According to the World Bank’s ‘Migration and Development Review,’ remittances to low- and middle-income countries experienced an 8% uptick in the last year, reaching US$647 billion.
Of this, Latin America contributed US$145 billion, signifying a regional growth of 11.3%.
Mexico, in particular, witnessed a 12.9% surge to US$61.1 billion in remittances, ranking second globally after India (US$111 billion), and surpassing China (US$51 billion).
Dilip Ratha, head of the Global Knowledge Partnership on Migration and Development (KNOMAD), emphasized the crucial role of remittances as financial aid during the pandemic, expecting this trend to persist.
The report also cautioned about potential decreases in remittance flow to low- and middle-income countries, including Latin America, due to economic downturns in remittance-originating countries.
While a global increase of 1.4% in remittances is predicted for 2023, bringing the total to US$656 billion, regional growth in Latin America is forecasted at a lower 3.3%.
These projections are tied closely to the US economy’s performance.
However, WorldRemit, a digital payments firm, predicts Latin America to lead remittance transfers by 2023 and expects the South American digital remittance market to reach a net worth of US$2.45 billion by 2027.
“Remittances will continue to provide vital financial support to families facing economic challenges, with the use of technology facilitating rapid transfers even to the remotest corners,” said Jorge Godinez Reyes, Director for the Americas at WorldRemit.
In 2022, the average cost of sending US$200 in remittances rose slightly to 6.2%, from 6.0% in the previous year, as per the World Bank.
Mobile transactions were the cheapest method, constituting less than 1.0% of total transaction volume.
WorldRemit highlighted the importance of remittances for certain Latin American economies, particularly Central American countries where remittances account for over 20% of the Gross Domestic Product.
Mexico and Guatemala were the largest remittance recipients in 2022.
In the same year, Guatemala and Honduras recorded the highest percentage growth in total remittances received, exceeding 15%.
As of 2023, Central American banks have shown a positive trend for remittances from the region.
For instance, Nicaragua and Guatemala reported an influx of remittances up to April and May this year, marking a significant increase compared to last year.
“Despite economic and inflationary challenges, remittance flows in the region continue to demonstrate a resilient upward trend,” stated WorldRemit’s Director for the Americas.
With information from Bloomberg