Remittances have always been a major indicator of a country’s economic strength. With the ability to show the connections between citizens and their compatriots, this metric provides a great look into the health of nations.
When people travel abroad - whether to live or just stay temporarily - they eventually need to send money home. They send money to their families, their business partners, and more. All of this money sent by citizens in the diaspora back to their home country is classified as remittances.
Determining the exact size of remittance flows into a country can be challenging because some remittances take place via unofficial channels. For instance, cryptocurrencies and stablecoins have become popular methods for people looking to transfer money across borders due to their quick and low-cost operating model. However, because the cryptocurrency space is largely unregulated, many data records and statistics don’t cover the volume of cross-border remittances that these assets generate or process.
Nevertheless, several data sets easily point to the volume of remittances today.
The World Bank recently reported that global remittances surged by 5% in 2022 to hit $626 billion. Despite the massive economic headwinds faced by individuals and corporations around the world, remittances are a viable and resilient metric that can tell a lot.
In June 2022, the International Fund for Agricultural Development (IFAD) reported that the volume of global remittances is poised to hit $5.4 trillion by 2030. The agency also reported that remittances - especially to low- and middle-income countries - grew by 8.6% in 2021 alone.
As for Statista, the data source revealed that digital remittances worldwide alone clocked $117 billion in 2022 - a number that is expected to hit $171 billion by 2027 and cross the $200 billion mark by the next decade.
You might be wondering why many economic analysts and sources focus a lot on remittances when measuring the health of a country. Remittances continue to matter more than ever, especially in low - and middle-income countries. Here are a few reasons why this metric continues to matter:
The world’s largest democracy, India is a diverse and rapidly-expanding economy with a skilled workforce and a growing population of young people. Agriculture continues to be the biggest employer of labor in India, but the fastest-growing industry has so far been the service industry.
For Indians who live abroad, however, remittances make up a significant part of diaspora activity. In 2021, India got about $89.4 billion in remittances, making it the largest recipient in the world. The number also marked a significant 4.6% gain on remittance inflows in previous years - and the numbers are also expected to surge in the coming years.
Home to one of the largest populations of Spanish speakers in the world, Mexico is a federal republic with one federal district and 31 states. It is also one of the largest economies in the world, and the biggest trade partner for the United States.
2021 was a huge year for remittances in Mexico, with the country recording a reported $54.1 billion in remittances. Interestingly, a significant portion of those funds came from the United States, with increased integration and migration helping bolster the rate of capital flows.
China is the world’s most populous country with one of the largest populations of migrants in the world. And with most of its population being youth and tech-savvy, it’s easy to see why remittance flows to China are surging - to the tune of $53 billion in 2021.
Despite being one of the oldest countries in the world, China has one of the planet’s fastest-growing economies. And as the country continues to position itself as a focal point of the global economy, it’s easy to see why remittances to this country will continue to grow.
Of course, it is worth noting that remittances only make up a small fraction of China’s economy, because the country has the world’s second-largest economy, valued at $17.3 trillion.
The Philippines has become the world’s premier island nation. Made up of thousands of islands, the country has a massive diversity rate and has done a good job of becoming a hub for global digital and financial innovation.
Remittances - or cash flows from Overseas Filipino Workers (OFWs) - have helped improve this country’s economy significantly. In 2021, Filipinos sent a record $36.7 billion back to the country - a 5.2% surge from the numbers recorded in 2020. Once again, most of these remittances originate from the United States.
Egypt is home to one of the oldest and most renowned civilizations in Africa - and, indeed, the entire world. And with a hoard of historical settings and artifacts, it’s no wonder that tourism is one of the country’s biggest industries.
Despite the government’s best efforts to grow the economy, Egyptians have faced an increasingly high level of poverty and unemployment in the past few years. This appears to be why remittances in the country are so crucial. The country recorded about $31.5 billion in remittances for 2021, with most of these money transfers arriving in local currency.
One of the emerging economies in the Middle East, Pakistan is the seventh most populous country in the world. It is also the youngest with the vast majority of citizens being under the age of 22. Pakistan is known for its booming textile industry, although a rocky political climate has also hampered its export-driven economy.
Still, Pakistanis in the diaspora have continued to prop up the country’s economy. With remittances totaling about $31.2 billion, Pakistan continues to see a massive influx of foreign capital from citizens in the diaspora. Remittances from Gulf countries make up most of these inflows.
One of the few developed economies on this list, France is home to one of the biggest strongholds of cultural heritage in the world. Picturesque locations, great dining, art, and fine wine are only a few of the many attractions available in this country.
France received $26.3 billion in remittances in 2021. On the other hand, digital remittances received by the country totaled $3.7 billion in digital remittances in 2022, with that number expected to hit $5.17 billion in 2027.
Even though it is known for its long and luscious beaches, Bangladesh is also a hub for the garment and textile industry. The country’s agrarian culture is also very strong, with over half of its population occupied with agriculture.
Remittances to Bangladesh totaled an impressive 6.7% of the country's GDP in 2020. In 2021, remittances received by the country reached $22.2 billion. As the country continues to see a heavier reliance on remittances, this will be a metric that many economic indicators will keep an eye on.
Germany is the most populous and one of the most prosperous countries in the European Union. With a population of almost 85 million and a GDP of close to $4 trillion, the country’s position in today’s import-export economy has made it an integral player on the global economic landscape.
Remittance flows to Germany have come from both individuals and corporations, and they totaled about $20.4 billion in 2021. Most of these remittances come from fellow high-income countries, including the United States, Switzerland, and Luxembourg.
Africa’s largest economy, it comes as no surprise that Nigeria ranks on this list. Despite having one of the 50 largest economies in the world, Nigeria has also been hit with significant economic woes, stemming primarily from political and social instability. This has led to a significant number of migrations in the country - and a rise in remittances, tallying $19.1 billion in 2021.
Sources
https://www.statista.com/statistics/962827/leading-remittance-receiving-countries/
