Migrant workers’ remittances have been the lifeline of Nepali economy. The ballooning trade deficit, high level of consumption, and still high real estate and housing prices, are largely financed by remittances, which is estimated to be about US$5.12 billion in 2012, up from US$4.22 billion in 2011. The figure for 2011 is 22.3% of GDP, which makes Nepal the sixth highest receive of workers’ remittances, as a share of GDP, in the world (last year as well it as the same). The increasing remittances have been crucial in maintaining overall current account and balance of payments surplus (except for in 2010 and 2011 for CAB and 2010 for BoP). More on the costs and benefits of remittances here and here.
The latest remittances update by Ratha, Aga and Silwal notes that worldwide remittances, including those to high-income countries, are expected to total US$534 billion in 2012, and projected to grow to US$685 billion in 2015. They forecast remittances to developing countries to grow at an estimated 7.9% in 2013, 10.1% in 2014 and 10.7% in 2015 to reach US$534 billion in 2015. Developing countries are expected to receive US$406 billion in remittances in 2012. In terms of absolute flows, India is estimated to receive the highest remittances (about US$70 billion), followed by China (US$66 billion), the Philippines (US$24 billion), Mexico (US$24 billion), Nigeria (US$21 billion), Egypt (US$18 billion), Pakistan (US$14 billion), Bangladesh (US$14 billion), Vietnam (US$9 billion) and Lebanon (US$7 billion). The overall estimated growth of remittances for 2012 is slight lower than earlier forecast, reflecting the weak economic projections in Europe, the GCC countries, Russia and the US.
It is just formal flows. The real flows, including those from informal channels, is expected to be even higher. The size of remittance flows to developing countries is almost three times the ODA. In Nepal’s case, it is five times the ODA. By the way, the total remittance outflows in 2012 from Nepal is estimated at US$39 million, up from US$32 million in 2011.
The strong economic activities in the Gulf helped boost remittance inflows to Nepal, and South Asia and MENA regions. Additionally, the depreciation of local currency against the major foreign currencies also encouraged migrants to remit more money home (the “sale effect”). South Asia is estimated to receive US$109 billion in migrant workers’ remittances in 2012 and is forecast to receive US$144 billion in 2015 (see the table).
Migrant remittance Inflows (US$ million)
|Remittances as a share of GDP, 2011 (%)|