Download Present

Global Economic Prospects 2006
Economic Implications of
Remittances and Migration
Press launch
Washington
November 16, 2005
Outlook for the global economy
 Despite a cyclical slowdown, GDP continues to
grow rapidly in developing countries, underpinned
by past policy reforms.
Outlook for the global economy
 Despite a cyclical slowdown, GDP continues to
grow rapidly in developing countries, underpinned
by past policy reforms.
 Low-income oil importers have only recently
started to feel the squeeze of high oil prices and
are vulnerable to further spikes.
Outlook for the global economy
 Despite a cyclical slowdown, GDP continues to
grow rapidly in developing countries, underpinned
by past policy reforms.
 Low-income oil importers have only recently
started to feel the squeeze of high oil prices and
are vulnerable to further spikes.
 The possibility of a large and disruptive rise in
interest rates also poses a serious risk.
Growth in developing countries is still strong
Forecast
Real GDP annual change %
7
Developing
6
High-income
5
4
3
2
1
0
1980
1985
1990
1995
2000
2005
2007
Longer-term prospects: GDP per-capita
Real GDP per capita, annual average percentage change
2000-05
8.0
1980-90s
2006-15
6.0
4.0
2.0
0.0
0.0
-2.0
High-income
East and South Asia
Other developing
Sub-Saharan Africa
Poverty forecast
Share of population living on $1/day, millions
50
45
40
35
30
25
20
2002
1990
15
2015
10
5
0
East and South Asia
Other
Sub-Saharan Africa
Further reforms, including Doha, are crucial
to future growth prospects
% of total possible gains
Full liberalization
100
90
80
o/w Agriculture
70
60
50
40
30
20
10
0
Tiered cuts w/ SDT
w/ 2% exclusions
Outlook for the global economy
 Despite a cyclical slowdown, GDP continues to
grow rapidly in developing countries, underpinned
by past policy reforms.
 Low-income oil importers have only recently
started to feel the squeeze of high oil prices and
are vulnerable to further spikes.
Poor oil-importing countries now more
vulnerable
Terms-of-trade impact
(% of GDP)
2
Sub-Saharan
1
0
Low-income
-1
-2
-3
2000-03
2004-05m7
Outlook for the global economy
 Despite a cyclical slowdown, GDP continues to
grow rapidly in developing countries, underpinned
by past policy reforms.
 Low-income oil importers have only recently
started to feel the squeeze of high oil prices and
are vulnerable to further spikes.
 The possibility of a large and disruptive rise in
interest rates also poses a serious risk.
Low spreads have supported growth, but…
Basis points
1600
1200
800
400
0
1991
1993
1995
1997
1999
2001
2003
2005
Low spreads have supported growth, but…
Basis points
1600
1200
800
400
0
1991
1993
1995
1997
1999
2001
2003
2005
Policy priorities
 Long-term prospects of developing economies
will depend importantly on further reforms,
including a successful Doha round.
 Policy must promote not impede oil-sector
adjustment mechanisms.
 Increased public and private savings in the
U.S., supportive policy in Europe and
continued balance sheet vigilance by emerging
markets will reduce global interest rate risks.
Development implications of migration
and remittances
 Migration and remittances continue to increase
 Migration generates substantial welfare gains and
reduces poverty
 The development gains from low-skilled emigration are
clear cut, while high-skilled emigration has more
complex effects
 Benefits to countries of origin are mostly through
remittances
 There is considerable scope for reducing remittance
costs faced by poor migrants
International migration has increased
Stock of migrants as share of destination countries’ population (%)
8.3
1970
2000
4.3
2.9
2.2
1.6
World
Source: UN
Industrial countries
1.8
Developing
countries
1.6
1.3
Developing
countries, excl.
USSR
Remittances have continued to increase
$ billion
FDI
175
150
Private debt
and portfolio
equity
Recorded
remittances
125
100
75
50
ODA
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
0
20 3
04
20 e
05
e
0
Top recipients of remittances, 2004
$ billion
22
% of GDP
31
21
27
18
13
India
China
Mexico France
26
25
23
12
Philippines
Tonga Moldova Lesotho
Haiti
BosniaHerz.
Migration boosts welfare for most
households
Change in real income in 2025
$billion
200
Percentage increase from baseline
0.4
0.9
200
150
100
50
-6.0
0
-50
-100
Natives in high 'Old' migrants in
income
high income
countries
countries
Natives in
developing
countries
.
Global gains of $356 billion or 0.6 percent
New migrants
Sources of gains for origin countries
(Composition of percent change in real income in 2025)
1.0
0.9
0.8
0.6
0.6
0.5
0.4
0.2
0.0
-0.2
-0.4
ta
l
To
es
R
em
itt
a
nc
bo
r
La
C
ap
ita
l
-0.3
Low skilled migration reduces poverty
 If a poor person migrates
 Through improvements in labor market conditions
 Through remittances
Impact of high-skilled migration on origin
countries is complex
 High-skilled emigration also generates remittances
and diaspora benefits
 However, countries lose:
– Skilled workers
– Opportunities for training
– Improved governance
High-skilled emigration rates are high in
some countries
share of developing country
population (%)
# of countries
75%
62
33
28
19%
16
3%
< 10%
10%-20% 20%-30%
High-skilled emigration rate
> 30%
< 10%
10%-20% 20%-30%
High-skilled emigration rate
3%
> 30%
Remittances reduce poverty
 Evidence from household surveys shows significant
poverty reduction effects of remittances
 Cross-country evidence shows that a 10% increase
in per capita official remittances leads to a 3.5%
decline in the share of poor people
 Remittances also finance education and health
expenditures, and ease credit constraints on small
businesses
Remittances tend to rise following
crisis, natural disaster, or conflict
Remittances as % of private consumption
2.0 2.0
2.0
1.7
1.8
1.4
1.2
year before
year of crisis
year after
1.0
0.5
Indonesia
Mexico
Thailand
Remittances improve countries’ access to
capital
Present value of external debt as % of exports of
goods, services, and remittances
800
700
600
Excluding remittances
500
Including remittances
400
300
200
100
al
a
te
m
G
ua
do
r
Sa
lva
Jo
rd
an
El
M
or
o
cc
o
a
ai
c
Ja
m
ne
s
ilip
pi
Ph
Pa
kis
t
an
or
ua
d
Ec
Le
ba
no
n
0
Downside
 Large remittance flows may lead to currency
appreciation and adverse effects on exports
 Remittances may create dependency
 Remittance channels may be misused for
money laundering and financing of terror
Remittance fees are high, and regressive
Fee and foreign exchange commission as % of principal, U.S.-Mexico corridor
20
Western Union
Moneygram
Vigo
Dolex
15
10
5
0
$100
$200
$300
$400
$500
$600
Policy priorities
 Governments can provide information and regulate
intermediaries to reduce risks, costs of migration
 A significant opportunity exists to increase low-skill
migration through managed programs for temporary
migration
 Investments in infrastructure and R&D, along with
improved working conditions, would limit brain drain
 High remittance costs faced by poor migrants can be
reduced by increasing access to banking and
strengthening competition in the remittance industry
 Governments should not tax remittances or direct the
allocation of expenditures financed by remittances
Policy priorities
 Governments can provide information and regulate
intermediaries to reduce risks, costs of migration
 A significant opportunity exists to increase low-skill
migration through managed programs for temporary
migration
 Investments in infrastructure and R&D, along with
improved working conditions, would limit brain drain
 High remittance costs faced by poor migrants can be
reduced by increasing access to banking and
strengthening competition in the remittance industry
 Governments should not tax remittances or direct the
allocation of expenditures financed by remittances
Policy priorities
 Governments can provide information and regulate
intermediaries to reduce risks, costs of migration
 A significant opportunity exists to increase low-skill
migration through managed programs for temporary
migration
 Investments in infrastructure and R&D, along with
improved working conditions, would limit brain drain
 High remittance costs faced by poor migrants can be
reduced by increasing access to banking and
strengthening competition in the remittance industry
 Governments should not tax remittances or direct the
allocation of expenditures financed by remittances
Policy priorities
 Governments can provide information and regulate
intermediaries to reduce risks, costs of migration
 A significant opportunity exists to increase low-skill
migration through managed programs for temporary
migration
 Investments in infrastructure and R&D, along with
improved working conditions, would limit brain drain
 High remittance costs faced by poor migrants can be
reduced by increasing access to banking and
strengthening competition in the remittance industry
 Governments should not tax remittances or direct the
allocation of expenditures financed by remittances
Policy priorities
 Governments can provide information and regulate
intermediaries to reduce risks, costs of migration
 A significant opportunity exists to increase low-skill
migration through managed programs for temporary
migration
 Investments in infrastructure and R&D, along with
improved working conditions, would limit brain drain
 High remittance costs faced by poor migrants can be
reduced by increasing access to banking and
strengthening competition in the remittance industry
 Governments should not tax remittances or direct the
allocation of expenditures financed by remittances