwait, Netherlands, and Luxembourg come next, contributing by 6.4%, 5.8%,4.9%, 4.6%, 3.1%, 3%, 3%, and 2.8% respectively.

Looking Through the Specialists Lens…Inspecting What’s Next?[4]

In October 2020, the World Bank (WB) renewed its forecasts towards the remittances flows for 2021, where it is expected to decrease to 14%. Due to COVID-19, and the economic slowdown, international migration is expected to decline for the first time in recent decades.

Remittances and transfers from migrants started to decrease since Q1 and Q2 of 2020. The International Monetary Fund (IMF) also expected the decline of remittances, pointing out that the largest recipients for migrants’ remittances will be the most exposed to negative impacts due to remittances expected to decline.

Settling Controversy & Setting Results

Some results agree that remittances positively impact families’ lives and consumption. While there is no quite clear positive impact for migrants’ remittances on countries’ economic growth. Since then, remittances affect economies and families on a short-term basis as consumption is a short-term driver.

To settle the controversy, the puzzling effect for the remittances whether it positively impacts the hosting country’s economic growth can be resolved according to a group of factors. For instance, this depends according to the economy’s strength and diversity.

If the economy is diversified, the country will be capable to absorb shocks’ impact easily. While if the remittances contribute to a large percent of the economy, so the economy might be dependent on it.

All mentioned statistics are only named a few, which include the most important highlights for migrants’ remittances in the last recent years. Calculations are based on the data’s main source, which is the WB. Other data are collected from the IMF, OECD, and the WB as well. This article aims to highlight the major elements that might impact migrants’ lives post-pandemic era and support economies to set policies that help absorb shocks easily.


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